A seemingly simple question came across my desk a few weeks ago: What does Dominion Energy Virginia charge residents per kilowatt-hour (kWh)? Given how frequently I write about Dominion, I was embarrassed not to have a quick answer. In my own defense, though, Dominion makes it hard to find out. And when you do find out, the answer is, it depends.
Examine a recent bill, and you will see the number of kilowatt-hours you used in the preceding month, a confusing list of charges and the dollar amount that you owe. You can do the math to figure out what you paid this month per kilowatt-hour, but that’s more of a snapshot than the whole picture.
I asked colleagues to send me their utility bills to see what people were actually paying, and I got out my calculator. Everyone’s rate was different, and the more electricity they used, the less they paid per kWh. Even after I removed state and local taxes from the equation, rates ranged from a low of 12.2 cents per kWh for a home that used 2930 kWh in February, to a high of 17.3 cents for a home that, thanks to solar panels, drew just 179 kWh from the grid in the same time period.
As that solar home shows, the flat rate of the basic customer charge skews the average price higher. That basic charge is currently $6.58 per month, according to Dominion’s residential rate schedule, but you won’t see it on your bill.
The rate schedule reveals other information your bill doesn’t tell you, and that’s where the real impact lies: you pay less per kWh, in both generation and distribution charges, for the electricity you use in excess of 800 kilowatts per month from October through May. From June to September, you pay less in distribution charges for every kilowatt over 800, but more in generation charges.
You’re also charged a single rate year-round for transmission, which is different from distribution. Plus, every kilowatt-hour is subject to a list of riders – “charges applied to certain rate schedules to recover various costs associated with Dominion Energy’s electric operations and electricity production,” according to Dominion – and non-bypassable charges. The rate schedule doesn’t identify these charges, but the bill does, albeit with no explanation for how the amounts are determined. Your bill also lists fuel as a separate charge under Electricity Supply, though fuel does not appear in the rate schedule.
Still with me? No? All of this must make sense to the State Corporation Commission, which approved the rate schedule, but it is thoroughly opaque to customers.
The sufficiently dogged can find a worksheet on Dominion’s website that breaks out all these costs. If you plug in the month and a number of kWh you used, it will calculate a bill. You still need to do the math yourself to arrive at the price per kWh, but you can then play with numbers to see how usage affects rates.
Doing that confirms what I saw in my colleagues’ bills. Assuming 1,000 kWh, the number Dominion uses to represent the “typical” customer, the price works out to 14 cents in winter. Change that to a frugal 500 kWh and you get 15 cents. Raise it to 2,000 kWh, and it goes down to about 13 cents.
When challenged about this in the past, Dominion justified its buy-more, pay-less winter rate structure by arguing it was needed to make bills affordable for customers with electric heating, whose use can double or triple in the wintertime. The company didn’t mention that it also benefits wealthier people with large homes, and decreases the incentive for customers to conserve energy.
It also turns out that large homes do well in summer, too. According to the worksheet, a customer using 1,000 kWh in June would pay 14.6 cents per kWh. For 2,000 kWh, it rises slightly to 14.7 cents. The customer who uses only 500 kWh pays the highest rate, at 15 cents. Energy efficiency, alas, is not rewarded.
So Dominion’s bills aren’t just confusing, they mask a perverse incentive in the rate structure that rewards people who use more electricity. This year’s utility legislation changes a lot of things, but it doesn’t require greater clarity in billing, nor does it fix that upside-down incentive.
All utility bills are not equal
This perverse incentive is shared by some other Virginia utilities, though not all, and not all hide the ball the way Dominion does. Appalachian Power’s website shows it charges a single rate no matter how much you use. There’s neither a price break nor a penalty for higher consumption. The website provides two examples, for customers using 1,000 and 2,000 kWh, respectively. This makes it easy to calculate what you’re paying per kWh (about 16.5 cents), though you won’t find that number on either the website or the bills themselves. But neither the bill nor APCo’s website mentions the existence or amount of the basic customer charge, which can only be inferred from the website examples.
I also looked at February bills sent me by customers of Northern Virginia Electric Cooperative (NOVEC) and Rappahannock Electric Cooperative (REC). In both cases the bills were easy to understand. They identify the flat monthly charge, though in both cases the charge is unfortunately more than twice as high as Dominion’s. The bills also list the rates applicable per kWh for generation, transmission and distribution. Both utilities give a year-round volume discount on the distribution charge for higher levels of usage, another regrettable feature. However, REC’s SCC filing shows it imposes a higher electricity supply charge in summer for monthly usage over 800 kWh. I could not find current information about NOVEC’s rates online; I hope its customers have better access.
Being able to understand your electric bill matters. Virginia’s average residential rates increased 20% between December 2021 and December 2022, according to the U.S. Energy Information Agency, mostly due to last year’s spike in the price of methane gas and coal. Even before last year, our bills were higher than those in most other states.
Consumers have an array of options to help them lower their energy costs, including new federal and state programs and incentives for weatherization, energy efficient appliances and renewable energy. But customers who are confused about what they currently pay are less likely to act.
For the same reason, utility rate structures should incentivize customers to take steps that conserve energy. Lower rates for using more electricity undercut the value of investments in energy efficiency.
If utilities want to help their customers, they can start by sending the right message.
This article was originally published in the Virginia Mercury on March 16, 2023.
For followers of Virginia energy policy, 2023 will be remembered as the year Dominion Energy lost its stranglehold on the General Assembly. The utility’s all-out campaign to boost its return on equity earned it little more than crumbs. By contrast, a bill to return authority over rates to the State Corporation Commission garnered overwhelming support.
Another surprise loser was the nuclear industry. Gov. Youngkin and boosters of small modular reactors (SMRs) expected a lot more love, and incentives, than legislators proved willing to dole out this early in the technology’s development.
Less noticed was the rise to political power of one of Dominion’s largest customers, Amazon Web Services. Many legislators may still not have caught on, but the corps of lobbyists who haunt the hallways of the General Assembly building know a 500-pound gorilla when they see one. As one lobbyist put it: “Amazon is the new Dominion.”
These are the standout takeaways from a legislative session in which, otherwise, few significant energy bills emerged from the scrum. Senate Democrats ably protected the energy transition framework established in 2020 and 2021, but modest efforts to accelerate the transition mostly failed. Of the roughly 60 bills I followed this session, only a handful made it to the governor’s desk.
Republican attacks on the energy transition failed
The three foundational bills of Virginia’s energy transition — the Regional Greenhouse Gas Initiative (RGGI), the Virginia Clean Economy Act (VCEA) and Clean Cars — all came under attack this year, as they did last year. And again, repeal efforts failed every time.
Senate Democrats blocked the one bill that would have pulled Virginia out of RGGI. Gov. Youngkin remains bent on achieving the pullout by regulation through Department of Environmental Quality rulemaking.
In the transportation sector, every bill to repeal the Air Pollution Control Board’s authority to implement the Advanced Clean Car Standard failed in the Senate as Democrats held the line.
Efforts to undermine key parts of the VCEA failed, including House and Senate bills that would have given the State Corporation Commission more authority over closures of fossil fuel plants and require it to conduct annual reviews designed to second-guess the VCEA’s framework for lowering emissions and building renewable energy.
A House bill that would have exempted certain industrial customers categorized as “energy-intensive trade-exposed industries” from paying their share of the VCEA’s costs passed the House on a party-line basis. However, with the bill facing certain death in Senate Commerce and Labor, patron Lee Ware, R-Powhatan, requested it be stricken. At the time, he had reason to expect that a compromise approach proposed by Sen. Jeremy McPike, D-Prince William, would pass. McPike’s bill would have had the SCC put together a group of experts to study the issue and make recommendations. After passing the Senate, however, McPike’s study bill went to House Energy and Commerce, which insisted on amending it to mirror Del. Ware’s bill. That did not go over well in the Senate, where the House substitute was unanimously rejected. McPike then asked the Senate to kill his own bill, and the energy-intensive trade-exposed industries got nothing.
Raids on the VCEA produced mixed results
One of the VCEA’s strengths is in creating incentives for clean energy. That’s also a vulnerability, because everybody and their brother wants in on the incentives — and this year, once again, the brothers came peddling some pretty sketchy stuff.
In the end, however, the VCEA sustained little damage. An effort to open up the renewable energy category to coal mine methane was modified to become simply a policy to encourage the beneficial capture and use of methane that would otherwise escape from old coal mines into the air. However, methane extraction jobs in four Southwest Virginia counties will now qualify for a “green jobs” tax credit.
More successful was an effort by the forestry industry to allow more woody biomass to qualify for the renewable portfolio standard (RPS); this was in spite of drawbacks including high levels of pollution, expense and large climate impact. As passed, the House and Senate bills will allow Dominion-owned biomass plants to remain open and have their output qualify for the RPS, so long as they burn only waste wood from forestry operations. Climate advocates opposed the change, but remain hopeful that Dominion and the SCC will want to close these uneconomic biomass plants to protect ratepayers.
Two different Housebills that tried to shoehorn nuclear and hydrogen into the RPS failed in the Senate. A third bill promoting small modular nuclear reactors (SMRs) got more traction initially; it would have had the SCC develop a pilot program for SMRs with a goal of having the first one operational by 2032. After it passed the House, the Senate Commerce and Labor committee adopted amendments to require the SCC to examine the cost of any SMRss relative to alternatives, and to prevent ratepayers from being charged for the costs if an SMR never became operational. The Senate voted unanimously for the bill with these protections included, but the House rejected them. Ultimately, the bill died, a remarkable setback for the governor’s nuclear ambitions.
Utility reform consumed most of the session (again)
Dominion’s money grabs have turned into near-annual food fights. This one almost wrecked the cafeteria.
The action proceeded along two fronts. One consisted of bipartisan, pro-consumer House and Senate legislation promoted as the Affordable Energy Act, intended to return ratemaking authority to the SCC. As passed, it merely authorizes the SCC to modify Dominion’s or Appalachian Power’s base rates going forward, if it determines that current rates will produce revenues outside the utility’s authorized rate of return. If that strikes you as hard to argue with, you’re not alone; no one in either chamber voted against it.
Far more divisive was Dominion’s own effort to secure an increased rate of return on equity (ROE). This legislation earned its own bipartisan support from Dominion loyalists, led by Senate Majority Leader Dick Saslaw, D-Fairfax, for the Senate bill and House Majority Leader Terry Kilgore, R-Scott, for the House bill.
As initially drafted, it probably should have been called the Unaffordable Energy Act instead of the reassuringly bureaucratic-sounding Virginia Electric Utility Regulation Act. The bill described a formula for determining Dominion’s allowed ROE that SCC staff calculated could result in an ROE as high as 11.57%, up from the currently-allowed 9.35%. SCC staff told legislators this could cost ratepayers $4 billion through 2040. In return, the bill offered some near-term savings for customers but also would have removed the last vestige of retail competition and opened VCEA coal plant retirement commitments to second-guessing by the SCC.
Dominion pulled out all the stops. The company supplemented its own in-house lobbying corps of 13 with another 17 top lobbyists from around Richmond. Former senator John Watkins signed on, as did former FERC commissioner Bernard McNamee. CEO Bob Blue showed up personally to push the bill. Dominion ran full-page ads in the Washington Post and Virginia newspapers touting a provision of the bill that would save ratepayers $300 million (neglecting to mention that it was the ratepayers’ own money). The ad featured a dog so people could be sure Dominion was being friendly.
It didn’t work. The consumer advocates hung tough, and Gov. Youngkin, possibly a cat person, added his weight to the resistance. As the Mercury reported, the “compromise” that all parties now swear they are delighted with gives Dominion very little kibble. The coal plants will be retired on schedule, ratepayers will see savings and a larger percentage of over earnings will be returned to customers in the future. In exchange, Dominion’s future return on equity will be bumped up to 9.7%, but only for two years, after which the SCC will have discretion to set the ROE as it deems fair. (That is, if Dominion doesn’t start the next food fight first.)
Appalachian Power had its own troubles this session. APCo-only legislationthat would have replaced the requirement for an integrated resource plan with an “annual true-up review” was radically amended to become an entirely different bill. It now allows both utilities to finance the high fuel costs they’ve incurred due to soaring natural gas and coal prices. The amendments were welcomed both as a way to handle the fuel debt and so that no one had to figure out what a true-up review is. The bills passed handily.
One other successful piece of legislation may help avoid future food fights. Sen. Scott Surovell, D-Fairfax, and Del. Kilgore worked together to resuscitate the Commission on Electric Utility Regulation (CEUR) and create more transparency around utility planning. The original bill also created a structure for state energy planning, but that proved too much for House Republicans, who amended it down to the lean bill that passed.
Over the years CEUR earned a bad reputation as an entity that rarely met but that served as an excuse for legislators to defer action on pro-consumer bills. That makes advocates somewhat wary of this bill. On the other hand, provisions welcoming stakeholders into the utility integrated resource planning process seems likely to benefit the public, if not the utilities.
Elsewhere, consumers did poorly
Dominion may have taken a drubbing on its money grab, but it did pretty well in guarding its monopoly. The Dominion-friendly Senate Commerce and Labor committee killed a bill to allow customers to buy renewable energy at a competitive rate from a provider other than their own utility. Bills to expand shared solar passed the Senate but died in the House.
Indeed, the House turned into a killing field for any bill with the word “solar” in it, no matter how innocuous or popular. A House Rules subcommittee killed a bill that would have helped schools take advantage of onsite solar, though it had passed the Senate unanimously. A resolution to study barriers to local government investments in clean energy was left in House Rules. A bill to create a solar and economic development fund passed the Senate but was tabled in House Appropriations. A resolution directing the Department of Transportation to study the idea of putting solar panels in highway medians never got a hearing in House Rules. A consumer-protection effort for buyers of rooftop solar was tabled in House Commerce and Energy. A bill clarifying the legality of solar leases passed the Senate unanimously, only to be left in House Commerce and Energy.
Do we detect a little frustration on the part of House Republicans at the complete failure of their anti-clean energy agenda? Why, yes. Yes, we do.
The only pro-consumer legislation to pass was a very modest bill requiring the SCC to establish annual energy efficiency savings targets for Dominion customers who are low-income, elderly, disabled or veterans of military service. But legislation that would have made homeowners eligible for low-cost loans through property-assessed clean energy (PACE) programs failed.
Offshore wind remains on track
Dominion beat back an effort to make it hold ratepayers harmless if its Coastal Virginia Offshore Wind project fails to produce as much energy as expected. A bill to allow the company to create an affiliate to secure financing for the project passed.
Legislation to move up the VCEA’s deadline for offshore wind farm construction from 2034 to 2032 passed; the law now also requires that the SCC consider economic and job creation benefits to Virginia in overseeing cost recovery. However, a bill that would have required the SCC to issue annual reports on the progress of CVOW failed. That bill would also have required the SCC to analyze alternative ownership structures that might save ratepayers money.
The gas ban ban fails again
This year’s attempt to bar local governments from prohibiting new gas connections passed the House on a party-line vote but was killed in Senate Commerce and Labor. A Senate companion bill from Democrat Joe Morrissey, which had caused something of a tizzy initially, was stricken at Morrissey’s request.
And this year’s big winner is … Amazon!
With data centers now making up over 21% of Dominion’s load and since they have already sucked up over a billion dollars in tax subsidies, this should have been the year Virginia government woke up to the need for state oversight of the industry. Alas, no. Bills that would limit where data centers could be sited failed. Senate legislation that would have simply tasked the Department of Energy with studying the impact of data centers passed the Senate on a voice vote but was killed in a subcommittee of House Rules on a 3-2 vote, the same fate suffered by a similar House bill.
Who could be against studying the impact of an industry this big? Aside from the data center industry that is enjoying the handouts, the answer is the Youngkin administration. The governor is so pleased with Amazon’s plan to spend $35 billion on more data centers across Virginia that he promised the company even greater handouts.
Those handouts take the form of a bill creating the Cloud Computing Cluster Infrastructure Grant Fund, with parameters that ensure only Amazon gets $165 million. In addition, the far more impactful sales and use tax exemption, currently set to expire in 2035, will be continued out to 2040 with an option to go to 2050; again, this is all just for Amazon, unless some other company manages to pony up $35 billion in data center investments. In return, Amazon must create a total of just 1,000 new jobs across the entire commonwealth, and only 100 of them must pay “at least one and a half times the prevailing wage.” A jobs bill, this is not.
With the sales and use tax exemption already costing Virginia $130 million per year and growing rapidly, this legislation will be very costly. You would not know it, though, from the budget analysis performed for legislators. Through the magic of accounting rules, that analysis managed to conclude that the budget impact of this legislation would be zero.
As preposterous as that is, it may explain why only a few legislators voted against the bill. They have no idea what the governor is getting us into.