Electric utility service; advances scheduled expiration of capped rate period. (SB1416)

Introduced By

Sen. Tommy Norment (R-Williamsburg)


Passed Committee
Passed House
Passed Senate
Signed by Governor
Became Law


Electric utilities. Advances the scheduled expiration of the capped rate period from December 31, 2010, to December 31, 2008, and establishes a new methodology for determining electric rates for investor-owned electric utilities after the expiration or termination of capped rates. After the expiration or termination of capped rates, the State Corporation Commission (SCC) is required to conduct biennial reviews of the rates for generation, distribution and transmission services, on an unbundled basis, by each investor-owned incumbent electric utility. The reviews shall be conducted to determine, for a 12-month test period, whether the utilitys earnings have produced a fair combined rate of return on the utilitys common equity for its generation and distribution services. If a utility is earning less than a fair combined rate of return, its rates will be adjusted to provide such a return. If the utility is earning between 100 and 200 basis points above a fair combined rate of return on both its generation and distribution services in the test period, one-half of the excess is to be credited to customers; if it is earning between 200 and 300 basis points above, two-thirds is to be credited back; if earning between 300 and 400 basis points above, three-fourths is to be credited back; and if earning between more than 400 basis points above, all of such amount is to be credited back. If a utility earned more than 100 basis points above a fair combined rate of return on both its generation and distribution services, and total aggregate regulated rates of such utility were more than five percent, compounded annually, above the total aggregate regulated rates of such utility determined in the biennial review for the base period, the SCC may direct that the earnings for such test period that were more than 100 basis points above the fair combined rate of return be credited to customers' bills. A "fair rate of return" on common equity is 600 basis points above the latest available three month average bond yield of investment-grade bonds using Moodys Long Term Baa Utility Bonds; however, if the bond yield exceeds 12 percent, the SCC may adopt an alternative method that produces a figure not less than 12 percent (which when added to the 600 basis point bump is 18 percent). The Commission may increase or decrease the rate of return by up to 0.5 percentage points under a "Performance Incentive." Costs for transmission services provided by PJM Interconnection and approved by the Federal Energy Regulatory Commission (FERC) and costs of FERC-approved demand response programs administered by PJM, are deemed reasonable and prudent and recoverable under a rate adjustment clause. Utilities may also obtain, during or after the capped rate period, rate adjustment clauses, for various purposes, including demand-side management, conservation, renewable energy, energy efficiency and load management programs, which shall be approved if the costs or the need for the incentives are demonstrated with reasonable certainty. The provision of the Virginia Electric Utility Restructuring Act that currently addresses the development of a coal-fueled generation facility in Southwest Virginia is amended to apply to other generation facilities, environmental projects, and major unit modifications of generation facilities and to provide that the utility has the right to recover the costs of the facility through its rates, including allowance for funds used during construction plus a fair rate of return, through a rate adjustment clause. During such a rate proceeding, the SCC may examine the prudency of any cost incurred except for those transmission-related and FERC-approved demand response programs declared to be reasonable and prudent. Costs that are recoverable through rate adjustment clauses will be considered on a stand-alone basis without regard to the other costs, revenues, investments or earnings, and the requests for their approval are to be decided within specified time limits. After the capped rate period ends, only customers whose annual demand exceeds five megawatts will be permitted to purchase electricity from a competing provider of generation services. The ability of large customers to purchase electric power from a licensed competitive supplier is subject to the condition that they cannot thereafter purchase electricity from their incumbent utility without giving five years notice, unless it demonstrates that the supplier failed to perform and that such customer is unable to obtain service from an alternative supplier. If a customer receives an exemption from the five-year minimum stay requirement, the cost of its power during the exemption period will be the market-based costs of the utility. The measure also (i) authorizes any public utility to apply to the Commission to implement rate design changes which overall, and by customer class, are not designed to increase or decrease the aggregate regulated operating revenues of such utility; (ii) directs that the fuel factor allowing the recovery of costs of purchased fuel by an electric utility that divested its generation assets prior to January 1, 2002, shall increase its regulated electric revenue by an amount not more than 20 percent of such revenue during the previous calendar year, with a deferral of any costs excluded by this limitation until subsequent proceedings, with interest at a rate no less than the rate for refunds in rate cases; (iii) provides that in fuel factor proceedings, energy revenues associated with off-system sales of power are to be credited against fuel factor expenses in an amount equal to the total incremental fuel factor costs incurred in the production and delivery of such sales, with 50 percent of the total positive accumulated energy revenues received from off-system sales transactions, less the total incremental costs incurred in the production and delivery of such sales, being credited against fuel factor expenses and 50 percent of the energy margins not being considered in the new biennial reviews of electric utilities' rates; (iv) repeals the existing provision that allows the Commission to dispense with the fuel factor procedures for any electric utility if it finds that its fuel costs can be reasonably recovered through rates established through other provisions; and (v) requires utilities to file plans for how they will meet generation and transmission requirements to serve native load for the ensuing 10 years. Provisions of the Restructuring Act that exempt the generation of electric energy from regulation, prohibit public service corporations from exercising the power of eminent domain to acquire property for generation facilities, authorize the Commission to take certain actions to expand transmission capacity, and authorize competition for metering and billing services are repealed. Read the Bill »


04/04/2007: enacted


01/19/2007Presented and ordered printed 076542780
01/19/2007Referred to Committee on Commerce and Labor
01/26/2007Impact statement from SCC (SB1416)
02/06/2007Committee substitute printed 070281780-S1
02/06/2007Read second time
02/06/2007Reading of substitute waived
02/06/2007Committee substitute agreed to 070281780-S1
02/06/2007Reading of amendment waived
02/06/2007Amendment by Senator Watkins agreed to
02/06/2007Engrossed by Senate - committee substitute with amendment SB1416ES1
02/06/2007Printed as engrossed 070281780-ES1
02/06/2007Constitutional reading dispensed (40-Y 0-N)
02/06/2007VOTE: (40-Y 0-N) (see vote tally)
02/06/2007Passed Senate (37-Y 2-N 1-A)
02/06/2007VOTE: (37-Y 2-N 1-A) (see vote tally)
02/06/2007Communicated to House
02/08/2007Placed on Calendar
02/08/2007Read first time
02/08/2007Referred to Committee on Commerce and Labor
02/12/2007Impact statement from SCC (SB1416ES1)
02/19/2007Reported from Commerce and Labor with substitute (18-Y 4-N) (see vote tally)
02/19/2007Committee substitute printed 070300780-H1
02/20/2007Read second time
02/21/2007Read third time
02/21/2007Committee substitute agreed to 070300780-H1
02/21/2007Pending question ordered
02/21/2007Engrossed by House - committee substitute SB1416H1
02/21/2007Passed House with substitute (82-Y 16-N)
02/21/2007VOTE: PASSAGE (82-Y 16-N) (see vote tally)
02/22/2007Passed by temporarily
02/22/2007House substitute agreed to by Senate (35-Y 3-N 1-A)
02/22/2007VOTE: (35-Y 3-N 1-A) (see vote tally)
03/02/2007Impact statement from SCC (SB1416H1)
03/12/2007Bill text as passed Senate and House (SB1416ER)
03/12/2007Signed by President
03/13/2007Signed by Speaker
03/15/2007Impact statement from SCC (SB1416ER)
03/26/2007Governor's recommendation received by Senate
03/27/2007Governor's substitute printed 070309129-S2
04/03/2007Placed on Calendar
04/04/2007Enacted, Chapter (effective 7/1/07)
04/04/2007Senate concurred in Governor's recommendation (37-Y 2-N 1-A) (see vote tally)
04/04/2007House concurred in Governor's recommendation (83-Y 15-N)
04/04/2007G Governor's recommendation adopted
04/04/2007VOTE: ADOPTION (83-Y 15-N) (see vote tally)
04/04/2007Reenrolled bill text (SB1416ER2)
04/04/2007Signed by President as reenrolled
04/04/2007Signed by Speaker as reenrolled
04/04/2007Enacted, Chapter 933 (effective 7/1/07)
04/11/2007G Acts of Assembly Chapter text (CHAP0933)


jen writes:

Oppose this bill! Write your senator today!!

Farmers are calling it the "fox in the henhouse approach". Consumer advocates are concerned that self regulation fails to protect customers from rising power bills. Energy experts and environmentalists believe it fails to encourage the cleanest and most cost effective ways to meet Virginia's energy needs.

"Reregulation" as the power companies are calling it, is complex and almost guaranteed to have unanticipated consequences, since there has been no time for fair and objective analysis. Dominion Power may be pulling out all stops to pass this law before the basic questions can be answered. Significant rate increases are rumored for July, and getting self regulation will be much more difficult after a major increase in power bills for Virginians. Dominion has told Wall Street that it expects a $290 million increase in revenue in 2007-8. That's the equivalent of a $100 increase for each of its 2.3 million Virginia customers.

Jason writes:

Yes, Jen is right. OPPOSE THIS BILL. Most Delegates and Senators are doing the bidding of AEP and Dominion. This is state-sponsored market manipulation at its worst. Many claim this will somehow "protect the poor" from escalating electric rates. Hogwash. This will guarantee minimum returns and increases for Dominion. The rates will jump up, up, up anyway. In a de-regulated market, the rates can go up AND down (see California). Now they will only go UP. In addition the law is written to favor existing generation technologies and does NOTHING to promote renewable energy. IT's A SCAM WRITTEN BY DOMINION and Tim Kaine should veto it.

Go here to oppose: http://www.chesapeakeclimate.org/campaigns/campaign_detail.cfm?id=2