By Christen Smith
In a ruling that highlights growing rifts in Virginia’s electricity sector, the State Corporation Commission rejected Costco’s bid to buy power from utilities across state lines, saying that keeping the retail giant a customer of Dominion Energy best serves the public interest.
The SCC ruling handed down June 1 prevents the company from aggregating its total electricity consumption to take advantage of a 2007 state law that allows large-scale customers with a peak demand of 5 MW or higher to shop around for suppliers The law provides the SCC with broad discretion for how to apply it.
While the commission agreed with Costco’s contention that Virginia’s regulatory framework supports unjustified rate hikes, it shifted the burden onto the state legislature to solve the issue of rising energy costs.
The SCC noted Dominion’s “rate-captive” customers have faced “a decade of rising rates and the likelihood of even higher rates in the future.” Allowing Costco to abandon Dominion under existing rules, the commission said, would force other ratepayers to make up the $1.57 million in lost annual revenues.
Although the state law enshrines an “escape valve,” the SCC determined it unfair for Costco to save money “at the expense of other customers.”
“This Commission will not allow small customers who cannot escape this structure, predominantly small businesses and residential customers, to be further burdened by the identified cost-shifting that will occur if larger customers like Costco choose to seek better deals for themselves outside of Dominion’s system,” the SCC wrote.
Costco argued “a wave of commercial customers leaving the utility through aggregated retail choice” would encourage Dominion to stop hiking prices to fund expensive system upgrades — often incompatible with clean energy goals. The commission denied Walmart’s request in February, while petitions from Target, Kroger, Harris Teeter and Cox Communications remain outstanding.
In the filing, a Costco witness accused Dominion of “over-earning on its frozen base rates for a number of years,” creating an “enormously frustrating” incentive “to keep what I view as the customer’s money.”
Costco’s comments underscore the rising tension between retail choice advocates and Dominion Energy, Virginia’s dominant utility company and most generous corporate campaign donor. Last month, a coalition of unlikely allies launched efforts to bust up the company’s monopoly — more than a decade after state lawmakers officially abandoned the deregulated electricity market design — insisting its well-funded lobbying efforts leave ratepayers footing the bill for wasteful infrastructure spending. (See Va. Group Seeks End to Dominion Monopoly.)
Dominion contributed more than $452,000 to state candidates and committees last year, according to the Virginia Public Access Project, making it the commonwealth’s largest campaign donor within the energy sector. That same year, the utility also advised lawmakers on an overhaul of its regulatory framework that allowed it to invest a larger share of revenues in new projects, rather than refunding customers for “overpayments” — as the SCC often made the utility do in years past.
Greg Morgan, Dominion’s general manager of regulatory affairs, said companies only began using the aggregation clause to pursue retail choice last year, despite its existence since 2007.
The utility also defended its infrastructure investments during an interview Tuesday, citing plans for six new solar facilities with a combined 350-MW capacity in Virginia and North Carolina, scheduled to come online in 2020. Dominion also supports cutting greenhouse gas emissions in half over the next decade and by 80% by 2050.
When it comes to the SCC’s decision, Dominion agreed it best protects customers from the shifting burden of costs while still supporting the diversification of the utility’s energy portfolio to include more renewable resources. Le-Ha Anderson, a Dominion spokesperson, said the company offers many different rate structures for customers unhappy with costs — a much more reasonable alternative than leaving the company altogether.