“Green” Mandates, Profit Demands Drive Dominion Price Hikes
By Steve Haner
The pending price increase for electricity from Dominion Energy Virginia is higher than the 14% jump reported by the news media, which basically parroted company releases. Should all of Dominion’s current rate applications at the State Corporation Commission be approved, residents and businesses will pay about 20% more.
The 1,000-kilowatt hour monthly bill used for illustration (smaller than many households really see) was about $116 just before the implementation of the 2020 Virginia Clean Economy Act (VCEA). All the pending price increases could take that to about $170 within two years. And that almost 50% increase is not the end, as additional VCEA compliance costs will keep piling on for years to come.
A repeal of the legal mandates to tie Virginia’s energy future to intermittent wind, solar and battery power would not take us back to the lower costs before it passed. But it would bend the future cost curve downward and save Virginia’s households and businesses billions of dollars over time. Will the issue be put to the voters in November by the candidates? Will they fall for claims that the problem is all the data centers and not the “green” mandates?
On April 1, Dominion, serving 2.7 million Virginia customer accounts, announced a pair of major rate applications. In one, it seeks a 15% increase in its base rates, and that increase is despite removing a major expense item that is now included in base rates. In the second, it wants about a 50% increase in the separate bill charge for fuel and purchased power, in part to pick up that expense it removed from base rates.
Those two requests would add more than $21 to the current bill of just under $141 for that 1,000- kWh user. But the media accounts (and the company’s own news release) ignored all the other price increases pending at the SCC, which will add another $7 to the bill for 1,000 kWh if approved. These pending applications are all VCEA compliance costs:
An application is pending to increase Rider OSW, the separate charge for construction of Dominion’s offshore wind project. That is clearly a compliance cost for the VCEA;
An application is also pending to increase Rider RPS (for renewable portfolio standard), which collects money from customers to either buy renewable energy certificates to comply with the VCEA non-hydrocarbon energy goals, or to pay the deficiency fine which results if (when) the utility misses those goals;
Two more pending applications with relatively small customer impact, Rider CE (clean energy) for the construction or purchase of solar and battery power, and Rider DSM (demand side management) are also VCEA compliance costs;
Finally, the company has filed an application to build a new natural gas generation facility in Chesterfield County. It is seeking an initial payment from customers of only 60 cents per 1,000 kWh, but that’s just the early walking-around money. The real capital cost will hit later in the construction period.
It is valid to include the Chesterfield gas plant in a discussion of VCEA compliance costs, because it would not be proposed if VCEA were not the law. The whole rationale for the plant, which will be far more expensive than a baseload generator, is to run only from time to time, when the utility’s wind and solar assets are impeded by the wrong kind of weather.
The utility cost category that Dominion wants to remove from its base rates and instead add to its fuel charge is the cost of firm capacity contracts, which lock in future electricity supply from other providers within the PJM Interconnection regional market. That is also 100% related to the VCEA “green” energy mandates because the poor performance of solar and wind assets creates far greater need for reliable back up power.
And do not forget that the majority party in the General Assembly is eager to return Virginia to the Regional Greenhouse Gas Initiative and to reimpose the RGGI carbon tax. There is still a lawsuit pending which could force Virginia to rejoin, but should Democrat Abigail Spanberger win the governorship in November, she’ll do it without the courts. Add another $4-5 per 1,000 kWh in cost for Dominion’s ratepayers when that happens.
Perusing the full Dominion rate increase application is a major time commitment, and the file will grow to be enormous. Skimming it, there appear to be two main justifications for the big price increase: ($8.51) in mid-2026 and a smaller one ($2) a year later. The first is inflation all along the supply and operational cost chains, including personnel, and the second is a failure (claimed, anyway) to reach its authorized profit margin.
The rate case is based on results of the 2023 and 2024 operation period, and Dominion claims it earned only a 7.8% return on equity. That means it fell $350 million short of what it would have earned had it achieved the 9.7% return on equity (ROE) which the General Assembly granted it. It was the first time the Assembly had ever dictated a specific profit margin in law, and the utility claims it missed it.
The company is now not satisfied with 9.7% as a profit margin and is asking the SCC to approve 10.4%. The higher base rates proposed are based on that, and arguing over the ROE will be a big part of the litigation. The last rate case for the other major Virginia utility, Appalachian Power Company, ended with a much smaller rate increase and profit margin than it sought.
Only the profit contained in the base rate portion of the bill is at issue. For the company’s major construction projects, such as the offshore wind project, all the solar, or the planned natural gas plant, the allowed profit margins are built into the separate rate adjustment clauses which fund them. They get annual reviews that make it easier to reap the profits. (Watch for these to be pushed higher by tariffs on imported generation components.)
In testimony last month on another case, a State Corporation Commission staff member noted that all the future electricity cost predictions being placed into evidence by Dominion included a huge assumption. They all assumed the company’s base rates would remain unchanged for years to come. Dominion had to know as it filed that sworn testimony that the base rate hike request was coming.
