A group of industrial customers of Dominion Virginia Power (“Dominion”) has recently taken steps to challenge the constitutionality of Virginia’s Electric Utility Regulation Act (“Regulation Act”) at the Supreme Court of Virginia. At issue is a 2015 amendment to the Regulation Act, Senate Bill 1349, which exempts Dominion and Appalachian Power Company from biennial base rate reviews through 2022. In effect, the legislation prevents the State Corporation Commission (“SCC” or “Commission”) from changing the utilities’ base rates until 2022 – even if the Commission determines that electric rates are too high and are producing excess profits for utility shareholders.

The potential constitutional challenge was triggered by an SCC order late last year that applied Senate Bill 1349 for the first time. In its Final Order in Dominion’s 2015 Biennial Review rate case, SCC Case No. PUE-2015-00027, a 2-1 majority of the Commission applied Senate Bill 1349 and declined to adjust Dominion’s base rates or set a new rate of return on equity for the company. Commissioner Dimitri, however, filed a dissenting opinion, arguing that Senate Bill 1349 violates Article IX of the Constitution of Virginia and therefore cannot prevent the SCC from adjusting Dominion’s base rates.

Following the Commission’s Final Order, the Virginia Committee for Fair Utility Rates (“Committee”), an association of large industrial customers, filed a Petition for Reconsideration at the SCC. The Committee’s Petition cited Commissioner Dimitri’s dissenting opinion and requested that the Commission find that Senate Bill 1349 is unconstitutional. On December 14, 2015, a 2-1 majority of the Commission denied the Committee’s motion. Commissioner Dimitri filed a second dissenting opinion, reiterating his finding that Senate Bill 1349 is unconstitutional. On December 22, 2015, the Committee filed a Notice of Appeal at the SCC, which preserves the Committee’s ability to file a formal appeal with the Supreme Court of Virginia.

The legal arguments advanced by the Committee are based on Article IX, Section 2 of the Constitution of Virginia, which establishes the powers and duties of the SCC. Article IX, Section 2 provides that “Subject to such criteria and other requirements as may be prescribed by law, the Commission shall have the power and be charged with the duty of regulating the rates, charges, and services … of electric companies.” According to the Committee, therefore, the Commission’s authority to regulate electric rates is subject only to “criteria” and “other requirements” that may established by the General Assembly.

The dissenting opinion argues that Senate Bill 1349 “does not establish criteria that the Commission must apply in regulating Dominion’s base rates” but instead “fixes [Dominion’s rates] and takes the base rate setting function away from the Commission.” The Committee has also argued that if Dominion’s rates remain unchanged through 2022, Dominion’s shareholders will reap excess profits of “well over a billion dollars.”

Appeals from the State Corporation Commission are “of right,” meaning that the Supreme Count cannot decline to hear properly filed appeals. In order to be heard by the Court, however, the Committee would have to file a formal “Petition for Appeal” within four months of the date of the Final Order in this case. If a Petition for Appeal is filed, oral arguments would likely be heard by the Court in its September, 2016 session.

If you have any additional questions about any of the legal aspects of this case or its potential to affect the electric rates paid by Dominion’s customers, do not hesitate to contact one of GreeneHurlocker’s Virginia energy and regulatory attorneys.