Electric bills are climbing out of reach for too many Virginia families and businesses. Appalachian Power’s residential bills have increased 158% since 2007. Dominion Energy projects customers’ bills could increase up to 50% in the next 15 years. Data centers are driving unprecedented electricity demand, straining our power grid and creating the need for significant new transmission infrastructure. Meeting that demand will be costly. It is important that these costs be fairly allocated to customers driving the demand and that utilities use the most cost-effective approach consistent with our clean energy goals, so Virginian families and businesses are not left on the hook.
That’s why we’re encouraged by two recent actions by independent experts at the State Corporation Commission (SCC). First, in Dominion Energy’s ongoing rate case, the SCC has signaled a focus on cost allocation to ensure that data centers pay for the infrastructure built to serve them. Second, an independent report commissioned by the SCC charts a potential performance-driven regulatory path forward. The report was commissioned by legislation we sponsored and passed with bipartisan support and provides a detailed, data-backed case for aligning utility profits with the public interest.
Virinia has historically used a regulatory model that ties utility profits to how much they spend instead of how efficiently they operate, so the more they invest in capital projects the more profit they make. The current system creates an incentive to spend more rather than to pursue lower-cost, more operation-oriented and efficient strategies.
The challenge
Dominion projects its electricity demand could double by the 2030s. Meeting this demand will require billions in new generation and transmission infrastructure. Fortunately, the most cost effective and quickest ways to deploy technologies align with our clean energy goals, including energy storage, renewable generation such as solar and offshore wind, and efficiency technologies like geothermal systems. We can also tap into emerging technologies like fusion energy and small modular nuclear reactors to meet this demand.
These investments are essential for Virginia’s economic competitiveness. The critical question is: How do we make these investments as cost-efficiently as possible?
The independent experts offer clear recommendations deserving careful study, including:
- Manage fuel cost risks: Between 2021 and 2024, Appalachian Power’s fuel costs more than doubled, driving nearly 40% of bill increases, since utilities pass 100% of fuel costs on to customers. Another recent study assigned 30% of Virginia’s overall rising electric rates to natural gas price increases caused by the Ukraine War. Renewable generation creates a natural hedge on fuel costs while reducing risks for customers. Dominion has described the fuel savings from renewables (meaning costs ratepayers won’t have to pay) as “eye-popping,” saving Virginians more than $118 billion in the future. We need to do more of that: incentivize reducing fuel costs to ratepayers. Going forward, utilities can better manage these risks — integrating fuel-free renewables and reducing exposure to volatile fuel markets— while maintaining reliability.
- Streamline strategic reviews of utility planning: Billion-dollar decisions about generation and transmission could be reviewed comprehensively in more holistic and long-term proceedings, rather than in piecemeal filings. Streamlining reviews and cost accounting would improve transparency, reduce regulatory expenses and encourage cost control.
- Employ all-source competitive procurement for reliability needs: When Colorado’s Xcel Energy opened its process to all energy sources, it received six times more proposals than expected, with record-low bids producing $213 million in customer savings. Virginia utilities should consider the feasibility of a similar approach, allowing all resources — nuclear, renewable, storage and efficiency — to compete on a level playing field based on cost, reliability, speed to market and value.
- Multiyear rate plans with cost controls: Virginia has taken steps in this direction, establishing periodic utility rate reviews. Building on this construct could hold utilities accountable for prudent investments and on-time, on-budget project execution. Under a better designed multi-year rate plan, if utilities build efficiently, they profit; if costs balloon due to imprudent management, they should bear the burden.
Learning from others
We can look to some states that are already implementing comprehensive performance-based frameworks while managing dramatic infrastructure needs to determine if their measures fit Virginia’s needs. Maryland’s experience demonstrates the risk of moving forward without strong cost controls — rising bills without proportionate benefits. Virginia should learn from these examples to get this right.
A balanced approach
These reforms aren’t anti-utility or anti-investment. Virginia needs substantial new infrastructure to meet future energy needs. Well-designed performance-based regulation allows utilities to maintain financial health and earn fair returns while shifting focus from spending more to spending smarter. Reliability and safety remain paramount, with rewards for exceptional service and penalties.
The time to act
With demand soaring and costs rising dramatically, we cannot wait. Every year without reform means higher bills for Virginia families and businesses. We commit to leading a comprehensive discussion on these recommendations, hosting public hearings to hear from utilities about operational realities, consumer advocates about protections, businesses about affordability, and utility regulation experts about lessons learned from other states.
Taken together, these reforms could give Virginia the tools to ensure reliable, affordable power while providing utilities the stability they need. Virginians want affordable, reliable, clean energy, and confidence that every dollar they pay is spent wisely. The experts’ roadmap shows a path to achieve all three. Now it’s time to ensure Virginia’s energy system works as reliably as possible, allocates costs fairly, and aligns the costs of new infrastructure with the beneficiaries of these investments.
The path to lower electric bills runs through smarter regulation. Let’s work together to determine how best to take it.
– Senator Scott Surovell and Delegate Rip Sullivan
