Richmond’s big gift from our pockets

Dominion Virginia Power customers paid $523.7 million too much for electricity in 2008, according to a state audit of the utility.

The typical residential customer’s share comes to about $133, but they’ll never get all of that money back. Customers who feel that’s unfair can thank state legislators for a law that makes a full reimbursement impossible.

The General Assembly adopted legislation in 2007 that lays out ground rules for re-setting utility rates after Virginia’s failed experiment with deregulation. Those rules give state regulators two options if they determine that a utility collected more money than it needed in a previous year to cover operations and offer stockholders a fair profit on their investment. Neither alternative will appeal to Dominion’s 2.3 million customers.

Under the first option, Dominion can be ordered to pay partial refunds equal to 60 percent of its over-earnings. The utility keeps the rest.

A refund may be tempting for customers struggling with a recession that refuses to end. However, this alternative allows Dominion to keep rates at the same level that earned it an extra half billion bucks in 2008. In other words, customers will continue to pay way too much, as they undoubtedly did in 2009. The next opportunity to lower monthly bills won’t come until December 2013.

That’s especially galling because there’s evidence the over-earnings in 2008 weren’t a one-time phenomenon. The last audit of Dominion found that the utility collected more than $600 million in excess revenues. The state could not intervene then because utilities were being deregulated.

The second option would lower electricity rates, offering customers a better deal over the long term. But they won’t get a refund; they lose any claim to even a fraction of that $523.7 million in excess payments in 2008.

It comes as no surprise that the rules are weighted in favor of utilities. After all, the 2007 legislation was largely written by Dominion lobbyists. That’s standard operating procedure at the state Capitol, where Dominion wields enormous influence as one of the top private campaign donors in the state. The utility made more than $655,000 in political contributions this year, according to the Virginia Public Access Project.

Given the limited options available to them, SCC analysts have made the tough but fair recommendation that rates be cut by $365 million a year. The typical residential bill would shrink by $12.80 per month.

Dominion executives have signaled a willingness to abandon their outrageous request for an increase in monthly bills, but they are pushing hard for a plan that would prevent any reduction in their base rates. That’s unacceptable. An audit by SCC regulators found that the utility’s rate of return on average equity, a measure of its profitability, was 19.12 percent in 2008. That same year, Wal-Mart Stores topped the Fortune 500 with profits of 19.7 percent.

Customers have an interest in making sure Dominion remains financially healthy, but there’s no reason for a regulated and protected utility to be raking in profits on par with Wal-Mart. Dominion executives say they’ll accept a maximum return of 13.5 percent, but that’s still excessive in an economy in which 262,000 Virginians are jobless, businesses are struggling to survive and public schools are facing budget cuts.

The final decision on Dominion’s rates lies with three regulatory judges at the State Corporation Commission who, fortunately, don’t accept or need campaign donations. Those judges should follow the advice of their staff analysts and reduce the rates as much as law allows. Customers who still feel that they’re getting a raw deal should complain, not to the SCC, but to the legislators who forgot who they were elected to represent.