Electric Rate Reform Pits Utilities Against Consumer, Clean Energy Advocates

By Brian Sewell

Reacting to dynamic changes in the nation’s energy landscape, electric utilities across the Southeast are proposing an array of reforms that could raise costs on ratepayers. Groups advocating for more distributed clean energy resources and stronger consumer protections are sounding the alarm.

In Virginia, lawmakers are in agreement that it’s time to move beyond an unpopular “rate freeze.” The 2015 law locked in base rates and allowed the commonwealth’s largest utilities to keep hundreds of millions of dollars in overearnings — revenues above a guaranteed rate of return that would typically be refunded to customers.

But lawmakers rejected legislation to simply undo the rate freeze, and a proposal to overhaul rate design favored by Dominion Energy and Appalachian Power Company is controversial.

The Grid Transformation and Security Act would force utilities to return a modest portion of the overearnings they captured during the freeze. It would also grant the companies more latitude to skirt regulatory oversight and spend ratepayer money on projects deemed by the bill to be in the public interest. Those investments could then be counted against utilities’ earnings, increasing revenues while decreasing the likelihood of a refund to ratepayers being triggered.

A lobbyist representing the Virginia Poverty Law Center, Stephen Haner, told the Richmond Times-Dispatch that the proposed customer payback “represents pennies on the dollar compared to the potential refunds the [State Corporation Commission] might order.”

Raising fixed charges could create a buffer for power companies against revenue losses, whether from flat electricity demand or the rise of distributed resources like rooftop solar. Opponents describe the tactic as unfair to low-income customers, who typically consume less electricity, and to those who have installed solar or invested in energy efficiency upgrades.

The Tennessee Valley Authority recently postponed a plan to restructure rates, but municipal utilities like the Knoxville Utilities Board plan to hike fixed charges for local customers to recover the cost of buying power from TVA.

Speaking at a meeting of the utility’s board of commissioners in January, Southern Alliance for Clean Energy Executive Director Stephen Smith asked commissioners to hit pause on planned fixed charge increases and to oppose efforts by TVA to charge local utilities grid-access fees — fees that would be passed onto customers.

Meanwhile, still mired by its mishandling of coal ash, Duke Energy hopes North Carolina regulators will approve a rate increase to help it recoup costs associated with cleaning up the mess. North Carolina Attorney General Josh Stein joined environmental groups demanding that Duke Energy and its shareholders foot the bill.

“Duke Energy has known that coal ash was going to be an issue since at least the 1990s, but the company didn’t deal with it,” Stein said in a statement. “Now that it’s more expensive for Duke to clean up its coal ash mess, it wants North Carolinians to pay the price.”

Stein and the attorneys general from states including Virginia and Kentucky recently called on the Federal Energy Regulatory Commission to investigate whether current electric rates are fair given the windfall electric utilities received as a result of federal corporate tax reform.

Last fall, Kentucky Attorney General Andy Beshear opposed a request by American Electric Power subsidiary Kentucky Power that would have increased annual revenues from base rates by $60 million. “The people of Eastern Kentucky do not deserve any more punches in the gut,” Beshear said in an October press conference.

Ultimately, the Kentucky Public Service Commission approved an increase in base rate revenue of just $12 million, citing the lighter tax burden on utilities. Beshear applauded the decision but acknowledged in a statement that, for many Kentuckians, it’s not enough.

“I will continue to fight so that no family must decide between feeding their children or keeping them warm,” he said.

Protecting the Central and Southern Appalachian Mountain Region