Electric Rate and Review Freeze – Not Such a Clearly Positive Picture

Monday, March 27th, 2017


Dominion’s recent OpEd, “Why Dominion’s electric rate freeze in Virginia is good for residents” doesn’t provide a full picture of how the freeze is affecting electricity bills in Virginia.  The Virginia Poverty Law Center is concerned that Dominion’s “rate freeze” has the potential to hit Virginia’s most economically vulnerable consumers the hardest. An electricity consumer’s bill is comprised of lots of parts.  The “base rate”, the part that was frozen, is only one part of the consumer’s bill.  Other charges are added to the base rate:  charges for distribution and fuel, rate adjustments (of which there are many), recovery for costs the utility incurs for storm responses (new under the 2015 legislation), and other costs are added to the “base rate” to comprise the entire bill.

The 2015 law passed by the Virginia General Assembly prevents the State Corporation Commission from reviewing Dominion’s base rate for electricity usage-it’s frozen (until 2020 for Appalachian Power Company and 2022 for Dominion).  However, none of the other charges that are added to the base rate have been frozen. In fact, 2015 and 2017 legislation added additional charges that could be added to the base rate, meaning those charges and rate adjustments were not frozen either. By law in Virginia, Dominion is guaranteed a “reasonable” return or profit. The SCC staff historically does a periodic complex analysis of many different factors to determine what are reasonable returns, and if the SCC analysis determined that Dominion was “overearning”, Dominion would be required to adjust the base rate to “refund” those overearnings to their customers. The last SCC analysis found that both Dominion and Appalachian Power were overearning but the base rate has been frozen, and so have the rate review analyses, so the SCC cannot adjust the base rate and refund the overearnings to the customers.  All consumers will be stuck paying higher utility bills for this extended period with no possibility of relief.

We appreciate the programs that Dominion and other utilities have instituted to assist many who cannot afford their utility bills. These programs are a big help to some customers in the short term, but we would also like to see the utilities invest much more into longer-term, sustainable programs that help stabilize bills and move toward more affordable bills instead of short-term assistance. We believe more significant investments in energy efficiency programs, particularly those that address specific needs for low-income renters and homeowners, can reduce consumer’s ongoing monthly bills into the future. A 2016 study showed that lower-income households pay a disproportionate amount of their monthly incomes for utility costs, nearly twice the percentage of median income households. Establishing affordable and stable monthly utility bills benefits all Virginia ratepayers, not just the lower income households. Unfortunately, the 2015 legislation isn’t a stabilizer, it leaves bills more in flux, and between now and 2020 when the “freeze” is supposed to end, there is always the possibility that storms or rate adjustments can add to bills well into the future. The base rate and review might be under a freeze, but most consumers will not see bills that are frozen in place, nor will they likely see a return of funds overspent on electric utilities anytime soon.

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