Virginia Explained: What does it mean to be ‘in the public interest’? And what does that have to do with offshore wind?
Q: What do 5,000 megawatts of solar and wind energy,1 the building of a new coal-fired power plant in Southwest Virginia,2 the creation of the Fort Monroe Authority3 and the development of intercity passenger rail4 have in common?
If you’ve heard the phrase “in the public interest” being batted about among lawmakers or policy wonks, you could easily be forgiven for thinking it was just another rhetorical flourish. But in fact, this benign-sounding phrase carries an extraordinary amount of power in Virginia law, especially when it comes to energy. Here’s four things to know about why those four little words are showing up in so many bills this session.
1. When the General Assembly declares something to be in the public interest, it’s ordering the various arms of the state to make sure it happens – sometimes no matter what.
Declaring that an action is in the public interest is a mechanism used by the legislature to ensure a particular policy goal comes to fruition.
Much bureaucratic decision-making relies on agencies carrying out studies or gathering data to determine the best course of action on a particular issue, whether “best” is defined in terms of cost, efficiency, equity or some other yardstick. The “in the public interest” approach rejiggers that process by determining the outcome first and then leaving it to agencies or other entities to figure out how to get there.
At a basic level, said Will Cleveland, an attorney for the Southern Environmental Law Center who often has cases before the commission, declaring some action to be in the public interest is just a way of setting public policy.
“The concept that the General Assembly would determine what the public policy of the commonwealth is, is not offensive. That is their job,” he said. “If they think that certain things benefit the public, they have the authority to do so.”
2. Bills declaring actions in the public interest have been an effective tool for legislators looking to set energy policy.
The legislature has found “in the public interest” bills particularly useful when it comes to energy. That’s because they offer one of the most direct routes for lawmakers to intervene in decision-making largely carried out by another body: the State Corporation Commission, which oversees the main producers and providers of Virginia’s energy, the electric utilities.
With both legislative and judicial powers, the SCC was explicitly designed by constitutional architect Allen Caperton Braxton as an independent government agency. Among the reasons for this decision was the desire to take monopoly regulation out of the hands of the legislature, the members of which could be swayed by powerful companies, and give it to a body that could protect the public interest while also preserving property rights.
“The SCC traditionally has province over whether or not a (utility) project is in the public interest and whether what the utility actually spends on a project, those costs, are reasonable and prudent,” said Peter Anderson, an attorney and Virginia program director for Appalachian Voices, another environmental group often involved in cases before the SCC. “Those are core functions for the commission. That’s really at the heart of what their responsibility is.”
But while the SCC has special powers, it’s still subordinate to the legislature. As Braxton wrote: “Paramount authority is reserved to the General Assembly to legislate on all matters (except fixing rates and the classifications on which they are based).”
Because of this “paramount authority,” if the General Assembly says something is in the public interest, the SCC has to accept that and make its decisions accordingly.
3. People disagree on whether ‘in the public interest’ bills are the best way to enact change.
While no one disputes the General Assembly’s right to legislate what’s in the public interest when it comes to energy, not everyone agrees it’s the best way to craft policy.
Under Virginia law, the SCC has the power to approve electric facilities if it determines they won’t hurt reliability, are “required by the public convenience and necessity” and “are not otherwise contrary to the public interest.”
Generally, the commission evaluates those criteria through its hearing process, and what “the public interest” is “evolves and gets shaped over time as the commission issues orders and issues come up before the commission,” said Ken Schrad, director of the SCC’s Division of Information Resources.
But when the legislature declares a project to be “in the public interest,” it’s predetermining the outcome of part of those deliberations.
Some groups see that circumvention of the commission as an appropriate lever to force change. Many environmentalists, for instance, have hailed the declaration, via the 2018 Grid Transformation and Security Act, that 5,000 megawatts of wind and solar power are “in the public interest” as a recognition of environmental factors (e.g., climate change and the need to reduce carbon emissions) not otherwise considered by the SCC. Such legislation, in this view, can drive critical change when no other mechanism exists to do so.
But others see this approach as stripping protections that the SCC provides, like its need to evaluate whether costs passed on to ratepayers are “reasonable and prudent.” And, many caution, because utility regulation is notoriously complex, legislators may not understand all the ramifications of their orders, while commissioners steeped in the field tend to be more attuned to such legal nuances.
Such bills are “not good process,” said Anderson. “The SCC is the expert, and it’s an independent agency, whereas the legislature is subject to politics.”
Since Virginia went back to a regulated utility market in 2007 after a brief experiment with deregulation, there has been mounting tension between the commission and the General Assembly, which has passed utility-friendly legislation like the 2015 rate freeze law that suspended the ability of the commission to review base rates and issue refunds for customers of Virginia’s two largest utilities – Dominion Energy and Appalachian Power. The law sparked a legal challenge, and in 2017, the Virginia Supreme Court ruled that the legislature had the power to intervene in one of the commission’s core responsibilities: setting base rates.
In recent years the SCC itself has gotten testy about these legislative fiats. An unusually pointed November 2018 decision to allow Dominion Energy to build a 12-megawatt offshore wind pilot made clear the body’s unhappiness, stating that based only on the facts of the case, the project “would not be deemed prudent as that term has been applied by this Commission in its long history of public utility regulation or under any common application of the term.”
However, the ruling concluded, “as a matter of law the new statutes governing this case subordinate the factual analysis to the legislative intent and public policy clearly set forth” by the General Assembly, and therefore the SCC had no choice but to approve the project.
4. ‘In the public interest’ bills are cropping up this session on one key energy issue: offshore wind.
A host of bills finding varying degrees of offshore wind development to be in the public interest are before the General Assembly this session – and at least some lawmakers are showing concerns about what these measures will do.
This year, Dominion is looking for an explicit legislative green light to build, on its own, what would be the nation’s largest offshore wind project off the coast of Virginia Beach, and recoup the estimated $8 billion cost from ratepayers.
At a late House energy subcommittee meeting Thursday, a substitute version of a bill from Democratic Del. Cliff Hayes of Chesapeake (which rolled together Hayes’ proposal with one from Democratic Del. Joe Lindsey of Norfolk) proposed to declare the development of 5,200 megawatts of offshore wind “in the public interest” and to find all costs associated with that effort “reasonably and prudently incurred.”
What that means, Chief Assistant Attorney General C. Meade Browder told the subcommittee, is that “whatever it ends up costing, the legislature has declared that those costs are reasonable and prudent. That means those costs are charged to ratepayers.”
Senate equivalents of this bill were signed off on by the five-person, Democrat-led energy subcommittee of that chamber Wednesday and will go before the full Commerce and Labor committee Monday. But SCC testimony Thursday that the $8 billion project would add an estimated $13 to customers’ monthly bills and opposition from the Attorney General’s Office, as well as from groups such as Appalachian Voices and the Virginia Manufacturers Association, indicated the House bill has a bumpier ride ahead.
“Normally utility commission’s regulators make factual findings” to determine the prudency of costs, Browder said at the Thursday House Labor and Commerce meeting. “This bill does away with that (ratepayer) protection for what would be a first-of-its-kind project in North America.”
Brett Vassey, president and CEO of the Virginia Manufacturers Association, called the measure “a blank check.”
“That’s not something I’ve ever seen in my time up here,” he said. “We don’t think this is the venue to do that. We think the SCC is the venue to do that.”
Uncertainty among lawmakers was evident in a chaotic vote that saw several members change their votes in rapid succession, leading Chair Rip Sullivan, D-Fairfax, to call for a re-do.
On a 5-4 tally, the bill advanced, but unease from Democratic Dels. Mark Keam of Fairfax and Alfonso Lopez of Arlington showed not everyone is sold on the idea that such a project would be in the public interest.
“The language that’s written in front of us is unclear whether we are putting in the code one company to have sole contract on the massive project that will put Virginia on the map for wind, or if it’s just an option for other companies,” said Keam. “Until we get that answer … I’m not going to be able to support that.”
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