Rate Regulation Reform Met its Demise in Senate Committee

The 2021 General Assembly session saw a slew of bills seeking to reform the SCC’s distorted and unbalanced rate review process for electric utilities. We explained the nature and potential impact of these bills in a previous article. Most of these reforms, in one form or another, passed the House only to be swiftly killed by the Senate Commerce and Labor Committee just before the session ended.

This came as a great disappointment to the patrons of the reform bills, stakeholders, and many members of the House, after the proposals gained strong bipartisan support. The suite of bills that ultimately passed the House and were sent to the Senate were whittled down and reshaped into a few coherent and essential reforms, much to the credit of the patrons who worked to negotiate and revise their initial proposals. Still, they were met with an unceremonious end.

Four of the five bills were recommended to be struck down by the subcommittee. All five were killed by the full committee. A particular disappointment was the failure to pass HB1914 (Helmer) which would simply have changed the word “shall” to “may” in certain places to give the SCC discretion to count some utility costs against revenue. The vote in the Senate Commerce and Labor Committee was 8-7, with Senators Barker, Lewis, Lucas, Mason, Newman, Norment, Obenshain, and Saslaw, Lucas voting to kill the bill and Senators Bell, Deeds, Ebbin, Edwards, Marsden, Spruill, and Surovell voting to keep it alive.

HB1984 (Hudson) would have given the SCC some added discretion to determine a utility’s fair rate of return and to order rate increases or decreases as needed. This bill managed to pass the House in bipartisan vote of 64-35. The vote in Commerce and Labor was 11-4, with only Senators Bell, Deeds, Ebbin, and Edwards voting to keep the bill alive.

HB2049 (Bourne) would have prevented electric utilities from using the overearnings from ratepayers to fund new projects instead of issuing refunds. This bill passed the House with a vote of 56-44. Commerce and Labor killed the bill 11-4, with opposition from only Senators Bell, Ebbin, Deeds, and Spruill.

The other bills had broad support in the House, and all had a similar fate in Commerce and Labor. For more information about each of the proposals, read our previous article.

Delegates Lee Ware and Jay Jones, in particular, have both put forth a number of reform bills to protect ratepayers over the past few years, without success. In an email obtained by the Virginia Mercury, Delegate Ware wrote, “The legislature some years ago interposed itself between Dominion and the SCC, with the result that one of the principal public utilities in the commonwealth is free to operate without the appropriate oversight for which the SCC was created. Ratepayers can be, and have been, adversely affected by such an arrangement.”

Ultimately, senators called for reconvening the Commission on Electric Utility Regulation to address what was characterized as complex issues in need of additional consideration. The Commission is comprised of six delegates and four senators, but it has not met since 2017. Whether the Commission makes any headway remains to be seen. It is clear, however, that the difference in the views of the House and Senate on the issue of rate regulation reform seem to be widening.

The unfortunate result of this reform effort also highlights issues with the General Assembly’s legislative procedures, which we explained in our Pathways to a More Effective Government. In particular, the broad authority of committees to make decisions on behalf of the whole body poses issues. Virginia relies on committees and subcommittees to do the bulk of the analysis and decision-making to accommodate its short session.

The Senate Labor and Commerce Committee is notorious for taking a hard line on many proposals and it is a committee comprised of only 15 members of a legislative body composed of 140 members. The ability of 10% of the legislative body to command such influence suggests a need for a broader reform of the legislative process as well.