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Dominion, Appalachian Power Dispute SCC Decision

SCC CASE UPDATE:

Last week we told you about an important State Corporation Commission (“SCC” or “Commission”) decision that could expand access to competitive electric supply in Virginia. The SCC approved a request filed by a group of manufacturing customers to combine their demands for purposes of shopping for competitive electric supply. The SCC found that their request was “in the public interest.” The SCC approved the customers’ application over the objections of both Dominion Energy Virginia (“Dominion”) and Appalachian Power Company (“APCo”). Dominion argued that allowing the companies to shop for competitive electric supply would “erode a significant portion of the utility’s jurisdictional customer base.”

Both utilities are now appealing the decision to the Virginia Supreme Court. Dominion filed a notice of appeal with the SCC on March 21, while APCo filed its notice on March 15. The utilities have not yet filed their assignments of error (i.e., their grounds for appealing the decision).

Appeals from the SCC are “of right,” meaning the Supreme Court is required to hear any case that’s properly appealed.  While the Court can overturn any of the Commission’s findings, the Court usually gives deference to the SCC. The Court has frequently said that SCC decisions are “entitled to the respect due judgments of a tribunal informed by experience” and that Commission orders won’t be disturbed if “based upon the application of the correct principles of law.”

We’ll keep you updated on the status of this important case. If you want to talk about this case, the SCC’s role, or energy law and regulation, just call any of our energy lawyers.

SCC Decision Expands Access to Competitive Electric Supply

transmission towers for electricityWhile many political observers were focused on Senate Bill 966, the omnibus utility legislation that was just passed by the General Assembly, the Virginia State Corporation Commission (“Commission” or “SCC”) recently issued an important decision affecting customers’ rights to purchase energy from competitive suppliers.

On February 21, 2018, in Case No. PUR-2017-00109, the Commission approved the first ever “customer aggregation” petition under § 56-577 A 4 of the Code of Virginia. As explained in detail below, this section of the Code allows customers to aggregate their demand for the purposes of satisfying the 5 MW demand threshold required to purchase generation from non-utility companies.

In most circumstances, Virginia’s incumbent electric utilities, including Dominion Energy Virginia (“Dominion”), have a monopoly on the sale of electricity in their service territories. Customers must purchase energy from their utility. Virginia law, however, provides two exceptions to the utilities’ monopoly rights. (Under these two exceptions, customers may purchase generation from non-utility suppliers. But shopping customers must still pay for the utility’s distribution services.)

First, under Va. Code § 56-577 A 5, customers may purchase “100 percent renewable energy” from competitive suppliers if  the customer’s monopoly electric utility does not offer an SCC-approved 100% renewable energy tariff. No utility currently offers an SCC-approved 100% renewable tariff.

Second, Va. Code § 56-577 A 3 law allows large customers with annual demands over 5 MW to purchase generation from competitive suppliers. Importantly, the law also allows a group of customers to “aggregate” their demands in order to reach the 5 MW threshold. The statute treats large customers with multiple meter locations as different customers but allows them to aggregate to meet the 5 MW threshold. Once aggregated, the group will be treated as a “single, individual customer” under the law. Before allowing an aggregation, however, the Commission must find that the requested aggregation would be “consistent with the public interest.”

SCC Case No. PUR-2017-00109 was the first test of this statutory provision – that is, the first time a group of customers sought to combine their demands in order to reach the 5 MW threshold. In this case, Reynolds Group Holdings, Inc. (“Reynolds”), a metals and packaging manufacturer, petitioned the SCC for approval to aggregate six of its retail accounts in Dominion’s service territory.

Dominion and Appalachian Power Company (“APCo”) intervened in the case and opposed the petition. Dominion argued that allowing customers to aggregate their demand “would unreasonably expand the scope of retail access [and would] have the potential effect of eroding a significant portion of the utility’s jurisdictional customer base.” Dominion also suggested that the General Assembly – despite authorizing customer shopping and aggregation – intended to allow retail choice “only in limited circumstances.”

But the SCC, relying on the plain language of Va. Code § 56-577 A 4, rejected Dominion’s and APCo’s arguments and approved the petition. Dominion and APCo have until March 23, 2018, to appeal the decision to the Virginia Supreme Court.

The SCC is also currently considering additional aggregation requests filed by over 160 Walmart customer accounts in Case Nos. PUR-2017-00173 and PUR-2017-00174. (In both of these cases, GreeneHurlocker is representing competitive suppliers who are supporting approval of Walmart’s aggregation requests.)

Should you have any questions about customer aggregation or competitive supply options in Virginia, please contact one our regulatory attorneys.

Additionally, GreeneHurlocker recently published Principles of Electric Utility Regulation in Virginia, which provides a plain-English explanation of Virginia’s electric utility laws, including the statutes affecting retail choice.

Delaware Sets Hearing for Retail Market Enhancements

The Delaware Public Service Commission has established a March 8, 2018 hearing date to consider retail choice enhancements.

The Delaware General Assembly meets in the Leg...

The Delaware General Assembly meets in the Legislative Hall in Dover. (Photo credit: Wikipedia)

The enhancements include a purchase of receivables program; “seamless moves” where customers may move within the utility service territory and maintain their supplier; “ instant connects” where customers may sign up with a supplier on their first day of service; an “enroll with your wallet” program where customers may enroll with a supplier without the use of their utility account number or other utility-assigned identifier; improvements to the Commission’s shopping website; and utility bill inserts to promote choice.

The proceeding has been pending since the end of 2015 when the Electricity Affordability Committee created by the Delaware General Assembly filed a petition with the Commission. Since that time, the parties have filed written comments and participated in working group meetings. Also, the case was stayed for a period of time while the parties and the Commission finalized amendments to the Delaware Electric Supplier Rules.

The case will be heard before a hearing examiner. The primary participants in the case are the Staff of the Commission, Delmarva Power, the Delaware Public Advocate, and the Retail Energy Supply Association (RESA). GreeneHurlocker is representing RESA in the proceeding.

For more information, please contact one of our regulatory attorneys.

Virginia Energy Laws and Regulations Demystified

The GreeneHurlocker law firm has just published Principles of Electric Utility Regulation in Virginia, a guidebook designed to provide a plain-English explanation of some of the state laws regulating Virginia’s two largest monopoly electric utilities, explained co-managing member Eric Hurlocker, one of the firm’s energy law attorneys.

“The statutes governing Virginia’s electric utilities, found in Title 56 of the Code of Virginia, are extremely complex, but we’ve made our best effort at helping citizens who must do business with and purchase energy from Dominion Energy Virginia and Appalachian Power Company understand the rules in plain English,” said Hurlocker.

The guidebook and its glossary of key terms is intended to be a reference tool for those who want to gain a better understanding of utility regulation and energy policy in Virginia.

Hurlocker has focused for more than two decades on advising clients in the areas of energy law as well as commercial transactions and general corporate work for energy and technology companies, manufacturers and services providers. After working in large law firms and for utility firms, Hurlocker joined with Brian Greene five years ago to form the GreeneHurlocker firm, which concentrates on work in energy law and for businesses in the energy space.

Persons interested in a copy of the guidebook can contact Hurlocker or download the complete guidebook here.

Retail Suppliers Petition MD Commission for Supplier Consolidated Billing

Earlier this month, five competitive retail suppliers (NRG Energy, Inc., Interstate Gas Supply, Inc., Just Energy Group, Inc., Direct Energy Services, LLC, and ENGIE Resources LLC) filed a petition electricity controlswith the Maryland Public Service Commission to implement supplier consolidated billing. If approved, the petition would allow retail suppliers to directly bill customers for both retail generation supply charges and utility distribution charges. Utility consolidated billing (where the utility bills customers for both the utility’s charges and the supplier’s charges) has been in the norm since Maryland restructured its energy market to enable retail competition.

The Maryland petition seeks to flip that model on its head. According to the petitioners, the supplier consolidated billing (“SCB”) model is a significant step in the evolution of competitive retail energy markets. In Texas, where SCB has been the standard for many years, suppliers have more flexibility to inform customers about their energy usage, develop innovative products and service structures, and adapt their customers’ bills to accommodate changes in the market. With SCB in place in Maryland, suppliers will be able to introduce new products and services that are not possible under the current utility billing model. As examples, suppliers will be able to offer flat billing options – where customers pay a set amount each month no matter how much energy they use or when they use it – and prepay service options – where customers pay in advance for their energy usage and then the energy they use counts against their account balance, with regular updates on the funds in their account and no surprise bills at the end of the month. In addition to these billing options, suppliers will be able to better inform customers about their usage and offer other energy-related products and services to Maryland customers.

Here are some quick points addressed in the SCB petition:

  • Supplier Qualifications – Suppliers must meet specific experience, operations, and financial security requirements to offer SCB services.
  • Receivables – Suppliers must purchase the full value of the utility’s receivables (for utility distribution charges) and take on responsibility for billing those amounts through to the customer.
  • Disconnect for Non-Payment – Currently, when a customer does not pay their utility bill, they will eventually have their service disconnected. With SCB, the same result would occur – with all existing customer safeguards remaining – but the supplier would initiate disconnects by notifying the utility that no payment has been received. From there, the utility would utilize existing disconnect procedures, including notifications to the customer. According to the petition, it is imperative that suppliers offering SCB services have the same tools at their disposal as to the utilities to manage their bad debt and encourage timely collections.

The Commission issued a Notice on September 15th requesting comments on the petition by November 15, 2017. If you are interested in learning more about the Maryland SCB petition or other issues affecting competitive retail energy markets in Maryland and other Mid-Atlantic jurisdictions, please contact GreeneHurlocker’s energy lawyers and regulatory attorneys.

Virginia Supreme Court Upholds Electric Utility Rate Freeze

But There Is A Powerful Dissent

On September 14, 2017, the Supreme Court of Virginia issued an opinion affirming the controversial “rate freeze law.”transmission towers for electricity

As we previously discussed here and here, a group of industrial customers of Appalachian Power Company (“APCo”) appealed to the Supreme Court of Virginia, asking the Court to strike a controversial portion of the Virginia Electric Utility Regulation Act (“Regulation Act”). The group, the Old Dominion Committee for Fair Utility Rates (“Committee”), challenged a 2015 amendment to the Regulation Act, Senate Bill 1349 — the so-called “rate freeze law” which prevents the State Corporation Commission (“SCC” or “Commission”) from reviewing or reducing the base rates of APCo and Dominion Virginia Power (“Dominion”) until 2020 and 2021, respectively.

There is little dispute the law has helped APCo’s and Dominion’s profits and led to rates that are higher than they otherwise would be if the Commission had authority to review them. Using Dominion’s own figures, Commission Staff calculated in a recent report that the company’s customers would be due about a $130 million refund on bills paid in 2015 and 2016. APCo had overearnings of more than $20 million in 2016, according to the report.

The case centered around the language in Article IX, § 2 of the Constitution of Virginia, which the Committee argued reserved rate-making authority to the Commission, and that the General Assembly had overstepped its authority by passing legislation that stripped the Commission from reviewing the utilities’ rates for five and seven years. Article IX, § 2 provides as follows:

“Subject to such criteria and other requirements as may be prescribed by law, the [State Corporation] Commission shall have the power and be charged with the duty of regulating the rates, charges, and services and, except as may be otherwise authorized by the Constitution or by general law, the facilities of railroad, telephone, gas, and electric companies.” Va. Const. art. IX, § 2.

Justice Mims, in a powerful dissent, summed up the issue properly:  “This case boils down to a simple question: what does that sentence mean?”

In an opinion written by Justice Elizabeth A. McClanahan, the Supreme Court of Virginia rejected the Committee’s argument that the rate freeze law violates Article IX, § 2 of the Constitution of Virginia. The Court explains that “[t]here is nothing in Article IX, § 2 that clearly indicates that the Commission’s authority to set rates displaces or is exclusive of the General Assembly’s authority.” The Court further states that the Commission correctly decided that the rate freeze law “is constitutional because it is not plainly repugnant to Article IX, § 2 of the Virginia.” In her opinion for the Court, Justice McClanahan also noted that the Court has “no constitutional authority to judge whether a statute is unwise, improper, or inequitable because the legislature, not the judiciary, is the sole author of public policy.”

In his dissent, Justice Mims argues that the language in Article IX, § 2 means that the “General Assembly may impose standards and prerequisites that the Commission must adhere to when exercising its power and duty to set rates.”  He goes on to clarify that it “does not mean that the General Assembly may suspend that power and duty.” Justice Mims warns that based on the Court’s analysis, the General Assembly has the power to strip the Commission of its power set forth in Article IX, § 2 at its will. “That sobering outcome thwarts the purpose behind creating the Commission in the first place.”

GreeneHurlocker represented the Virginia Citizens Consumer Council (“VCCC”), which filed an amicus brief before the Court. The VCCC argued that the rate-freeze law was unconstitutional. If you have any questions about any of the legal aspects of this case, do not hesitate to contact one of GreeneHurlocker’s Virginia energy and regulatory attorneys.

Virginia Commission Rejects Utility “Green Tariff” Proposal

wind turbines and solar arrays

Virginia Commission unanimously rejects utility “Green Tariff” proposal, representing major victory for renewable energy advocates

wind turbines and solar arraysOn September 14, 2017, the Virginia State Corporation Commission entered a final order rejecting a renewable energy tariff proposal (“Green Tariff”) filed by Appalachian Power Company, finding that the tariff rates were not just and reasonable. APCo’s Green Tariff was intended to offer customers the option to purchase 100% renewable energy instead of energy produced from coal and gas-fired facilities. Given the structure of APCo’s proposal, the Commission’s decision represents a major victory for renewable energy developers, environmental advocates, and clean energy suppliers in Virginia.

APCo’s application requested permission to offer a voluntary, 100% renewable tariff to its customers. But APCo proposed to simply repackage generation it was already purchasing via four power purchase agreements (“PPAs”), and then reallocate that energy to participating customers. Customers would have paid 18% more than their standard rates to participate in the program.

The so-called Green Tariff, if approved, would have represented the first time a Virginia utility offered a 100% renewable tariff option for its customers. But, if approved, the tariff would have also largely foreclosed competition for renewable energy and prevented customers from purchasing generation from competitive suppliers. Under current law, most customers are allowed to purchase renewable generation from third-parties only if their incumbent electric utility does not have an approved tariff for 100% renewable energy. See Va. Code Section 56-577(A)(5).

GreeneHurlocker represented the Maryland-DC-Virginia Solar Energy Industries Association (“MDV-SEIA”) in the case. MDV-SEIA argued that APCo’s proposal was not in the public interest and should be rejected for several reasons. For example, the per-MWh price of the Green Tariff was unreasonably high and not reflective of current prices for renewable energy. MDV-SEIA also noted that the Green Tariff did not contain any solar generation or any Virginia-based renewable resources of any kind.

The Commission agreed with MDV-SEIA, finding that “[APCo] has not established that the rate proposed under [the Green Tariff] is just and reasonable,” The Commission also cited MDV-SEIA’s arguments that the Green Tariff price “is much higher than prevailing prices for renewable energy.” But the Commission noted that APCo is not precluded from applying for approval of a redesigned renewable energy tariff.

APCo is permitted to appeal the decision to the Supreme Court of Virginia by filing a notice of appeal at the Commission on or before October 16, 2017.

The Commission is also currently considering a similar renewable tariff application filed by Dominion Energy Virginia (“Dominion”) in Case No. PUR-2017-00060. If approved, Dominion’s tariff would severely limit clean energy choices for its large customers and potentially other classes of customers in the future.

Please contact one of our renewable energy lawyers or regulatory attorneys should you have questions about this case. The Commission case number for the APCo matter is PUE-2016-00051, while Dominion’s proposal is currently being considered in PUR-2017-00060.

Maryland Public Service Commission Rejects Utilities’ Proposals

Proposals Would Drive Up Costs for Competitive Retail Energy Suppliers and their Customerstransmission towers for electricity

Good news for Maryland’s competitive energy suppliers and their customers. In the past few weeks, the Maryland Public Service Commission issued two Letter Orders rejecting requests by BGEPepco, and Delmarva Power to include in the Purchase of Receivables programs costs incurred to comply with the recent RM54 proceeding. In other words, they wanted to recover those costs from competitive retail suppliers. Under the utilities’ proposals, costs to implement certain market enhancements – including 3-business-day accelerated switching – would have been recovered through the discount rate applied when the utility purchases supplier receivables.

There were slight differences to the utilities’ arguments. BGE argued that its current tariff allowed for recover through the POR rates of RM54-related costs. The Commission agreed with the Retail Energy Supply Association that BGE’s tariff does not allow BGE to recover these costs through POR discount rates. Pepco and Delmarva had sought to modify their respective tariffs to include language allowing for recovery. The Commission said no.  Also, in each case, the Commission stated that it “does not believe that it would be appropriate to force suppliers and their retail customers to bear the costs associated with the implementation of a program that benefits all ratepayers, as well as the competitive market as a whole.” Instead, the utilities can seek cost recovery through a base rate case.

RESA scored another win on a second issue in the case when the Commission rejected BGE’s proposed exclusion of revenues from late payment charges (“LPCs”) in the POR discount rate, effectively reducing the amount BGE pays suppliers for receivables purchased through the POR program. In a powerful rebuke to BGE’s proposal, the Commission explained that for “the past six years the Commission has consistently approved the inclusion of the LPCs in the discount rate calculation.  Similarly, the Commission has consistently denied any request for exclusion of these charges. The Commission reaffirms the reasons previously given for requiring the inclusion of LPCs in the calculation, declines to make the significant policy change being requested by BGE, and denies the Company’s request that LPCs be omitted from its POR discount rate.” This is a great result for RESA, the competitive retail energy supply markets in Maryland, and Maryland energy consumers.

Brian Greene, managing member of GreeneHurlocker, PLC represented RESA in this matter as referenced in the Commission’s Letter Order. The lawyers of GreeneHurlocker are pleased to be able to report this good news from Maryland and look forward to continuing to serve our clients in Maryland and the other jurisdictions where they operate. If you have questions about the details of this Commission Letter Order or any other matters involving regulated industries, please contact one of GreeneHurlocker’s regulatory attorneys.

SCC Hearing Examiner Recommends Denial of Appalachian Power’s Renewable Tariff

wind turbines and solar arraysOn Wednesday, June 21, a Virginia State Corporation Commission (“Commission”) Hearing Examiner issued a report recommending denial of a renewable energy tariff (“Green Tariff”) filed by Appalachian Power Company (“APCo”). If accepted by the full Commission, the Hearing Examiner’s findings would be a victory for renewable energy developers and competitive energy suppliers operating in Virginia.

APCo’s application requested permission to offer a voluntary 100% renewable tariff to its customers. APCo proposed to repackage generation it was already purchasing via four power purchase agreements (“PPAs”), and then reallocate that energy to participating customers. Customers would pay an 18% premium in order to participate in the program.

The so-called Green Tariff would represent the first time a Virginia utility offered a 100% renewable tariff option for its customers. But, if approved, the tariff would also largely foreclose competition for renewable energy in Virginia and prevent customers from purchasing generation from competitive suppliers. Under current law, most customers are allowed to purchase renewable energy from third-parties only if their incumbent electric utility does not have an approved tariff for 100% renewable energy. See Va. Code Section 56-577(A)(5).

Environmental and renewable energy advocates, including our client, the Maryland-DC-Virginia Solar Energy Industries Association (“MDV-SEIA”), opposed APCo’s proposed Green Tariff. MDV-SEIA argued that the proposal is not in the public interest and should be rejected for several reasons. First, the per-MWh price of the Green Tariff is unreasonably high and not reflective of current prices for renewable energy. MDV-SEIA also noted that the Green Tariff does not contain any solar generation or any Virginia-based renewable resources of any kind. The four PPAs that form the basis of the Green Tariff represent wind and hydrologic energy located in Indiana and West Virginia. Moreover, the Green Tariff would not encourage the development of any new resources; all of the Green Tariff’s out-of-state facilities were placed into service between 7 and 15 years ago.

The Hearing Examiner largely agreed with the arguments raised by MDV-SEIA, finding that the “per MWh cost of the [proposed tariff] is significantly higher than the average cost for new wind power in the PJM region” and that the tariff rate would be “18% higher than APCo’s standard rate for service.” The Hearing Examiner also cited data, obtained by MDV-SEIA through a motion to compel, indicating that the Green Tariff price was significantly higher than other renewable energy recently added to APCo’s portfolio. Finally, the Examiner noted that the Green Tariff “has the potential to suppress or even curtail customer access to 100 percent renewable energy by precluding sales by [competitive renewable energy suppliers] while at the same time offering an incumbent utility alternative that is simply too costly for customers to bear.” The Hearing Examiner determined that the Green Tariff, if approved, would not support the clean energy objectives of the Commonwealth’s Energy Policy, found in Title 67 of the Code of Virginia.

The Hearing Examiner’s report and recommendation now goes to the full Commission, which can approve or reject it. The Commission is also currently considering a similar renewable tariff application filed by Dominion Energy Virginia (“Dominion”) in Case No. PUR-2017-00060. If approved, Dominion’s tariff would also severely limit energy choices for most of its customers.

Please contact one of our renewable energy lawyers or regulatory attorneys should you have questions about this case. The Commission case number for this matter is PUE-2016-00051.

DC Commission Instructs WGL to Implement a Purchase of Receivables Program

The District of Columbia Public Service Commission (PSC) has issued an Order directing Washington Gas Light Company (WGL) – the only natural gas distribution utility in the District – to implement a purchase of receivables (POR) program for competitive retail natural gas suppliers that sell natural gas supply in the District.  WGL must file an implementation plan by July 17, 2017, and stakeholders may comment on the plan within 15 days thereafter.

In the Order, the PSC adopted components of a POR program that will resemble WGL’s program already in effect in Maryland, and also Pepco’s program already in effect in the District. At the outset, the PSC made clear that POR programs promote customer choice, thereby increasing competition and reducing commodity prices. The PSC noted that the availability of POR programs has led to increased supplier participation in Maryland and in the District’s electric choice programs.

The PSC addressed the elements of the discount rates for suppliers serving residential and non-residential customers. Without going into every component, WGL’s POR will be non-recourse as to suppliers and the POR discount rates will include: (1) bad debt expense; (2) implementation costs; (3) incremental collection costs; (4) cash working capital costs; (5) risk factor; (6) reconciliation factor; and (7) late payment revenues. A few points here worth mentioning:

  • WGL must include in its implementation plan a detailed breakdown of implementation costs. WGL has previously stated that its the costs will range from $600,000 to $800,000, which the PSC noted is far more than the $150,000 it cost Pepco to implement a POR program in the District in 2012, and far less than the $3.3 million it cost WGL to implement a POR program in Maryland in 2012.
  • The risk factor will be set to zero.
  • WGL must include late payment revenues collected on purchased receivables in the discount rate.
  • Non-commodity charges, such as early termination fees, are not to be purchased.

The PSC initiated this case after the Retail Energy Supply Association (RESA) raised POR as an issue in a separate proceeding regarding WGL’s billing system. The PSC held, in that case, that consideration of a POR program was warranted, and initiated Formal Case 1140 to consider it. Stakeholders, including WGL, RESA, and the Office of People’s Counsel, filed comments in FC 1140 during the months leading up the Order.

If you would like more information about GreeneHurlocker’s work in the competitive retail energy space throughout the Mid-Atlantic region, or other related areas, please contact one of our energy lawyers.