RD272 - Report of the State Corporation Commission to the Commission on Electric Utility Regulation of the Virginia General Assembly - Status Report: Implementation of the Virginia Electric Utility Regulation Act - September 1, 2016

Executive Summary:

*This report was replaced in its entirety by the State Corporation Commission on December 19, 2017.

Section 56-596 B of the Code of Virginia directs the State Corporation Commission to provide an annual update on the status of the implementation of the Virginia Electric Utility Regulation Act, §§ 56-576 through 56-596 of the Code of Virginia, and to offer recommendations for any actions by the Virginia General Assembly or others that the Commission considers to be in the public interest. This report is responsive to that directive. Highlights of activity pursuant to the Regulation Act since the Commission’s September 1, 2015 report include:

• The Commission completed its biennial review for Dominion Virginia Power for the time period January 2013 through December 2014. The Commission found that the company earned a 10.89% return on equity during the biennial review period and that customers were due a refund of $19.7 million.

• On July 5, 2016, Dominion Virginia Power provided analyses of its base rate financial results for calendar year 2015 reflecting an earned return on common equity for calendar year 2015 of 11.0%, on a regulatory accounting basis. The earned return on equity of 11.0% exceeds the return on equity most recently approved by the Commission for Dominion Virginia Power of 9.6% by 1.4 percentage points, or approximately $106.7 million in revenues. The earned return on equity of 11.0% also exceeds the most recent return on equity of 10.0% set by the Commission in Dominion Virginia Power’s 2013 biennial review; the 10.0% return on equity is applicable to base rates during calendar years 2013 and 2014 and to rate adjustment clauses pursuant to § 56-585.1 A 5 and A 6 of the Code of Virginia effective November 30, 2013.

• On May 5, 2016, Appalachian Power Company provided an analysis of its base rate financial results for calendar years 2014 and 2015 reflecting an earned return on equity of 9.83%, on a regulatory accounting basis. This earned return on equity is 0.13% above the return on equity most recently approved by the Commission for Appalachian Power Company of 9.7%, which equates to approximately $630,000 of revenues. Appalachian Power Company’s analysis did not include all of the regulatory accounting adjustments previously approved by the Commission in Appalachian Power Company’s 2014 Biennial Review (for calendar years 2012 and 2013). While there is no quantification of the 2014/2015 effect of omitted adjustments on regulatory earnings, the effect of these omitted adjustments in Appalachian Power Company’s 2014 biennial review found that regulatory earnings were increased by approximately 0.75% ($11.7 million) for 2012 and 1.45% ($21.2 million) for 2013.

• Appalachian Power Company filed its application pursuant to § 56-585.1:1 of the Code of Virginia for a Commission determination of a proper return on equity for rate adjustment clause riders. A hearing is set for September 2016.

• The Commission authorized a base rate increase of $5.5 million for customers of Kentucky Utilities/Old Dominion Power Company.

• The Commission approved certificates of public convenience and necessity for several new facilities, including Dominion Virginia Power’s Greensville County Power Station and three solar facilities in Powhatan, Louisa, and Isle of Wight Counties, as well as for Doswell Limited Partnership’s Hanover Electric Generation Facility.

• The Commission is currently considering two additional applications by Dominion Virginia Power for approval of two solar facilities: (i) the 20 megawatt Remington Solar Facility in Fauquier County, and (ii) the 17.6 megawatt solar facility on the Naval Air Station Oceana in Virginia Beach.

• The Commission approved interim or final fuel factor decreases for customers of all three investor-owned electric utilities in Virginia.

• The Commission continues to follow activity at the federal level concerning the U.S. Environmental Protection Agency’s Clean Power Plan, which has been stayed by the U.S. Supreme Court.

• The Commission received integrated resource plan filings from all three investor-owned electric utilities in Virginia. These are currently under review.

• The Commission approved a pilot-type program for Dominion Virginia Power to engage in undergrounding of certain distribution lines.

• Dominion Virginia Power, Appalachian Power Company, and some cooperatives continue to offer demand-side management and energy efficiency programs.

• Dominion Virginia Power and Appalachian Power Company continue to offer opportunities for customers to support renewable energy, and the companies continue to meet voluntary renewable portfolio standard program goals.

• The Commission updated its Net Energy Metering Rules to conform to changes in § 56-594 of the Code of Virginia.

• The Commission’s consumer education program, Virginia Energy Sense, continues to enhance program features to stress the value of energy conservation and efficiency. Key efforts in the past year have included radio and television announcements, community outreach, digital and social media outreach, public relations, and updated market research.

• The Commission’s electricity price analysis shows that Dominion Virginia Power’s and Appalachian Power Company’s electricity rates for 2015-2016 appear to be fairly competitive with their peer utilities, though pending rate requests could impact the competitiveness of electric rates in the future.

• The Commission continues to participate in Federal Energy Regulatory Commission proceedings related to how PJM Interconnection, L.L.C., spreads costs for transmission lines across the PJM region.