Virginia’s regulatory model is making it possible for Dominion Virginia Power to invest billions of dollars in improving reliability and meeting the growing energy needs of its customers while keeping electric rates lower than they were in 2008, Dominion's Robert M. Blue told a committee of Virginia legislators on Dec. 17, 2012.
A senior vice president-Law, Public Policy & Environment, Blue was invited to address the General Assembly’s Commission on Electric Utility Regulation (CEUR) along with a representative from Appalachian Power.
Blending tried and true methods with new approaches to promote a secure and reliable energy system, Virginia has adopted an electric industry regulatory structure designed to meet the Commonwealth's growing need for power in the 21st Century.
In April 2007, the General Assembly overwhelmingly approved and Gov. Tim Kaine signed bills setting up the new regulatory system. The legislation protects consumers by reaffirming the State Corporation Commission's authority to set electric rates. It also works to promote a sound energy future for Virginia by creating incentives for construction of needed new power stations — particularly those using environmentally friendly technology. And it contains strong incentives for utilities to operate more efficiently.
The General Assembly's action brought to an end Virginia's eight year experiment with deregulating its electric industry. Backers of deregulation expected the energy market to do a better job of holding down prices and promoting development of new generation sources than the old "cost of service" system of regulation.
But many states — including nearby Maryland and Delaware — saw rates skyrocket when the temporary price controls that were features of their deregulation plans expired. And deregulation failed to provide investors with the financial certainty they needed to invest billions of dollars in new power stations.
So the General Assembly — with Governor Kaine's concurrence — acted to avoid the problems that plagued other states. Here are some of the major points.
Under the plan, not one cent can be added to customer rate without the SCC's approval. With a few modifications, the Commission will have the powers it historically exercised before Virginia's deregulation process began. The SCC will have sweeping authority to set rates and review the books, records and costs of utilities — on a frequent and predictable schedule.
The plan helps ensure a reliable energy future for Virginia by providing incentives for construction of new power stations. The Commonwealth's utilities will have the opportunity for higher authorized rates of return for major generation projects, especially those using nuclear, clean coal and renewable energy technology. This will help attract the billions of dollars in capital needed for these projects from highly competitive financial markets.
The plan recognizes that Virginia must meet its growing energy needs in an environmentally responsible way. It sets up a program to expand dramatically the use of renewable resources to meet the Commonwealth's demand for electricity. It creates an ambitious goal to reduce electricity consumption by retail customers in 2022 by 10 percent of the amount consumed in 2006.
And it gives all retail customers, statewide, the right to buy "green" power from their incumbent utilities - or, from competitive suppliers, if their own utility fails to make such an offer.
The new plan also promotes greater operating efficiency by Virginia utilities by allowing the companies to keep some of the earnings produced by superior operations — and authorizing the SCC to reward or penalize utilities, based on their performance. By blending the best of the old and the new, Virginia's "hybrid" regulatory plan works to ensure that the Commonwealth has the affordable, reliable power it needs to maintain its vigorous economic growth in the future.
The State Corporation Commission (SCC) has approved the resolution of several electric rate cases that result in benefits to Dominion Virginia Power customers of $726 million. Additionally, customers will receive a refund of higher interim base rates in effect since September 1, 2009 that could exceed $145 million, and refunds in two rate adjustment clauses that could exceed $9 million. The company's base rates will remain the same through December 1, 2013, while fuel and other rates may change during this period.