A big win for one of Virginia’s big boys
As Ted Morrison sees it, the big boys got exactly what they paid for.
Morrison, who for 18 years was one of Virginia’s corporate cops, suggests that the nearly $5 million in campaign contributions that Dominion Energy Virginia, the state’s biggest political donor, has thrown at aspiring and incumbent legislators since 1996 is yielding huge dividends — literal and figurative — for the local electric monopoly.
The latest: a lopsided decision by the Virginia Supreme Court this past Thursday affirming a controversial 2015 law that — for seven years, but perhaps permanently — strips the State Corporation Commission of its century-old power to order utilities to surrender lavish profits as refunds to their customers.
Though disappointed with the decision, Morrison, a member of the commission from 1989 to 2007, isn’t the least bit surprised. He said that broad language in the Virginia Constitution — folded into it nearly five decades ago on Morrison’s watch as a member of the House of Delegates — gave Dominion Energy Virginia the opening it needed.
“The legislation bought by Virginia Power has restricted the application of sound public policy,” said Morrison, referring to the company by its former appellation. In Morrison’s view, lawmakers are entirely to blame: “They can’t be that stupid or maybe they just looked the other way.”
Thanks to a Republican General Assembly, a Democratic governor and a seven-member Supreme Court that is more Republican than Democratic, Dominion Energy Virginia can keep at least
$1 billion — a commission-estimated windfall that improves the utility’s already-impressive ledger, making it even more attractive to Wall Street.
By week’s end, Dominion Energy shares were up, closing at $79.50 and nearing the 52-week high, $81.65. That increases the on-paper wealth of shareholders, including Frank Wagner, the Virginia Beach senator who wrote the disputed law. And because each share throws off more than $3 in dividends, it also means more folding money for investors.
Dominion Energy Virginia would tell you the freshly upheld law is about accountability. But to whom?
In pressing for a shackled State Corporation Commission, the company said it required maximum flexibility to comply with the conditions — and cost — of Barack Obama’s Clean Power Plan, which Donald Trump is killing off as a financial hardship on the energy industry; in particular, coal. It’s been dying for 40 years, in the process, slowly suffocating Appalachian Virginia but strengthening its Republican reflex.
The stock pickers love the law, kvelling that investors would be the big winners. After all was said and done in Richmond two years ago, UBS, for example, declared Dominion Energy Virginia the “king of the hill,” saying that the legislation eliminated “one of the largest single risks” to higher earnings.
And hours after the Supreme Court decision, Goldman Sachs said pretty much the same thing: “We view this as a positive for (Dominion Energy Virginia) as it removes risk that a rate review could
... provide a headwind to (earnings per share).”
When it comes to the politics of this issue, Dominion Energy Virginia doesn’t talk as much about the stock market as the marketplace of ideas; that the 2-year-old law supposedly is a deal for its customers, freezing base rates into the next decade. What’s significant is what the company isn’t saying; that it continues, with the SCC’s consent, to raise rates to recover rising expenses.
Virginia allows for electric utilities 11 so-called rate-adjustment riders, covering everything from environmental costs to fuel, from transmission to plant construction. For the typical residential customer, those increases have pushed the monthly bill from $113.20 in July 2015 to $119.75 this month.
David Botkins, Dominion Energy Virginia spokesman, sidestepped a question on the influence of the company’s campaign contributions in winning the law validated by the Supreme Court on a 6-1 decision. Also, he would not say whether Dominion Energy Virginia would seek to make permanent the restrictions that temporarily exempt it from an everyother-year financial snapshot by the SCC that could force the company to give up excess profits.
“One thing is crystal clear: (the law) is constitutional and has kept our customers’ rates low,” Botkins said.
Emasculating the commission was a perfectly permissible stroke by Dominion Energy Virginia, but a throwback as well.
The current Virginia Constitution not only perpetuates the SCC — established in 1902 as an independent agency responsible for policing business, big and small — it gives the General Assembly a say in the rules by which the agency operates. This is the sweeping language that Morrison said ultimately proved troublesome for opponents of the new law, notably the utility’s biggest customers, such as manufacturers.
At issue in the Supreme Court case was whether that language extended to what the constitution had said was solely and entirely the commission’s responsibility: setting rates. As of Thursday, Virginia apparently had new law allowing the General Assembly to shape them.
Actually, that was the old law.
Before Dominion Energy Virginia called the tune at the legislature, the railroads did. In the late 19th century, the General Assembly set rates for hauling products and produce. A vast swath of state law specified how much it cost to move goods from this town to that city and beyond. The railroads liked it that way because they could — by handing a few bucks to a legislator — carve in the Code of Virginia prices that kept them profitable and penalized their competitors.
And for part-time, often-incurious lawmakers — the General Assembly then met every second year — the money was easier to understand than the issue. The railroads controlled the cash spigot and the flow of information. That put the legislature at a distinct disadvantage — much as it would be in 2015, when deep-pocketed Dominion Energy Virginia came calling with a complicated idea that would fatten earnings.
A. Caperton Braxton, a delegate to the convention that wrote the 1902 constitution and a stout advocate of what would become the State Corporation Commission, said in 1904 that the agency was essential to protecting consumers; that with expertise and independence, rate-setting would no longer be one-sided. This fed a rare spasm of reform that birthed the SCC, which, in turn, brought the railroads to heel.
Alluding to the bogeymen of the time, Braxton wrote in The Virginia Law Register, “The vast superiority of the railroad managers over the general legislature in mobility and quickness of action, enabled them to design and execute plans to evade the law, faster than the legislature could establish new laws to defeat their new plans.
“The contest between the legislature and these railroad managers was not unlike an elephant charging a pack of terriers, or the proverbial attempt of the Irishman to catch the flea.”
More than 100 years later, all you have to do is substitute “utility lobbyists” for “railroad managers.”