RICHMOND, Va. (AP) — A new federal corporate tax cut is good news for Virginia’s two largest electric monopolies. Whether it will mean lower electric bills depends on state lawmakers. A 2015 state law blocks regulators from passing the companies’ savings from the corporate tax rate cut — estimated to be about $245 million a year — to customers.
But the legislator who sponsored the law and has defended it in the face of heavy criticism said he will try to make sure ratepayers benefit from lower taxes. “We’re going to fix that,” said Republican Sen. Frank Wagner. He said he plans to introduce legislation seeking to overhaul the 2015 law for next year’s legislative session, which starts in January.
Dominion Energy, the state’s largest utility and driving force behind the 2015 law, also agrees that “any reduced tax expense should benefit our customers,” said company spokesman David Botkins. State regulators calculated earlier this month that Dominion stands to save about $165 million a year while Appalachian Power would save about $80 million a year if the corporate tax rate was slashed from 35 percent to 20 percent. Congress ultimately settled on a 21 percent corporate tax rate, meaning the companies’ savings will be slightly less. And spokesmen for both Dominion and Appalachian Power said the companies are still analyzing what impact other provisions of the federal tax overhaul will have on their electric utility operations.
Regulated electric monopolies are typically allowed to charge rates that let them cover their costs, including taxes, and make a reasonable profit. But the 2015 law shields electric utilities from having to give refunds or lower their rates for several years even if regulators have found their base rates — which make up a majority of a customer’s bills — produce excessive cash for the utilities.
While the 2015 law is in effect, said State Corporation Commission spokesman Ken Schrad, “the tax savings arising from base rate earnings would remain with shareholders.”
Dominion helped usher through the law, saying the move was needed to provide rate stability in the face of potentially expensive federal carbon-emission rules. The law effectively bars utilities from raising their base rates if they aren’t enough to cover their costs. The SCC issued a report earlier this year that shows the law has helped both Dominion and Appalachian Power’s bottom lines. Dominion customers would be due about $130 million in refunds on bills paid in 2015 and 2016, but for the law. Its rates going forward would also be lowered significantly.
Both Dominion and Wagner staunchly defended the law for nearly two years, but have recently signaled they are willing to make significant changes to it. Dominion said at a committee hearing earlier this month that it supports “transitioning” away from the law so that excess profits are put toward modernizing the electric grid, according to the Richmond Times-Dispatch.
Wagner said regulators should be allowed to adjust base rates again, now that there is “certainty” over carbon regulations. Republican President Donald Trump has rolled back his predecessor’s efforts to battle climate change, prompting Democratic Gov. Terry McAuliffe to enact state-level limits on carbon emissions from power plants.
The willingness to change the law comes shortly after a Democratic tidal wave swept over the election in November, giving seats in the state House to several candidates who are skeptical of Dominion’s political influence.
Democratic Sen. Chap Petersen, an outspoken critic of the 2015 law, said the fact that regulators are currently barred from adjusting rates to account for the federal tax cuts is further proof that the law is “fundamentally corrupt.” He said he continues to supports a full repeal of the law, and a return to letting regulators, not lawmakers, set rates. “They can propose whatever they want; my position has been the same since day one,” Petersen said.
