General Assembly deal sets Dominion profits for two years while overhauling regulatory system

The decision came down to the wire, but on Saturday afternoon Gov. Glenn Youngkin’s office and the General Assembly reached a deal on sweeping legislation to adjust Dominion Energy’s profit margin and reform the state’s system of electric utility regulation.

The bills, carried by Senate Majority Leader Dick Saslaw, D-Fairfax, and House Majority Leader Terry Kilgore, R-Scott, passed the Senate on a unanimous vote, with only one vote in the House — from Del. Dave LaRock, R-Clarke — opposing it.

The bill’s final language, which has been under negotiation all session, will set Dominion’s profit margin at 9.7% for two years. After that, the State Corporation Commission, which in Virginia oversees electric utilities, will have the authority to set the profit margin at its discretion.

Dominion’s current profit margin — the amount it is allowed to earn in addition to the costs of providing service to regulated ratepayers in Virginia — is 9.35%.

Kilgore said the two-year bump was to ensure Dominion would be in a better position to go to the bond market to seek capital to build new generations and provide stability to the company before the SCC takes “unfettered” control.

Among other provisions, the bill resets rate reviews from every three years to two starting this summer and will roll into base rates $350 million worth of rate adjustment clauses or extra charges for specific projects added onto customers’ bills. The SCC has estimated the latter change will lower the average monthly residential bill by $6 to $7.

Dominion will gain the ability to issue about $1.6 billion in bonds to pay for fuel upfront and recover those costs over a 10-year period. The move, known as fuel securitization, is designed to cushion customers from the impacts of spiking fuel costs that could lead to a $17 monthly bill increase for residential customers.

The final version no longer includes language that alters the plant closure schedule set by the Virginia Clean Economy Act, a 2020 law requiring the utilities to decarbonize by midcentury. Instead, it asks the SCC to report on concerns about the reliability of new-generation units and retirement determinations.

The legislation also changes the percentage of excess earnings Dominion is allowed to keep. Currently, if the SCC determines that Dominion overearned, the utility is still allowed to keep 30% of those earnings. The bill decreases that number to 15% for the 2023 rate case and removes for future rate cases a complex legislative framework that prescribes by statute a range of profits within which the company is allowed to earn.

Minority Leader Tommy Norment, R-Williamsburg, said he couldn’t recall a piece of legislation that was “more negotiated” and involved “more participants.”

Both parties praised the final version. Kilgore called it a “well-rounded, good deal for Virginians.” Del. Rip Sullivan, D-Arlington, said, “I’m glad that we took the time we did.”

Youngkin, who has railed against high energy costs and intervened in the negotiations, said the measure was “a big step forward on behalf of all Virginians.”

“I applaud the legislators who took the lead on writing and negotiating this landmark bill, which will save customers money on their monthly bills, restore the independent oversight of the State Corporation Commission, and support the long-term stability of Virginia’s largest electric utility,” he said.

Dominion, too said it supported the bill.

“This legislation is a win for consumers and regulatory oversight,” said Dominion spokesperson Aaron Ruby in a statement. “It will lower electricity bills for our customers, reduce the impact of rising fuel costs and strengthen SCC oversight.”

The reaction varied among environmental and ratepayer groups.

“For far too long, Dominion Energy has wielded its political influence and contributions to write the rules of its own regulation. This year’s legislative session has shown definitively that this era of self-regulation has come to an end,” said Brennan Gilmore, executive director of Clean Virginia, a group created by Charlottesville millionaire Michael Bills explicitly to oppose Dominion’s influence in the General Assembly.

Albert Pollard, a Virginia Poverty Law Center lobbyist, took a more lukewarm approach, criticizing a provision that sets Dominion’s debt-to-equity ratio but saying he thought it was worth accepting with the restoration of SCC oversight after two years.

The Sierra Club of Virginia switched its position from opposing the bill to taking a neutral stance after removing the provision changing the plant closure schedule set by the Virginia Clean Economy Act. Although some of Dominion’s coal and oil plants are already scheduled to retire within the next few years, environmental groups were concerned that altering the timeline would slow efforts to transition to renewable energy.

Despite the bill’s passage, the House and Senate have still not resolved a disagreement over appointments to fill two vacancies on the SCC. With only one remaining member on the body, keeping the seats vacant could prevent the SCC from having a necessary quorum in the future.

“None of this works unless we can reach that compromise,” said Sen. Scott Surovell, D-Fairfax.