Monday, February 19, 2007
Wired up for electricity re-regulation
From the RoundTable blog
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Margaret Edds
Edds is an editorial writer for The Virginian-Pilot.
Landmark News Service
I'm no financial adviser, although "pay as you go" has stood my family in pretty good stead over the years.
But if the electricity re-regulation juggernaut steaming through the General Assembly triumphs, you can take these two words to the bank:
"Buy Dominion."
It's a safe bet that electric bills in a year or two are going to be much higher -- partly because of rising fuel costs and partly due to the emerging regulatory structure.
Unique in the country, the plan limits discretion in rate-making. For decades, the State Corporation Commission set rates based on the cost of providing electricity. Then a few years ago, rates were capped as a prelude to deregulated competition, supposed to begin in 2010.
Now, with competition a bust, the General Assembly is on the verge of adopting a new plan that returns rate-making to the SCC but ties one hand behind its back.
The re-regulation plan has moved from birth to near-adoption in a breathtakingly short seven weeks. In a quarter-century of assembly-watching, I don't think I've seen a bill of such magnitude sweep through with narrower scrutiny or less understanding.
Maybe a half-dozen members could explain what's envisioned for a new era of rate-making. Most of the rest seem happy to trust the details to the attorney general (assigned to protect consumers), the governor (free to propose amendments) and a phalanx of Dominion Virginia Power lobbyists (paid to get their company the best deal possible).
In pages of fine print, the bill decrees that Dominion should be in the top half of peer utilities in allowed earnings. The utility should get to keep millions in over-earnings before consumer credits click in. Rate requests for new construction should be granted regardless of whether the utility is over-earning on generation. The proposed law even sets a minimum award in new-construction rate hearings.
In return, the utility promises to get moving pronto on the multi-megawatts of new generation -- including nuclear -- that the state expects to need over the next decades. Regulatory predictability is the key to making the financing come together quickly, and action is essential this year, Dominion insists.
Is it right? Remarkably, the assembly has made no visible effort to find out.
Eighteen registered Dominion lobbyists -- including two former Cabinet secretaries, two respected former legislators, the former chief counsel to Gov. Mark Warner and one of the state's premier Democratic deal makers -- are assigned to sell the case. I say with awe, and no shock, that they are really, really good.
The record $3.8 million in gifts and donations Dominion has dropped on lawmakers in the last decade, extensive personal connections and the complexity of the subject -- few know enough to argue back -- grease phenomenal success.
This year, they're almost too good. It's a tad unseemly for a change of such magnitude to coast through the assembly slowed by no more than a few peeps and a rare squawk. Here, from this reporter's notebook, is one timetable on re-regulation's march:
April: The electric rates paid by my sister and other Baltimore residents threaten to soar 72 percent as deregulation caps expire. I call Dominion to ask if the same thing might happen here when deregulation flowers in 2010. A roomful of nice PR types assures me that Virginia is nothing like Maryland and, appearances to the contrary, deregulation is working just fine.
November: Reporting on deregulation, which does not appear to be working just fine, I leave unanswered messages for the chairman of the legislature's electric utility restructuring commission. When Sen. Tommy Norment, R-Williamsburg, finally turns up, he's on his way home from a Georgia duck-hunting trip with Dominion's president.
December: Just before Christmas, the electric utility restructuring commission meets. In a surprise announcement, Dominion abandons its decade-long push for deregulation and unveils a so-called hybrid plan. In an instant, the cataracts fall from commission members' eyes. Everyone agrees that deregulation wasn't working.
Mid-January: With dismay growing over the first version of Dominion's hybrid plan, which reduces rate-making to a formula, Norment asks the attorney general's office to set up negotiations. The starting point isn't the old system of SCC rate-making, however, but the Dominion plan. After two intense weeks, a revised plan emerges. The formula is out, and a new set of elaborate guidelines is in. No votes have been taken, and consumer advocates aren't happy, but the new bill is dubbed "the compromise plan."
Feb. 1: A House committee considers the "compromise" and an alternative that would embrace the old SCC model with a few updates. A pivotal moment comes when committee members press Deputy Attorney General Bill Mims to say which is better for consumers. He declines to choose. In effect, that is the final go-ahead for the Dominion concept. The "compromise" sails out of committee with one dissenting vote.
Feb. 5: Del Harvey Morgan, R-Gloucester, a lonely voice against deregulation years back, now a lonely voice against the "compromise," makes an impassioned floor speech against hasty action. Few appear to be listening. The next day's vote is 85-13 in the House, 37-2 in the Senate.
Feb. 8: Several delegates complain that they never heard from consumer advocates on the bill. Irene Leech, the president of the Virginia Citizens Consumer Council, devoted 20 days in January to the bill. She gets no salary and no expenses. In Richmond, she stays with a cousin and pays her own parking. Now, she's back at her day job, teaching at Virginia Tech.
Mims, representing Attorney General Bob McDonnell, who is charged by statute with representing consumers in electricity rate matters, promises that the bill remains a work in progress. "It is on track to become a finished product that does protect consumers."
Stay tuned. The bill won't be law until Gov. Tim Kaine signs it. But in the meantime, if you're into low risk, "Buy Dominion." Odds are, you won't go wrong.
