RD274 - Combined Reports: Status Report: Implementation of the Virginia Electric Utility Regulation Act, Report on Distributed Solar Generation, and Report Assessing the Updated Integrated Resource Plans of Investor-owned Incumbent Electric Utilities
This document contains the combined reports of the Virginia State Corporation Commission ("Commission") pursuant to the following legislative directives:
• Section 56-596 B of the Code of Virginia ("Code"), which directs the Commission to provide an update by September 1 of each year on the status of implementation of the Virginia Electric Utility Regulation Act, Code §§ 56-576 through -596 ("Regulation Act");
• 2011 Virginia Acts of Assembly Chapter 771, which directs the Commission to consider utilities' petitions to construct and operate distributed solar generation facilities and to offer tariffs to facilitate customer-owned distributed solar generation, and to report on applicable demonstration projects (pages 25-29 herein);
• 2013 Virginia Acts of Assembly Chapter 382 and 2017 Virginia Acts of Assembly Chapter 803, pursuant to which the Commission conducts renewable energy pilot programs for third-party power purchase agreements in the certificated territories of Virginia Electric and Power Company ("DEV") and Appalachian Power Company ("APCo") (pages 25-29 herein); and
• 2015 Virginia Acts of Assembly Chapter 6, which requires the Commission to report on its assessments of investor-owned electric utilities' integrated resource plans ("IRPs") (pages 11-13 herein).
Key highlights from the combined reports include:
• DEV's residential bill, based on a customer using 1,000 kilowatt-hours ("kWh") of electricity per month, has risen from $90.59 in 2007 to $115 in 2018, with the largest part of the bill increase ($15.08) attributable to rate adjustment clauses ("RACs"). APCo's residential bill, based on a customer using 1,000 kWh of electricity per month, has risen from $66.61 in 2007 to $115 .62 in 2018, with the largest part of the bill increase ($25.75) attributable to base rate increases.
• On June 1 and July 3, 2018, DEV provided analyses of its combined generation and distribution base rate financial results for calendar year 2017 reflecting an earned return on common equity for calendar year 2017 of 13.84%. The earned return on equity ("ROE") of 13.84% exceeds the 9.20% ROE approved by the Commission for DEV's RACs during 2017 by 4.64 percentage points, or approximately $365.6 million in revenues. The earned ROE of 13.84% also exceeds the 10.00% ROE approved by the Commission in DEV's last biennial review in 2013 by 3.84 percentage points, or approximately $302.6 million in revenues.
• On June 1, 2018, APCo provided an analysis of its base rate financial results for calendar year 2017 reflecting an earned return on common equity for calendar year 2017 of 11.31%. The earned ROE of 11.31% exceeds the 9.40% ROE most recently approved by the Commission for APCo's RACs by 1.91 percentage points, or approximately $31.98 million of revenues. The earned ROE of 11.31% also exceeds the 9.70% ROE approved by the Commission in APCo's most recent biennial review in 2014 by 1.61 percentage points, or approximately $26.61 million of revenues.
• In January 2018, the Commission issued an Order protecting the interests of utility customers until federal income tax savings resulting from the Tax Cuts and Jobs Act could be reflected in customers' rates. Examples of these savings, that have been fully recognized, are rate reductions of at least $112 million and $29.8 million in DEV's and APCo's transmission RACs, respectively. Further reductions to generation RACs will be fully recognized in pending and upcoming case filings.
• From 2007 to 2017, DEV's energy mix has experienced significant changes. In particular, coal contributions have decreased from 36% in 2007 to 19% in 2017; natural gas contributions have increased from 6% in 2007 to 31% in 2017. For APCo, over the same period, coal contributions have decreased from 75% in 2007 to 69% in 2017; natural gas contributions have increased from 0% in 2007 to 14% in 2017.
• On a total rate basis, APCo's rates have become less competitive in comparison with peer electric utility providers. On a scale from 1 to 18 among peer group utilities, APCo's rates have dropped from a 2006 ranking of 1 (most competitive) to a rank of 10 in 2017. DEV's competitiveness ranking has remained stable, earning a rank of 7 in both 2006 and 2017. Further details may be found in Appendix 2.
In 2018, the Virginia General Assembly enacted major changes to the Regulation Act with the passage of the Grid Transformation and Security Act ("GTSA" or "SB 966"), Chapter 296 of the 2018 Virginia Acts of Assembly. Where material, these changes are addressed herein.