Why do we need to reform Electric Utility Regulations?

Electric utilities in Virginia operate as monopolies. They have captive customers, weak oversight, and – with some tiny exceptions – no competition.

Dominion and Appalachian Power, Virginia’s two largest utility monopolies, are required to come before the State Corporation Commission (SCC) every three years for a review of their earnings and expenses, known as a “base rate case.” Since neither Dominion nor Appalachian Power has any competition, they are not entitled to unlimited profits under the law. Instead, they are supposed to charge rates that would – if the companies operated appropriately – generate enough revenue for them to cover their costs and earn a fair profit. Importantly, the SCC – and not the utility – is supposed to determine how much profit is “fair.”

However, 2007 utility legislation (SB1416/HB3068) has prevented the SCC from doing its job.  Prior to this bill, if the SCC determined during a rate case that a utility had collected more revenue than it was entitled to, the SCC could refund those overcharges to customers. Currently, the SCC’s authority has been restricted to the point where they are unable to make decisions that fairly balance the interests of utilities with the interests of Virginians. SCC rate cases have been frozen ever since 2015, so electric utility rates haven’t been reviewed in six years.

In short, Virginia’s legislative history of electric utility regulation has been one long story of over-charging customers and kneecapping the SCC.

The General Assembly must act before Dominion’s rate case in March to pass the legislative reforms needed to protect consumers and restore oversight authority to regulators. Otherwise, Virginians will lose out on refunds of the $500 million we’ve been overcharged by Dominion Energy since 2017. Worse still, regulators may not be able to lower our electric bills even if they do find Dominion overcharged customers.

Virginia Electric Utility Overearnings Regulatory Structure – figures from the State Corporation Commission and Dominion Energy investor presentations. Credit: Virginia Poverty Law Center.

Reasons to Support Electric Utility Rate Reform

  • Virginians pay the 6th highest energy bills in the country, bills that are considered unaffordable for 75% of Virginia households based on federal energy burden standards.
  • Dominion Energy customers have already seen their bills increased by more than 25% in the last decade.
  • Dominion Energy has overcharged customers by at least $502 million since 2017. This suggests that rates are already much higher than they should be. As the country continues to face an ongoing public health and economic crisis, Virginians deserve this money back now more than ever.
  • These bills do not not harm the utility. Instead, this suite of bills ensure that customers have the opportunity to get overcharges refunded and have reasonable rates set. The utility continues to keep its base earnings and earn a fair profit.
  • Virginia’s monopoly utilities already gets a market-driven rate of return of $1.78 billion (from 2017-2019).
  • Our system is unbalanced: Virginia’s legislation allows our monopoly utility to overcharge their customers. Proper rate making should rarely result in customer overcharges.

Show Your Support

The Senate Commerce & Labor Committee will hear rate reform bills HB1835, HB1914, HB1984, HB2049, HB2160, & HB2200. Ask senators on the Commerce & Labor Committee to support electric utility rate reform!

Thank you to all of our Partners for their work on these issues, especially Clean Virginia‘s support in providing fact sheets and action alerts.