Dominion Energy Virginia earned more than $500 million in excess revenues over a three-year period outlined by the Virginia State Corporation Commission in an annual review of the state's utility regulation.
The Dominion Energy Inc. subsidiary, known legally as Virginia Electric and Power Co., earned $502.7 million above its authorized return on equity from 2017-2019, the commission, or SCC, wrote in a report filed Aug. 18 with Virginia Gov. Ralph Northam and other state legislative leaders. The report shows Dominion Energy Virginia earned an ROE of 11.79% over the three-year period, above the 9.20% base ROE approved for the utility's earnings test in its 2021 triennial rate review.
Dominion earned more than $300 million above authorized levels in 2017 and brought in $277.3 million in excess revenues in 2018, the report shows. However, Dominion reported generation and distribution base rate financial results for 2019 that reflect an actual earned ROE of 8.03% or $75.4 million below authorized levels, according to the SCC review.
A 2018 state law reinstates rate reviews for Dominion Energy Virginia in 2021. While commission-ordered rate reductions are allowed in the first triennial review, Dominion would be held to a "maximum $50 million rate reduction" following the first review of excessive earnings.
Legislation introduced on Aug. 19 in the Virginia House of Delegates would require the commission to "administer 100 percent of the earnings that were more than 70 basis points above [Dominion Energy Virginia's] most recently approved fair combined rate of return" for the test periods under review to benefit customers. House Bill 5088 states that all of the utility's excess earnings "not otherwise administered by the commission pursuant to an emergency investigation" should be credited to customers' bills over a period of six to 12 months.
The bill directs the SCC to "conduct an emergency investigation" of each investor-owned electric utility's earnings not currently undergoing an earnings review proceeding.
The SCC report shows Dominion Energy Virginia earned $366.8 million in revenue in excess of a 9.90% ROE. Dominion, however, is allowed to keep 30% of excess earnings under state law, which amounts to about $110 million.
Consumer and environmental advocates sent a letter to the Virginia General Assembly advocating for the passage of H.B. 5088. They contend the bill will "inject nearly $400 million into Virginia's economy" by returning more than $250 million to Dominion customers and establish a utility debt forgiveness fund to help ratepayers "who have accrued debt to Dominion due to the COVID-19 crisis." This fund would be administered by the SCC and financed using the 30% of overcharges that Dominion is currently allowed to retain.
American Electric Power Co. Inc. utility Appalachian Power Co. on March 31 asked for a $64.9 million rate increase as part of its initial triennial earnings review under the 2018 state law.
The SCC staff recently filed testimony showing that Appalachian Power earned a combined ROE of 9.61% for its legacy generation and distribution businesses from 2017 through 2019, within a 140 basis point deadband around the 9.42% ROE previously set by the commission.
Staff calculated a revenue requirement increase of $16.4 million premised upon an 8.73% ROE.