Virginia SCC Denies Costco Application To Take Competitive Supply, Cites Impact On Small Captive Customers

SCC: Won't Allow Large Customers To "Escape" Dominion Rates When Small Customers Cannot Shop

May 30, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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The Virginia State Corporation Commission (SCC) has denied an application by Costco to leave the utility system of Dominion Energy Virginia and obtain the combined electric power needs of its retail stores from a third-party electric supplier.

The SCC said in a news release that, "As it ruled in a recent order denying a similar request by Walmart, the Commission found that if Costco, a large customer, left Dominion’s system, the remaining 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. Captives include residential and small businesses which comprise most of Dominion’s customers."

In Virginia, 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.

While customers may aggregate to 5 MW to take competitive supply, such aggregation is subject to SCC approval. Costco was seeking to aggregate its load to take competitive supply

The SCC said in a news release that, "Costco had argued that Dominion’s rate structure was unfair. During the case, Costco stated that it sought to leave Dominion’s system, '...based on Dominion’s piling on of rate adjustment clauses [('RACs')], and [their] significant impact ...' Costco also said, 'under the current statutory structure Dominion has been over-earning on its frozen base rates for a number of years,' and 'it is enormously frustrating that an incumbent utility has an incentive to keep what [Costco views] as the customer’s money.' Costco also stated that 'Dominion's piling on of excessive costs ... was the motivation for the Costco Petition.' Costco further stated that, 'Costco is also seeking to avoid the anticipated future rate increases' from 'the huge potential cost impact if Dominion elects to fully implement the Grid Transformation and Security Act [Senate Bill 966 from the 2018 General Assembly Session].'

The SCC said that it, "respects the economic and business goals reflected in Costco’s pleadings and testimony," but that "if Costco believes that the current statutory structure for setting vertically-integrated electric utility rates results in unreasonable or unnecessarily high rates, its potential for recourse may be found through the legislative process."

The SCC continued, "... [G]iven the context of a decade of rising rates and the likelihood of even higher rates in the future, the Commission does not find it consistent with the public interest for ... captive customers -- predominantly residential and small business -- to experience the cost-shifting identified herein by enabling a larger commercial customer to seek its power supply elsewhere through aggregation."

The Commission concluded, "This Commission will not allow small customers who cannot escape [Dominion’s rate] structure, predominantly small businesses and residential customers, to be further burdened by the identified cost-shifting that will occur if larger customers like Costco choose to seek better deals for themselves outside of Dominion's system."

Case Number PUR-2018-00088

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