Virginia to consider controversial deregulation proposal again in 2021
The Virginia House of Delegates earlier this month voted to push off consideration of a controversial deregulation policy proposal until 2021.
The House voted Feb. 4 to reconsider the electric utility regulation and retail customer choice bill — initially House Bill (HB) 206, which now has been incorporated into HB 1677 — until its next legislative session, said Rayhan Daudani, manager of media relations at Richmond, Va.-based Dominion Energy Inc., Virginia’s largest investor-owned utility.
“Deregulation would be a big step backward in Virginia, which is making progress on renewables,” Daudani told Daily Energy Insider during a recent interview. “This seems at odds with what the Commonwealth is trying to achieve and with what customers are telling us they want.”
Both Dominion Energy and Appalachian Power Co., another regulated utility in Virginia, both have come out against the proposal, which would replace the Virginia Electric Utility Regulation Act with a system under which retail customers could purchase electricity from the retail electric provider of their choice.
If enacted, HB 1677 would require each incumbent investor-owned utility, electric cooperative and municipal electric authority to file with the State Corporation Commission (SCC) a plan detailing how it will separate its customer energy services business activities from its regulated utility activities, both by predetermined deadlines.
Additionally, the proposed bill stipulates that each company would have a deadline to separate its business activities into an electric distribution utility, an electric transmission utility, a power generation company, and a retail electric provider, or into a single electric transmission and distribution utility, according to the bill’s summary in the Virginia Legislative Information System.
Such separation, the summary says, may be accomplished by creating separate investor-owned companies, cooperatives or municipal electric authorities or through the sale of assets to a third party.
The measure also would provide consumer safeguards, including requirements that a retail customer have the right to choose a retail electric provider and to have access to providers of energy efficiency services, to on-site distributed generation, and to providers of energy generated by renewable energy resources, according to the bill’s summary.
One nationally recognized energy policy expert agreed that Virginia HB 1677 isn’t a good idea.
“In my opinion it would be bad policy all the way around, but especially for residential and small business consumers,” said Anthony “Tony” Clark, a senior advisor with the Washington, D.C., law firm of Wilkinson Barker Knauer LLP, whose clients are in the energy and telecommunications industries.
“We don’t have to guess how it will turn out, because there is ample evidence around the country,” said Clark, a former commissioner with the Federal Energy Regulatory Commission and previously a chairman and commissioner with the North Dakota Public Service Commission.
Clark told Daily Energy Insider in an email that almost every state that has deregulated has been in the process of fleeing the model.
“Some explicitly repeal deregulation, others tacitly re-regulate their utility sector,” he said. “Either way, it seems strange anyone would think deregulation would, by some miracle, turn out differently in Virginia than everywhere else.”
Specifically, Clark said that two of the most immediate impacts would be higher electricity bills and increased consumer fraud if HB 1677 is enacted by the Virginia General Assembly in 2021.
“Virginia is presently a low-cost electricity state. It is, however, in close proximity to a number of higher cost deregulated states like Maryland, Delaware and Pennsylvania,” Clark explained. “When a low-cost state deregulates its utilities into a regional market where other states have higher costs, customers’ bills in the low-cost state rise up to meet the high-cost states, not the other way around.”
And regarding consumer fraud, Clark pointed out that deregulation would allow third-party electricity supply marketers to enter the state. And that’s not a good thing.
“Deregulated states have had chronic consumer protection problems with this sector,” said Clark. “It is often vulnerable populations like the elderly that are targeted by marketers that promise big savings, only to stick customers with electricity bills far in excess of what they would have paid had they stayed with the traditionally regulated utility.”
Additionally, Clark said numerous states around the country have initiated multimillion-dollar enforcement actions to rein in the worst abusers. “As a result, public officials and consumer advocates in places like Connecticut have called for the outright elimination of the third-party electricity supply market,” he said.
Daudani, Dominion Energy’s spokesman, said the utility is regulated so consumers wouldn’t have to worry about such problematic marketers.
Daudani also said that the Grid Modernization and Security Act, which the General Assembly adopted and Gov. Ralph Northam signed in 2018, already provides statewide comprehensive reform that “transforms the grid.”
For example, he said Dominion and PEPCO had to submit grid transformation plans to the State Corporation Commission under the bill, which overall will help ensure that most future customer refunds will pay for modernizing the electric grid and investing in renewable energy and conservation over the next decade.
Dominion in 2018 worked to negotiate the state law with Northam, environmental stakeholders and consumer groups, hailing it as landmark policy that provides a road map for Virginia’s secure, smart, clean energy future, one that’s balanced by solar, wind, natural gas and emissions-free nuclear energy.
The law also found that the generation of more than 5,000 megawatts of electricity from new renewable energy projects is in the public interest, a policy that Daudani called aggressive and pro-renewables.
“So, it feels like there isn’t justification for deregulation in the Commonwealth,” he said, “and it seems odd this deregulation push is coming back again” in HB 1677.
