The legislation would require Dominion to maintain its base rate for eight years beginning in 2013 – when the state last reviewed the company’s rates – until 2020. While the base rate would stay the same, the company would retain the authority to increase fuel surcharges and other “riders” that are added to customers’ utility bills.
The base rate typically makes up just over half of a customer’s bill, said Ken Schrad, director of information resources at the State Corporation Commission, which regulates public utilities.
The riders – also known as rate adjustment clauses, or RACs – still would require approval from the SCC. But when approving them, the agency does not take into account Dominion’s “costs, revenues, investments, or earnings.” That is information the SCC examines during biennial reviews.
Under current state law, the SCC performs a review of Dominion Power every two years to ensure that the company is not “overearning” by overcharging customers, Schrad said. But Senate Bill 1349, introduced by Sen. Frank Wagner, R-Virginia Beach, would prohibit the SCC from conducting its reviews until after 2020.
Under the bill, the SCC would be “barred from adjusting the utility’s rates until the conclusion of the 2023 biennial review, with certain exceptions,” according to a summary of the measure by the Legislative Information Service, the General Assembly’s staff.
The bill stipulates that “no adjustment to a Phase II Utility’s rates shall be made” – meaning Dominion’s base rate would not change; however, it says nothing to limit riders.
Wagner approached Dominion for help with wording part of the bill, and the company provided “some draft language,” said Rob Richardson, a senior communications specialist for Dominion.
Asked who would benefit most from the bill, Richardson said customers would. He said federal and state regulation, such as the U.S. Environmental Protection Agency’s plan to reduce carbon emissions, could endanger “low electric rates and reliable service.”
However, consumer advocates say SB 1349 could benefit Dominion at the expense of consumers.
The Virginia attorney general’s office, which represents consumers in rate cases, said that the bill would eliminate SCC oversight, freeing Dominion to raise fees on consumers.
“We oppose bills like this that limit the attorney general’s ability to advocate on behalf of consumers for the lowest rates possible or that tie the hands of the State Corporation Commission in setting appropriate rates,” said Michael Kelly, director of communications for Attorney General Mark Herring.
Schrad said current Virginia state law binds Dominion’s rate changes to the biennial reviews. Changes can be made only after the review process.
This became customary after a 2007 law ended a 10-year period aimed at creating competition in the electric industry. The 10-year experiment failed, and Dominion maintained a monopoly over Virginia utilities, Schrad said.
The 2007 legislation brought back regulation of the electric industry.
Under settlements reached after the SCC’s first review of Dominion, the company had to refund $726 million, with the average customer receiving $153.
As a result of the SCC’s review in 2011, Dominion had to refund customers $78.3 million due to overearnings. The most recent review by the SCC resulted in a lower base rate.
Wagner served in the Virginia House of Delegates from 1992 through 2000, when he was elected to the Senate.
Since 1997, Wagner has received $43,100 in donations from Dominion, according to the Virginia Public Access Project, a nonprofit group that compiles campaign finance data. Dominion gave Wagner $10,500 in 2013-14, VPAP records show.
Wagner did not respond to a request for comment. But he told The Virginian-Pilot that he proposed SB 1349 because the EPA’s Clean Power Plan will impose costly pollution standards on Virginia.
The bill has been referred to a subcommittee of the Senate Commerce and Labor Committee that is examining the EPA plan. Wagner chairs the subcommittee.