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Va. regulators reject Costco request to 'escape' Dominion rate structure

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Va. regulators reject Costco request to 'escape' Dominion rate structure

Costco Wholesale Corp. is the latest retail giant to lose its fight to combine demand from its stores in order to "escape" the rate structure of Dominion Energy Virginia.

The Virginia State Corporation Commission on May 30 ruled that Costco, a members-only wholesale warehouse, cannot aggregate or combine the demands of 27 of its retail accounts in order to switch to a third-party competitive service provider.

Although Virginia statutes mandate retail choice for large customers with an electricity demand greater than 5 MW, it is up to the commission's discretion to consider retail choice for nonresidential customers that aggregate their demand.

Similar to its ruling against Walmart Inc., the commission noted that Costco's petition is "not consistent with the public interest" and could harm "non-shopping" customers.

Regulators pointed out that records indicate if Costco is allowed to aggregate its load and purchase electricity from a competitive service provider instead of Dominion Energy Virginia, about "$1.57 million of additional costs could be shifted to non-shopping customers on an annual basis."

The commission has not disputed that the rates for the Dominion Energy Inc. subsidiary, known legally as Virginia Electric and Power Co., have increased since Virginia ended its experimentation with retail choice in 2007. Regulators also acknowledge that rates are expected to continue to increase as utilities incur new costs to comply with mandates in the Grid Transformation and Security Act of 2018.

"This commission will not allow small customers who cannot escape this structure, predominantly small businesses and residential customers, to be further burdened by the identified cost-shifting that will occur if larger customers like Costco choose to seek better deals for themselves outside of Dominion's system," the commission wrote in its order.

Regulatory filings show that one Costco witness testified that "Dominion's piling on of excessive costs" was the motivation for the company's petition and that "it is enormously frustrating that an incumbent utility has an incentive to keep what I view as the customer's money."

"[I]f Costco believes that the current statutory structure for setting vertically-integrated electric utility rates results in unreasonable or unnecessarily high rates, its potential for recourse may be found through the legislative process," regulators wrote.

(SCC docket PUR-2018-00088)