The Virginia Electric Utility Act has lowered customers’ monthly bills, will lead to additional refunds, and will ensure consumers are no longer responsible for increases in energy costs caused by external events, like war.
After two years of unpredictable and rising energy costs that strained pocketbooks, Virginia families are set to get some relief on their electric bills, thanks to action from the Virginia General Assembly.
On July 1, Dominion Energy Virginia, which services 2.5 million homes and businesses in the state, lowered the average rates it charges residential customers for electricity by about $14 a month.
This rate reduction was enabled by bipartisan legislation passed during the General Assembly’s 2023 session. The Virginia Electric Utility Regulation Act, which was sponsored by Democratic State Sen. Richard L. Saslaw eliminated about $7 in monthly charges, and allowed Dominion Energy to seek regulatory approval to spread fuel costs over a multi-year period, taking another $7 per month off customers’ bills.
“This bill is full of good ideas that some members of this body have been championing for years,” Del. Sally Hudson (D–Charlottesville) said on the House floor earlier this year, right after the bill passed.
Here’s a breakdown of what else the legislation changes, and how it affects Dominion Energy customers.
Rate Reviews and Possible Refunds
The Virginia Electric Utility Act made it so the State Corporation Commission (SCC), which regulates utilities, insurance, certain financial institutions, and more, will now review rates every two years, instead of three.
During these reviews, Dominion Energy will report their earnings to the SCC, which will then look at what profit level was set for the utility in its previous review, and then determine if the company met that threshold, or over- or under-earned. Dominion will then either adjust rates for customers, or issue refunds if necessary.
The legislation also ditches Dominion’s “earnings collar,” or prescribed profit range, which previously determined how much customers pay. The prescribed profit range defined how much money Dominion was allowed to earn in a given year. Previously, if the company earned within the range, customer rates stayed the same. If earnings were above the range, refunds were issued to customers. If the earnings were below range, rates had to increase.
Without this prescribed profit range, customer rates will no longer be subject to a possible increase should Dominion underperform.
Furthermore, Virginia state law previously allowed Dominion to recover costs associated with severe storm recovery efforts and grid upgrades. If those costs were above a certain amount, Dominion was allowed to recoup them in the future by raising customer rates.
The company used this accounting tool to decrease the amount of excess earnings it had to refund to its customers. Effectively, the new legislation makes it so utility companies like Dominion can no longer use certain loopholes to avoid giving customers their proper refunds.
Additionally, the legislation makes it so that Dominion can only keep 15% of its over-earnings, should they over-earn. The company must then issue the remaining 85% to its customers as refunds. This is a change from previous legislation that let Dominion keep 30% of its excess earnings.
Additional Fees and Base Rates
As the Virginia Mercury notes, customer bills are composed of three types of charges: base rates, the fuel factor, and rate adjustment clauses, or RACs.
Base rates cover the cost of generation and distribution services. The fuel factor is what the utility pays for fuel, like natural gas or coal, which generate the electricity delivered to the customer. RACs are the additional fees tacked onto customer bills that cover the cost of other investments, such as the construction of specific generation facilities or programs like coal ash cleanup.
The Virginia Electric Utility Act makes it so the SCC now has the ability to combine two or more RACs, which lowers customers’ costs, and contributed to the overall decrease in customer rates.
The act also specifies that Dominion can’t request an associated base rate increase to offset the costs of the consolidated RACs in its next review. That specification only applies to 2023, however.
In September, the SCC granted Dominion’s request for an interim rate increase on monthly bills to cover fuel increases caused by the cost of natural gas yo-yoing due to the war in Ukraine.
The Virginia Electric Utility Act includes a “fuel securitization” provision that allows Dominion to issue $1.6 billion in bonds to pay for the fuel upfront, and spread out repayments on those bonds over several years.
This means that customers, at some point, could face minor increases in their bills as the company repays its debt. But for now, Virginians will be saving money thanks to this provision.