posted on Monday, January 29, 2007 10:20 AM by Gunnar Birgisson

Old Dominion Considers Regulation Favorable to Dominion Virginia Power

At the instigation of dominant utility, Dominion Virginia Power (DVP), the Virginia legislature is considering legislation that would end nascent customer choice for all but the Commonwealth’s largest retail customers, accelerate lifting existing price caps and guarantee DVP a certain level of earnings and no competition going forward.  Despite the state’s 1999 restructuring legislation, full retail competition has never taken effect in Virginia, because the 1999 law capped through the end of 2010 retail electric rates at levels so low that new entrant suppliers could not compete with the incumbents.

However, the rate impact of the utility’s proposal is unclear.  It offers what is billed as re-regulation to a receptive audience of pols and interest groups who are rightfully concerned over the prospect of big price jumps when the rate caps expire, just as Maryland and Illinois recently experienced when comparable rate caps expired in those states.  In exchange, however, DVP demands an end to the prospect of retail competition and new “regulated” retail rates that would guarantee a high ─ 13-plus % ─ rate of return.  Opponents of the proposal insist that the Virginia State Corporation Commission have some role in setting DVP’s and other utility’s returns to ensure that they bear a greater relationship to risk.  DVP’s proposal would also ensure recovery of costs for new power plants, transmission lines and environmental controls.

Virginia’s potential retreat from retail competition occurs in the context of controversy in states such as Illinois and Maryland regarding the effects of retail restructuring.  Many of these concerns stem from the use of multi-year rate freezes that temporarily disconnected retail markets from increases in wholesale market prices and accustomed customers to artificially low and unsustainable rates. 

Separately, State Senator Mary Margaret Whipple from Northern Virginia has introduced a bill requiring a minimum renewable portfolio standard.  Under the Whipple bill, 12% of the state’s energy would have to be procured from renewable resources by the year 2021.  Another, far less ambitious renewable energy bill calls for legislative committees to study the creation of voluntary programs to increase renewable energy production, but wouldn't entail any mandates for production.