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Electricity Regulation in Virginia: A Timeline

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When it comes to energy regulations, not all states are created equal. With so many laws and policies controlled at the state level, energy consumers in one zip code may be living by very different rules than the one next door. 

In areas with traditionally regulated electricity supply, utilities exclusively power homes and businesses – and control the prices. But many states have or are going through a process of electricity restructuring. It shifts the power to consumers to choose their electricity supplier, also known as a commodity service provider. 

Think of shopping for an electricity supplier like choosing an internet provider or cellphone carrier. Consumers have different price and coverage options depending on location and budget. You have more options, and energy suppliers have to compete for your business. Living or doing business in a state with regulated supply would be like paying for a government-mandated internet or cell phone service – your coverage and price choices are limited, and you don’t get the benefits of market competition and innovation. 

Surprisingly, perhaps, less than half of U.S. states have energy choice, though the list of restructured states is trending upward due to the benefits. 

And benefits extend beyond the happiness of individual consumers. A recent University of Pennsylvania Kleinman Center Study found wide-ranging benefits from competitive markets, including economic ones.  According to the study, electricity competition is injecting $818 million per year in economic benefits to Pennsylvania’s economy.

With the benefits so clear in their neighboring state, what about the Commonwealth of Virginia? 

Virginia has a primarily regulated power market, with a few exceptions. For years, legislators have been debating about the best role for electricity suppliers in their state. 

To help you understand the history and current environment, check out our timeline below of the regulation/restructuring/reregulation saga. 

We think it’s pretty clear why there needs to be a change.

Prior to 1999:

Virginia’s electric utilities were regulated under a state code (i.e. Chapter 10 of Title 56). Basically, it specified that the State Corporation Commission (SCC) could set base rates for electric utilities depending on their service costs. This way, utilities couldn’t overcharge customers, even though they held a monopoly in Virginia’s electricity market. 

1999: 

Virginia’s General Assembly passed a law restructuring the power market, which allowed retail energy providers to enter it. Virginia was on its way to becoming deregulated, along with most of the northeast.

2000:

A pilot program, Project Current Choice, was created to phase in retail electricity suppliers, with the intention to become fully deregulated by 2004. Unfortunately, the General Assembly became uncomfortable with the level of competition and, feeling the pressure from utilities, began to reregulate electricity.   

2007:

Virginia’s General Assembly passed the “Re-Regulation Act” which gave the SCC less power to keep the major investor-owned utilities, APCo and Dominion, from overcharging customers. The act scaled back competition for most consumers, with three exceptions.

The first exception was for large commercial and industrial consumers (over five MW annually), who could purchase non-renewable or system electricity from retail suppliers. The catch? If they wanted to return to the utility, customers were required to give five years of advance notice – a time frame far longer than any other state. Such rules historically deter consumers from choosing a retail supplier at all.

The second exception allowed all consumers to purchase 100 percent renewable electricity from an independent supplier. Once again, however, the legislation added a loophole. If a utility company procured an approved 100 percent renewable energy tariff1, customers were required to return to the utility at the end of their contact – even if they preferred to stick with their independent supplier. 

As of this writing, neither APCo or Dominion have approved tariffs consisting of 100 percent renewable energy. 

Finally, smaller commercial and industrial customers under 5MWs could aggregate their accounts to reach the 5MW shopping threshold. Unlike other states, however, which would allow these smaller customers immediate access, Virginia created a unique barrier. Upon aggregation, small customers would also need to seek regulatory approval to shop by filing a petition with the SCC.

2013 and 2014: 

The Re-Regulation Act was amended several times to change how APCo and Dominion calculated their earnings during biennial reviews conducted by the SCC. 

As stated in Principles of Electric Utility Regulation in Virginia by Greene Hurlocker Attorneys at Law:

"Two major amendments to the law required the SCC to allow APCo and Dominion to recover certain costs from customers during a particular earnings review period. These laws reduced the utilities’ reported earnings, and thus limited the SCC’s ability to reduce rates or order the utilities to disgorge some of their overearnings.” 

According to the Virginia Attorney General’s Office, this 2014 amendment allowed Dominion to collect $188 million in additional over-earnings.

2015:

Another amendment made to the Re-Regulation Act prohibited the SCC from reducing APCo’s or Dominion’s rates by multiple years, even though the SCC determined that they were overcharging customers. Feeling the weight of high electricity prices, customers lobbied to repeal the 2007 act, but the motions were denied. 

Additionally, the General Assembly froze base rates because, according The Roanoke Times, “the utilities argued they faced uncertain future costs related to former President Barack Obama’s Clean Power Plan and consumers needed to be protected from those.”

But it didn’t protect customers. As stated in the Richmond Times-Dispatch, this “controversial 2015 legislation, passed amid fear of federal carbon regulation, that locked in base rates that allowed Dominion and Appalachian Power to pull in hundreds of millions in excess earnings and prevented state regulators from ordering refunds for customers.”

2017 and 2018:

The SCC released a report stating that in 2016, APCo earned excess profit of approximately $28 million and Dominion approximately $252 million. That’s a 21 percent to 43 percent price markup from their retail supply costs – the highest electricity price premiums compared to adjacent states in the PJM region.

The General Assembly adopted “The Grid Modernization and Security Act” in 2018, which, as stated in the Richmond Times-Dispatch, “will ensure that most potential customer refunds in the future will pay instead for the costs of modernizing the electric power grid and investing in renewable energy and conservation over the next decade.” 

While this act supports great initiatives, including adoption of renewable power and energy efficiency initiatives, Dominion and APCo will still continue to increase customer bills.

According to the Richmond Times-Dispatch, “the act would allow utilities to charge one-time costs against earnings in future rate periods, reducing potential refunds and the possibility of lowering base rates in three-year reviews that won’t begin for Dominion until 2021.” 

“‘The big losers were the customers," Assistant Attorney General Matt Gooch said at a recent energy forum on the law, noting that he was speaking for himself and not for his office.”

On behalf of current and prospective customers, Direct Energy sought to clarify shopping rules in Virginia – and was the only retailer to do so. The first step was to file a “Petition for Declaratory Judgement” before the SCC regarding the rules of electricity shopping. The resulting SCC ruling closely aligned with a pro-market interpretation, a position also shared by environmental advocates. 

The utilities then appealed the SCC decision and were denied, prompting them to appeal it to the Virginia Supreme Court. The Supreme Court reaffirmed and upheld the SCC decisions. This decision offered the much-needed clarity on shopping rules that Direct Energy requested, and makes it easier for customers to secure renewable power from suppliers.  

Legislative Efforts and What You Can Do

In 2018, Virginia House Delegate Mike Mullin (D) and Senator David Suetterlein (R) introduced important bi-partisan legislation to foster competitive markets. The bills continue to receive awareness and interest is growing from customers and stakeholders alike to amend the statute and allow customers true choice of energy supplier.   

Highlights of House Bill 1528 and Senate Bill 837:

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

  2. Reduce the “Shopping Eligibility” threshold for individual and aggregated customers from 5 MW to 1 MW 

  3. 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

Please contact Governor Northam, your Senator and your Delegate today to express strong support for amendments like these that can foster growth of competitive markets and renewable energy.

1An electric utility tariff provides the terms and conditions of a service, including the price per kWh.

Posted: October 04, 2018

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