The current laws regulating Virginia’s electric utility monopolies restrict the ability to manage a clean energy transition that is both effective at combating climate change and affordable for Virginians. The State Corporation Commission (SCC) is responsible for keeping electricity prices fair and reasonable, but current law restrictions, including an arbitrary cap on rate reduction and constraints to address key accounting matters, have limited the SCC’s ability to protect Virginians from excessive energy bills. In this upcoming legislative session, it is crucial to eliminate these restrictions and allow the SCC to set fair electricity rates so that Virginia’s transition to clean energy is just and affordable.

Virginia made history in 2020 with the Virginia Clean Economy Act, which puts the Commonwealth on a path to be 100% powered by clean energy. It is critical this transition does not burden families and small businesses with needlessly high bills especially as the cost of renewable energy falls daily nationwide. The rate case is the best tool to ensure that Dominion Energy and Appalachian Power Company, the utilities responsible for powering most of Virginia, do not exploit the climate crisis at the expense of ratepayers. During this regulatory process, the SCC establishes the rates a utility should charge to recover its costs and earn a fair profit.

As a result of more than 14 years of restrictions to adjust rates, Virginians are paying the sixth highest electricity bills in the nation, bills that are unaffordable for 75% of Virginia households.

Historically, the SCC could order rate cuts if utilities overcharged customers. Unfortunately, these powers have been stripped away over the years. As a result of more than 14 years of restrictions to adjust rates,¹ Virginians are paying the sixth highest electricity bills in the nation,² bills that are unaffordable for 75% of Virginia households.³ Because of legislation that allows Dominion Energy to essentially regulate itself, the utility has overcharged Virginians by $1.3 billion since 2015.⁴ These massive excess profits have real financial impacts for Virginians and hinder our ability to have a fair and affordable clean energy transition.

The SCC must be able to ensure that electricity rates are reasonable and that electric utility monopolies, with captive customers and no competition, do not charge unfair prices at a time when Virginia is making massive investments in new clean energy and shuttering fossil fuel plants. In the last two years, a broad group of bipartisan advocates and legislators have proposed strong solutions to give back to the SCC tools to prioritize rate affordability.

Proposals included eliminating the unmerited bonus profit in the code of 0.7% above the authorized profit level that amounts to hundreds of millions of dollars, as well as utilities keeping 30% of overcharges that should be refunded to customers. Another set of ideas included giving back to the SCC the authority to determine reasonable amortization periods for investments; current law allows electric utilities to unilaterally determine cost recovery periods that impede rate reductions. Different proposals have been studied and widely supported by the House of Delegates. The next legislative session is yet another opportunity for the General Assembly to strengthen SCC oversight over electric utilities to make sure the clean energy transition is affordable and equitable.

1 The Electric Utility Regulation Act of 2007 only allowed the SCC to decrease rates if a utility overcharged in two consecutive rate cases. Although the SCC found that Dominion overcharged in two consecutive rate cases (2011 and 2013), electric utility monopolies successfully lobbied for a new law that would prevent a rate decrease. HB 2261 allowed Dominion to expense $400 million of storm-related costs in only one year instead of spreading costs out. This artificially disappeared overcharges and prevented the SCC from decreasing rates. Later in 2015, SB 1349, the so-called “Rate Freeze Law”, completely suspended revenue oversight and froze rates at artificially high levels for six years until the 2021 rate case. In 2018, the Grid Transformation Act included a provision restricting the SCC from decreasing rates by more than $50 million dollars, despite analysis showing the need for a greater decrease. As a result of this flawed regulatory history, the SCC has never had an opportunity to set fair rates based on the industry-standard cost-of-service method since 2007. In fact, base rates have not changed since 1992.

2 Electricity Sales, Revenue, and Average Price, Table 7.5(a). Energy Information Agency. (October 6, 2020). https://www.eia.gov/electricity/sales_revenue_price.

3 Electricity Burden and the Myth of Virginia’s Rate Utopia. Virginia Poverty Law Center (August 15, 2018). https://vplc.org/electricity-burden-and-the-mythof-virginias-rate-utopia.

4 The Dominion Scam : How a Utility Monopoly Overcharged Virginians $2 Billion (and Got Away with It).” Clean Virginia (January 2020). https://www.cleanvirginia.org/wp-content/uploads/2020/01/The-Dominion-Scam-Report.pdf.

5 Drehobl, Ariel, Lauren Ross, and Roxana Ayala. How High Are Household Energy Burdens? An Assessment of National and Metropolitan Energy Burdens across the US, American Council for an Energy-Efficient Economy (September 10, 2020). https://www.aceee.org/research-report/u2006.

6 Virginia SCC – New Releases, Virginia State Corporation Commission, June 4, 2020). https://www.scc.virginia.gov/newsreleases/release/SCC-SeeksComments-on-Dominion-Energy-Virginia%E2%80%99s-I.