As testimony in an ongoing review of Dominion Energy, a State Corporation Commission (SCC) staff report recommends a $312.4 million refund to the utility’s Virginia customers after finding that the utility’s earnings exceeded a regulatory threshold by $1.143 billion in 2017 through 2020.
“Staff’s analysis indicates the Company earned a 13.61 percent ROE [Return on Equity] during the 2017 through 2020 earnings test period. This is 441 basis points of earnings, or $1.143 billion of revenues, above the applicable fair combined ROE of 9.2 percent,” SCC Division of Utility Accounting and Finance Deputy Director Patrick Carr wrote in the report.
The SCC sets the fair ROE to make sure Dominion Energy is able to attract investment, compensate investors, and protect the company’s financial integrity while protecting the public interest. In 2019, the SCC ruled that the fair ROE should be 9.2 percent. In March, Dominion requested an ROE increase to 10.8 percent, arguing that was necessary for future investment needs. Carr’s testimony is part of an ongoing triennial review.
Dominion Energy can deduct some items from that $1.143 billion before issuing refunds, including a Customer Credit Reinvestment Offset (CCRO) that allows reinvestment in offshore wind, solar, and grid transformation projects. That leaves the $312.4 million customer refund.
But the utility disputes the report.
“We disagree with many of the report’s recommendations and look forward to responding in the legal proceeding. We continue to provide customers with reliable service, an industry leading clean energy portfolio and rates consistently below the national average,” Media Relations Manager Rayhan Daidani said in a statement.
In its March filing, Dominion Energy argued that its revenues closely matched its cost after considering more than $200 million in required COVID-19-era debt forgiveness, leaving just $26 million for the CCRO.
The key difference between the Dominion Energy calculation and the SCC staff report is in how to treat $686.7 million in losses from early retirement of some coal-fired generation units. The utility wants to apply those losses to the 2017-2020 period, but the SCC staff report argues for a 25-year amortization period going forward. The report argues that the 25-year period benefits customers by providing refunds and by preventing the need for a fair ROE increase, while Dominion Energy says applying the expenses to the 2017-2020 period benefits customers by keeping the customers from having to pay for the costs in future years.
The triennial review is organized much like a trial, with legal hearings and filings. Hearings in the triennial review are scheduled for October, and the SCC is expected to issue a ruling in January.