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Updated: Virginia SCC Cites "Broad Discretion" In Addressing Aggregation Of Load To Take Retail Choice

Earlier: Virginia SCC Denies Walmart's Request To Take Competitive Supply, "To Protect Small Captive Customers," Who Aren't Allowed Shop

February 25, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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Updated, 2/26:

The Virginia State Corporation Commission cited its "broad discretion" in addressing applications of aggregated customer load to take competitive electricity supply, in contrast to applications under other statutory mechanisms, in denying Walmart's application to take competitive supply for its aggregate load, after the SCC concluded that granting such application would shift costs to utility supply customers in a manner that is not consistent with the public interest

The SCC's denial of Walmart's application had been first reported by EnergyChoiceMatters.com on February 25, with an alert to our email subscribers

See details on the SCC's findings regarding cost shifting in our original story below

In its orders, the SCC cited the unique language of the statutory provisions concerning the ability of aggregated load to take competitive electric supply, versus two other provisions addressing customer choice

The SCC said that the statute provides two mechanisms for retail choice under which the ability of a customer to elect retail choice (so long as the statutory conditions are met) is not subject to the SCC's discretion to approve or reject such retail choice. These mechanisms are: (i) retail choice for large customers with a demand exceeding five megawatts; and (ii) retail choice for 100% renewable energy (applicable to all customers) if the same is not offered by the customer's utility.

In contrast, the SCC said that statute provides that allowing the aggregation of customer loads to take retail choice, "is subject to the Commission's discretion and is at issue in the instant cases: retail choice for nonresidential customers that aggregate their demand to exceed five megawatts."

The SCC said that, "Code § 56-577(A)(4) -- which we will call the 'aggregated retail choice' provision -- states that the Commission 'may' permit aggregated retail choice if it makes two independent findings: (a) '[n]either such customers' incumbent electric utility nor retail customers of such utility that do not choose to obtain electric energy from alternate suppliers will be adversely affected in a manner contrary to the public interest by granting such petition'; and (b) '[a]pproval of such petition is consistent with the public interest.'"

"The General Assembly, however, did not define the factors for determining what is, or is not, "contrary to" or 'consistent with' the public interest. Accordingly, the General Assembly has delegated to the Commission the broad discretion to determine the public interest for purposes of aggregated retail choice under Code § 56-577(A)(4)," the SCC said

"[U]nlike the other remaining retail choice options, the legislative intent of Code § 56-577(A)(4) is to delegate to the Commission the broad discretion to determine 'public interest' for purposes of aggregated retail choice. If and when such requests are received, the Commission must exercise that discretion based on the circumstances existing at such time. That is what we have done here," the SCC said

The SCC said that Walmart is free to seek statutory changes

"If Walmart believes that the current statutory structure for setting vertically-integrated electric utility rates results in unreasonable or unnecessarily high rates, or that the public policy of Virginia should be to institute retail choice on a far more extensive scale than required under current law, its potential for recourse may be found through the legislative process. In conclusion, given the context of a decade of rising rates and the likelihood of even higher rates in the future, we do not find it consistent with the public interest for captive customers who do not have the legal ability to obtain lower rates -- predominantly residential and small business -- to suffer from the cost-shifting identified herein by enabling a large-demand customer to seek its power supply elsewhere through aggregation," the SCC said

"We also find that the potential for load growth does not alter our public interest determinations herein; the reallocation of costs among remaining customers occurs independent of whether load growth exists," the SCC said

The SCC noted that Walmart is not precluded from exercising retail choice under the other statutory retail choice provisions as applicable

"The Commission emphasizes that its decision herein in no manner precludes Walmart from pursuing renewable energy alternatives permitted by other statutes and approved tariffs. Moreover, our decision herein does not limit the development of distributed energy resources, such as rooftop solar, as permitted by Virginia law," the SCC said

The SCC also said that its decision does not conflict with its prior approval of retail choice for an aggregation of Reynolds Group Holdings Inc.'s load (the first such application for aggregation, see story here). The SCC said that in the Reynolds case it had emphasized that the result of its review was strictly limited to the instant case and did not establish specific rules for, or the eventual scope of aggregated retail choice

As noted by RetailEnergyX.com, over a half a dozen customers including Costco, Target, Harris Teeter, Kroger, Safeway and Cox have filed similar petitions to take retail choice under the aggregation provision. While each case has its own facts and the load may be smaller than Walmart, given the SCC's over-arching concerns about cost-shifting, such customers will face a high hurdle in overcoming the SCC's stated public interest concerns established in the Walmart orders

Case Numbers PUR-2017-00173, PUR-2017-00174

Earlier:

The Virginia State Corporation Commission (SCC) has rejected Walmart’s request for permission to leave the utility systems of Dominion Energy Virginia (Dominion) and Appalachian Power Company (APCo) to obtain competitive electric power supply for its retail stores throughout Virginia from third-party suppliers.

The SCC said in a news release that, "The Commission found that if Walmart, a large-demand customer, left the utilities’ systems, the remaining Dominion and APCo customers who do not have the legal right to leave and seek lower rates would be harmed by the resulting shifting of costs to captive customers. Such captives represent the vast majority of both utilities’ customers and include residential and small businesses."

"Based on the record developed in this case, if Walmart’s request to leave was granted, the costs shifted to remaining captive customers is estimated at $65 million for Dominion customers and $4 million for APCo customers over the next 10 years. The loss of Walmart’s demand would cause, for remaining customers, a net increase in other costs, including rate adjustment clauses and base rates, and a possible decrease in rate refunds otherwise due to customers," the SCC said in a news release

"The Commission also considered Walmart’s application in the context of the past ten years of rising rates for captive customers of Dominion and APCo. Over this time, the monthly bills for APCo residential customers have increased by $48, or 73 percent, and for Dominion residential customers by $26, or 29 percent. And, the Commission noted the likelihood of future rate increases stating, 'Additional bill increases are expected as utilities incur new costs under the mandates of Senate Bill 966,'" the SCC said in a news release

"Enacted by the 2018 session of the Virginia General Assembly, Senate Bill 966 also contained a provision that automatically granted certain large-demand customers of Dominion the right to a two percent rate cut, a rate cut that was not available to residential and small-business customers, and that will result in cost-shifting to small-demand customers," the SCC said in a news release

"In conclusion, given the context of a decade of rising rates and the likelihood of even higher rates in the future, we do not find it consistent with the public interest for captive customers who do not have the legal ability to obtain lower rates – predominantly residential and small business – to suffer from the cost-shifting identified [in this case] by enabling a large-demand customer to seek its power supply elsewhere...," the SCC said

The SCC said in a news release that, "A provision of Virginia law mandates that a single customer with more than five megawatts of demand can leave the utility system and purchase power from a third-party vendor. Another provision of law allows, subject to the Commission’s discretion, an applicant such as Walmart to aggregate the demand from many retail stores to reach the threshold. Walmart had applied under this provision, and the Commission used its legal discretion to deny Walmart’s petition."

Case Numbers PUR-2017-00173, PUR-2017-00174

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