A big win for one of Vir­ginia’s big boys

Richmond Times-Dispatch Weekend - - Metro -

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.”

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