State lawmakers are moving closer to restoring the regulation of electric utility rates thanks to a new compromise brokered by Gov. Ralph Northam, which would reverse the controversial “rate freeze” law from 2015 and even force Dominion Energy to bury a troubled power line through western Prince William County.
Northam, a Democrat, rolled out a new proposal on the issue Feb. 5 after working with lawmakers and utility company representatives, and it quickly passed a state Senate committee to head to the floor for a vote. A similar bill in the House of Delegates is awaiting committee review.
In essence, the complex legislation will once again let regulators with the State Corporation Commission adjust the base electric rates of state-regulated monopolies (like Dominion).
The SCC used to evaluate whether utilities earned a fair profit on the rates they set (and awarded refunds to customers if regulators found the companies were overcharging people), but Dominion successfully argued for a freeze on that process in 2015 by citing uncertainty around costs associated with the Obama Administration’s “Clean Power Plan.” Regulators determined that the company has used the freeze to earn hundreds of millions of dollars in excess profits, and Northam’s new proposal would send roughly $200 million back to Dominion customers to compensate for those earnings.
“This compromise puts more money in ratepayers’ pockets, ensures real oversight of utility rates, paves the way for significant upgrades to Virginia’s electrical grid and mandates historic investments in energy efficiency and clean power,” Northam wrote in a statement.
Indeed, the legislation would let the SCC review rates once every three years, and direct utilities to invest any excess profits in things like renewable energy programs or efforts to modernize the electrical grid. But regulators wouldn’t be able to force the company to refund those profits to consumers after this year, a provision that’s irked some consumer advocates and lawmakers of both parties.
“This results in lower rates for consumers and in hardening the grid,” Sen. Frank Wagner, R-7th District and a patron of the Senate legislation, said in an interview. “It’s about the art of compromise. Is everybody going to be happy? Absolutely not. But they’re starting to go along with it.”
Yet the legislation also contains a key sweetener for Prince William County lawmakers: a provision forcing Dominion to build a planned 230-kilovolt power line underground on a route stretching through parts of Haymarket and Gainesville. People living along its proposed path have spent years protesting its construction over fears of its impact on the environment and nearby property values, and Del. Tim Hugo, R-40th District, successfully worked to include the undergrounding provision in early versions of the rate freeze legislation.
Wagner says he became “very familiar” with the concerns of people in Prince William about the project as he mounted his bid for the Republican nomination for governor last year. Accordingly, he had no problem working with Hugo to fold the provision into the legislation and he was pleased to see Northam preserve it in the compromise proposal.
“Certainly one aspect of hardening the grid is burying these key power lines,” Wagner said. “So we need to start looking at transmission lines, these high-voltage lines you see running all over the state and this is one case where it makes sense.”
Yet, as much as many western Prince William lawmakers oppose the power line project, that doesn’t mean they’ll jump on board with this version of the rate freeze simply due to the undergrounding provision. Del. Lee Carter, D-50th District, and Sen. Jeremy McPike, D-29th District, are among the Democrats who are wary of any proposal that restricts the SCC’s ability to offer refunds to consumers going forward.
“It’s not only about how much people are getting back with that first refund check, but it’s about making sure they get more refund checks in the future,” Carter said.
Even Northam’s own attorney general, Democrat Mark Herring, has expressed concerns about the bill. Herring’s office and SCC staff both told lawmakers Monday that they fear the legislation would let the company “double dip,” by directing excess profits into equipment improvements, then raising rates to compensate for those very same improvements.
"These policy initiatives can be achieved without the unusual ratemaking restrictions that are imposed by this legislation," Deputy Attorney General Samuel Towell told a Senate committee Monday.
Wagner dismissed those concerns succinctly: “Naysayers are going to say nay.” He believes the legislation won’t allow for any sort of double charging by the company, and he’s confident that the compromise bill has enough support to make it to Northam’s desk.
“Now that we have some certainty in the direction of the Clean Power Plan, let’s take the opportunity to move forward and make an investment in our infrastructure,” Wagner said.