What Virginia has to Gain by Restructuring the Electricity and Renewable Energy Markets

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Virginia’s electricity and renewable energy markets are changing dramatically. Over the last 20 years, state legislators, with input from regulated utilities, have introduced and amended numerous changes that impact the electricity and renewable energy markets. 

Market changes due to government regulations are nothing new in the energy industry. Suppliers and customers across the country face rules that are constantly evolving, from pricing and risk management to safety and infrastructure.

But in Virginia, much of the hybrid electricity market remains closed to retail electricity suppliers due to significant deterrents and barriers to entry. Some stakeholders support existing legislation, claiming that it’s in the best interest of Virginians; but we’re not convinced that it is. In fact, many decisions promote the utility monopoly that currently provides electricity for most of the Commonwealth. 

Energy Regulation in Virginia

For a play-by-play of the history of restructuring, check out our recent post. 

What’s most important to know is that legislation previously passed by Virginia’s General Assembly significantly removed oversights over the utility monopoly – and that likely means higher costs for consumers. 

For example, the Virginia State Corporation Commission (SCC) no longer has the power to consistently review rates or earnings, once again opening the door for utilities to overcharge customers. In 2016, Dominion brought in excess profit of approximately $252 million due to a 43 percent price markup on retail costs.

Adjacent states including Pennsylvania, Ohio, Maryland and New Jersey all enjoy energy markets in which prices are checked and balanced by commercial retailers who compete for consumers’ business – and they’ve been operating this way for years. 

88 percent of Virginia voters support having a choice of electricity provider. But unfortunately many lawmakers move slowly, most likely due to the stifling influence of utility monopolies. 

If Virginia restructures their electricity market, it’s a win for everyone who uses electricity or supports renewable energy options. Here are four reasons why:

1. Lower Electricity Costs

If the state restructures the market, commercial electricity suppliers will be allowed to sell competing power plans in Virginia, and do so at competitive prices that reduce monthly energy bills.

Consider that when you account for base rates and numerous riders, Virginia’s utility providers, Dominion and APCo, currently charge 20 to 40 percent higher (or more) than the costs to procure electricity. It’s what lead to Virginia’s astronomical electricity premiums, which price out as the highest in the PJM region, compared to adjacent states (Delaware, Washington DC, Maryland, Ohio and Pennsylvania).

They get away with it because consumers have no other option.  With the entrance of retail suppliers, like Direct Energy Business, consumers would no doubt enjoy lower cost alternatives.

And restructuring has a larger impact than reducing your monthly bills – it can also boost the economy. When energy costs go down, the Commonwealth becomes a less expensive – and therefore more attractive – place for existing and new businesses to operate.  For example, according to a study from University of Pennsylvania Kleinman Center, electricity competition is currently injecting $818 million per year in economic benefits to Pennsylvania’s economy.

2. Power of Choice

A change in the energy market means freedom of choice for consumers – choice about who supplies your power, how long your contract is, and what rate you’re paying. Competitive suppliers can generally offer consumers a greater variety of customized solutions. Options like flexible pricing, terms, services, and billing are valuable for businesses, particularly those with large loads that require strategic management. 

But perhaps even more importantly, a restructured market sets the industry up for a dynamic future. Competition gives energy retailers a strong incentive to innovate. By developing new technology and services, and improving existing ones, suppliers can set themselves apart, attract new customers, and retain existing ones. 

All of this means an even greater level of consumer choice in the long term.

3. Faster Transitions

Today, there is a handful of Virginia businesses that meet the criteria to purchase energy from an independent supplier. But even these consumers are still limited by an unusually restrictive regulation:

If consumers that have left the utility ever want to return, those that want non-renewable energy are required to place an advance notice of five years before they return.  

Five. Years.

To put that into context, a large energy utility in Pennsylvania, PECO, requires just three days of advance notice. In Ohio, the Public Utilities Commission recommends up to thirty days, though it takes just three days to set up service. 

Virginia’s extreme waiting time goes far beyond industry standard, almost entirely defeating the purpose of opening the market. It deters both suppliers from entering the market and customers from switching. 

Proposed legislation would reduce the advance notice requirement to a maximum of 3 months – a wait time similar to neighboring states. 

4. Renewable Energy Flexibility 

Virginia’s current energy regulations create precarious limits for renewable electricity. 

Consumers are permitted to choose independent suppliers for a 100 percent renewable product. But there’s a catch: if the utility proposes and receives regulatory approval for a 100 percent renewable energy tariff, independent suppliers must stop selling to new customers. And not only that, all renewable energy consumers may be obligated to return to the utility when their current contract expires, regardless of differences in price, plan or service-level.  

Such compulsory laws drive renewable energy retail suppliers away from even entering Virginia’s market, as the risks may outweigh the opportunity. Because of this, there are few renewable energy options available in Virginia for businesses that desire them.

A restructured electricity market would offer consumers true security with the renewable energy supplier of their choice, and increase the Commonwealth’s attractiveness for new renewables suppliers to enter the market. 

What Virginians Can Do

2018 bipartisan legislation is leading the way to a restructured energy market in Virginia. 2018 Bi-partisan House Bill 1528 (Mullin) and Senate Bill 837 (Suetterlein) proposed to:

1. Reduce the advance notice to return to utility service requirement from 5 years to 3 months.

2. Give consumers true choice by allowing competitive suppliers like Direct Energy Business to sell 100 percent renewable energy to customers, even if the incumbent utility offers its own renewable tariff.

Contact Governor Northam, your Senator, or your Delegate to express your support for legislation like the bills listed above that can create growth in competitive markets and renewable energy.

You can also get in touch with us today to learn more about the opportunity to choose your energy supplier.

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Posted: November 08, 2018