A coalition takes aim at Virginia’s ‘vampire squid:’ How much will it make it squirm?

New York investment bank Goldman Sachs was once memorably called “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” by Rolling Stone writer Matt Taibbi.

In Virginia, many would argue we have long had our own bloodsucking cephalopod wrapped around the Capitol. And nearly 2.6 million of us are required to buy what it’s selling if we want electricity.

That was largely the thrust of a news conference Tuesday in Richmond rolling out the Virginia Energy Reform Coalition, which former Republican Attorney General Ken Cuccinelli, in his capacity as director of regulatory action at the conservative FreedomWorks Foundation, aptly dubbed a “politically eclectic” group comprised of consumer, environmental, limited-government and other interests.

Generally though, what unites them is their opposition to the way Dominion Energy has ridden roughshod over its regulators and ratepayers for years, all while slow-walking moves into renewable energy and customer-focused innovations that are rapidly changing the electric power sector in other parts of the country.

“These utilities have irresistible financial incentives in pursuing large capital investments and high volume sales that are often against the interest of their captive consumer base,” said Brennan Gilmore, executive director of Clean Virginia, another coalition member and one that was explicitly founded to fight Dominion’s influence at the General Assembly by offering money to lawmakers who refuse the utility’s donations.

The collection of nine organizations spanning “a wide range of public policy ideologies” is pushing a platform that would fundamentally transform Virginia’s monopoly-dominated electricity market into one based on Texas’ move into retail competition, with “quarantined” utilities that are essentially limited to transmission and distribution wires; an independent grid operator; uniform and streamlined interconnection standards in place of the barriers that exist today for distributed energy like rooftop solar and a dizzying menu of other policy pieces.

The goal is to give customers more choice, attract jobs and investment and lower rates.

“We think it’s time that our 20th century markets are dragged kicking and screaming — and we’re under no illusions that they will (not) kick and scream — into the 21st century,” Cuccinelli said.

As I have been forced to learn in my short time covering energy policy here, electricity markets and regulation are complicated — when you start talking about earnings collars, rate adjustment clauses, triennial base rate reviews, load forecasting and other arcana, most people’s eyes glaze over.

But luckily, the regulatory compact — the premise governing the relationship between monopoly utilities, customers and state regulators — is so out of whack here that the basics are easy for anyone to understand.

Dominion, our dominant utility and major campaign donor, influencer and lobbying behemoth, largely writes its own regulatory legislation, which it pushes through what has been a historically accommodating General Assembly.

In 2018, this led to the risible spectacle of Sen. Dick Saslaw, D-Fairfax, one of the company’s most reliable cat’s-paws, gruffly trying to insist that the coming utility overhaul everyone knew Dominion had written but that he would put his name on was not “Dominion’s bill.”

Invariably, this type of legislation has shackled regulators at the State Corporation Commission and benefited the company’s shareholders at the expense of its ratepayers, drawing the effusive praise of Wall Street analysts (I was going somewhere with that Goldman reference).

Dominion, of course, rejects this argument out of hand, generally pointing to its middle-of-the-pack ranking in total rate competitiveness among its peer utilities. (The company’s residential rate, though, has fallen closer to the bottom of the peer group, going up more than 34 percent between 2006 and 2017, the commission found).

The merits of the “you could be getting gouged more” argument aside, the company’s spin machine hasn’t been able to effectively combat the regular reporting from the commission on the hundreds of millions of dollars it has “overearned” on top of its already handsome authorized rate of return.

The tipping point, Cuccinelli says, was the 2015 “rate freeze” that prevented regulators at the commission from ordering base rate reductions for years. Instead, the commission staff dutifully tabulated Dominion’s excess profits.

“I think it was a wake up call to a lot of people,” he said. “This is legalized stealing because the Generally Assembly says it’s OK. The State Corporation Commission is saying we’d give this money back to consumers.”

When the rate freeze became politically untenable, Dominion pulled off a truly impressive feat in 2018, convincing the majority of lawmakers and Gov. Ralph Northam to let them keep future overearnings if it plowed that money into a suite of eligible grid projects, committing to thousands of megawatts of new solar and wind and returning to a rate review scheme that critics said would make it virtually impossible for the commission to lower base rates.

However, the commission staff, evidently, like Popeye, can’t stands no more.  The SCC has been knocking big holes in the company’s plans ever since the 2018 bill passed, shooting down billions in proposed grid spending and, for the first time, rejecting Dominion’s integrated resource plan.

The company’s power and influence have become issues in (mostly Democratic) primaries, including in a race against Saslaw, whose partner in crimes against utility ratepayers, Sen. Frank Wagner, R-Virginia Beach, isn’t seeking re-election, landing a plum job as a deputy lottery director.

Both served on the Senate Commerce and Labor Committee, where they helped quarterback Dominion’s legislative priorities and snuff out things the company didn’t want to get to a floor vote.

So how did Dominion take the news of the coalition’s launch? A company spokesman raised the specter of blackouts and high prices in statements to reporters. Indeed, Texas news reports suggest deregulation has been something of a mixed bag.

“As it stands today, our Virginia customers get a great value,” Rayhan Daudani said. “We keep our costs low, while our reliability remains high.”

But a potential Democratic takeover of the General Assembly in this fall’s elections, which would ignite a push for a slew of more progressive energy legislation that the company has been able to reliably kill in committees until now, surely must keep some of them up at night.

Dominion’s own “overreach” is largely to blame for the rapid shift in the political landscape since the company was able to get the 2015 rate freeze bill through, Cuccinelli told me after the news conference.

“That has contributed very heavily to it. Left and right, tea party, environmentalist, you see it across the spectrum,” he said.