The money Dominion Energy Virginia collected through its base rates over the past four years was so close to its target that only 0.2% would be available for customer rebates or to offset future rate increases, the utility says.
Dominion said it wanted to use that $26 million difference to help cover costs of its offshore wind-power project, 27 miles off the Virginia Beach shore.
The electric company detailed those results and made a bid for an increase in the profit rate it is allowed to earn in a 5,000 page rate review it filed Wednesday with the State Corporation Commission, which regulates its rates.
That filing opens a months-long legal process. The SCC will analyze Dominion’s data, while lawyers representing its customers and environmental groups can challenge the utility’s conclusions.
The SCC’s three commissioners will rule on whether the $26 million figure is appropriate That ruling is due in November. They’ll also rule on Dominion’s request for an increase in its currently allowed 9.2% return on equity to 10.8%. That percentage basically expresses its profit as a fraction of its accumulated investment in its system.
The filing says Dominion’s cost of serving its 2.6 million customers in 2017 through 2020 was $12.45 billion.
That includes operating and maintenance costs for its power plants, substations and electric lines, as well as the 9.2% rate of return.
It collected $26 million more than that total through its base rates – the portion of customers’ bills that pay for existing facilities. Base rates account for 53% of customers’ bills.
The $26 million is after the $206 million of pandemic-linked past due accounts Dominion forgave.
It means Dominion’s rate of return for the four years was 10.04%, compared to the authorized 9.2%. There is a plus or minus 0.7 percentage margin allowed on the rate of return.
Dominion’s base rates – and the $12.45 billion – exclude some $4.8 billion in new investments, such as 6,000 megawatts of new generating capacity, including big new plants in Greensville and Brunswick County. Those are covered through “riders.”
Under legislation enacted in 2018 and 2020, Dominion can use the difference between base rate revenue collected and the total of operating costs and allowed rate of return to pay for investments in renewable energy and modernizing its grid. Doing that means those costs wouldn’t be recovered through riders or future rate increases.
Spending on renewables and grid modernization amounted to $309 million from 2017 through 2020. That total included $224 million in solar and wind plants and energy storage equipment, which is needed to insure electricity supply at night and when winds are calm. Grid modernization projects, such as installing smart meters, accounted for $85 million. But the $12.45 billion includes some $688 million in costs from the early shutdowns of fossil-fuel plants, including Yorktown’s two coal-fired units, and other asset impairments.
Since those costs are already absorbed by the revenue Dominion collected between 2017 through 2020, that means they won’t be passed on to ratepayers.
Looking ahead, Dominion said its 9.2% rate of return is among the lowest in the nation, and is well below the 10.5% to 11.5% it needs to continue to convince investors to fund the company’s future capital projects.
Dominion projects the cost of those investments at $28 billion over the next five years, in order to keep pace with a new state law requiring it to deploy 16.1 gigawatts of solar and onshore wind capacity, up to 5,200 megawatts of offshore wind capacity, and 2,700 megawatts of energy storage capacity by 2035
The SCC had cut Dominion’s allowed rate of return from nearly 12% in 2007, when it re-regulated electric utilities.
Last year Del. Jay Jones, D-Norfolk, sponsored legislation that said revenue exceeding the total needed to meet Dominion’s permitted profit rate must be returned to ratepayers if they exceed 0.7 percentage point above the permitted rate of return plus the 0.7 point margin. That rebate would be in the firm of a credit on customers’ bills over a 6 to 12 month period. The bill died in committee, however.
In its filing, Dominion said its rates are 8% below the national average and 35% below the average for states in the Regional Greenhouse Gas Initiative, which Virginia joined last year.