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If Virginia utility regulators follow the recent recommendation of a staffer, then Shenandoah Valley Electric Cooperative residential customers will be paying 20% more in fixed charges beginning March 1.
And while that’s a likely scenario, solar and energy efficiency advocates are holding out hope that commissioners buck that advice by rejecting what will amount to a $5-a-month increase on co-op members’ electric bills.
Advocates say raising fixed rates is regressive because it not only penalizes low-income customers and judicious energy users, but also means a higher portion of electric bills can’t be controlled with customer-initiated solar power and energy efficiency measures.
The three-member State Corporation Commission is expected to reach a decision on the contentious issue (PUR-2021-00054) next month. Commissioner Angela Navarro’s term ends Jan. 31. Last January, Democratic Gov. Ralph Northam appointed Navarro to fill the last year of an unexpired term. Incoming Republican Gov. Glenn Youngkin would have the opportunity to fill that opening only if the General Assembly fails to re-elect Navarro to a six-year term before it adjourns its 2022 session.
“I conclude the Cooperative’s proposed increase to the residential [basic consumer charge] is sufficiently supported by the record and should be approved,” senior hearing examiner A. Ann Berkebile wrote in a 49-page report filed with the SCC on Dec. 2.
Last Friday, the SCC staff filed a brief letter backing Berkebile’s conclusion.
“Her opinion carries a lot of weight because it’s common for commissioners to adhere to staffers’ advice,” explained Emily Piontek, the Virginia energy democracy field coordinator tracking the case for Appalachian Voices.
Piontek’s advocacy organization was among the 60 or so groups and individuals who filed comments to support an ambitious effort by national nonprofit Solar United Neighbors (SUN) to halt the co-op’s requested boost in fixed charges.
Still, she added, a final decision is not yet set in stone because commissioners also must consider rebuttals to Berkebile’s report that SUN and other advocates had to file by Dec. 10. Several met that deadline.
For instance, Richmond attorney Will Reisinger, serving as counsel for SUN, urged commissioners to reject the fixed rate increase. If approved, he pointed out that customers’ fixed charges would jump from $13.76 to $30 — a 118% increase — over roughly two years. That’s because the latest $5 request comes on the heels of the co-op more than doubling its fixed charges in January 2020 from $13.76 to the current $25.
“The evidence in this case showed the Cooperative’s proposal to assign 90% of the requested revenue increase to fixed customer charges was unreasonable, contrary to fundamental ratemaking principles, and inconsistent with Virginia’s public policy,” Reisinger wrote.
Shenandoah Valley Electric Cooperative, or SVEC, is headquartered in Rockingham County’s Mount Crawford and serves roughly 96,000 meters in the city of Winchester and 11 counties.
Since the rate case was filed in March, co-op leadership has maintained that the fixed-rate increase is a major piece of $5.3 million in annual revenues it needs to cover expenses, service debt, fund capital additions, and meet the financial goals established by its board of directors.
“We are happy the hearing examiner has recommended the State Corporation Commission approve our rate application in its entirety,” SVEC spokesperson Preston Knight said. “We look forward to the commission entering an order to the effect.”
In his rebuttal, Reisinger also highlighted earlier testimony of Karl Rábago, who served as an expert witness in the intervention. He is a member of SUN’s board of directors with an extensive resume that includes work as a Texas utility regulator and deputy assistant secretary with the U.S. Department of Energy.
(Rábago also provides occasional editorial feedback to the Energy News Network as a member of a reader advisory committee. See our code of ethics here.)
Rábago had provided three options for the co-op to recover its proposed revenue requirement more equitably via volumetric rates, the amount of electricity a customer used.
Fixed rates, Rábago had explained, should be “limited to the marginal cost of connecting the customer to the grid and should include only costs that vary directly with the number of customers.” He had recommended that regulators order the co-op to reduce the fixed charge by $5 annually until it’s no higher than $15 a month.
Squeezing solar and low-income customers
Sally Newkirk, a 20-year SVEC customer, testified in October how higher fixed rates will punish her and her husband for their good faith endeavors to reduce their energy consumption and control costs.
In all, they have invested about $80,000 in rooftop solar, a geothermal heat pump, shade trees and extra insulation. They also sealed air leaks, bought Energy Star appliances and replaced incandescent bulbs with LEDs.
“We provide energy to the grid, and we provide it during peak times in both the summer and the winter, therefore mitigating SVEC’s energy costs, and they did not have to invest one penny in new lines, new substations or pay more fuel from ODEC,” Newkirk said, referencing power generator and transmitter, Old Dominion Electric Cooperative.
“That’s why these proposed increased rates appear to me to be punitive.”
Newkirk also noted that none of the SVEC board members had considered potential energy burdens when proposing the rate hikes.
In his testimony, Rábago had stated that high fixed charges encourage excessive, wasteful, and polluting energy use because they send a strong price signal against the efficient use of electricity and investment in distributed generation, distributed storage, demand response, and other distributed energy resources.
Rábago emphasized that such rates disproportionately burden low-income customers who, for the most part, use less electricity. He also said that the co-op doesn’t know how its proposed rates will affect energy justice because management has not evaluated how its proposed rate changes will impact its elderly, low-income and minority members.
An analysis by Appalachian Voices revealed that about 17% of the co-op’s households — about 14,800 — would qualify as low-income with an average annual income of $16,206.
Their energy burden of about 14.2% is four times more than the 3.5% burden carried by the average household in the co-op’s service territory, with an income of $77,591.
In her testimony, Newkirk also expressed dismay about SVEC’s proposal, in this same rate case, to add a new demand charge of 10 cents per kilowatt to residential member bills. Simply put, demand is the rate at which power is consumed. Usually, utilities charge these additional fees to non-residential and commercial customers for maintaining a steady supply of electrons.
Traditionally, demand charges are calculated using the single highest 15-minute interval of power consumption over the billing cycle multiplied by the current per-kilowatt rate.
“This was a difficult rate for me to understand,” she testified. “Now that I understand it, and if you approve the demand charge, I know that I can behave responsibly and charge my electric vehicle, run my dishwasher and my HVAC system [during] off-peak hours and SVEC would capture it and charge me extra. This is odious.”
Piontek, of Appalachian Voices, agrees with that assessment. It would be much more sensible for co-ops to set up time-of-use programs for residential customers, she said. Such programs are simpler to explain to members and can recover costs more accurately.
“They really need to explain how their member base can reduce their energy usage,” Piontek said. “We just don’t see them doing that.”
Reisinger also strongly disagreed with Berkebile’s decision to green-light SVEC’s new demand charge. He called it “not ready for approval,” noting that the co-op “does not even have the smart meters in place to take advantage of any potential benefits that could be provided by a demand charge.”
Aaron Sutch, SUN’s Richmond-based Mid-Atlantic regional director, said he was pleased the orchestrated pushback against SVEC’s proposed increases rallied diverse parties to speak out.
For example, he never expected the board of supervisors from relatively conservative Frederick County to weigh in. Supervisors didn’t take a hard stand, but they filed a two-page letter asking utility regulators to consider modifying the requested fixed rate to “address the impacts of electricity costs on SVEC’s ratepayers of limited means” and “to encourage electricity conservation.”
Sutch called fixed charges a “lazy way” for co-ops to bring in money.
“Utilities know the landscape is changing,” he continued. “But instead of trying to accommodate a two-way grid and the benefits of solar and energy efficiency, they think they need to collect as much revenue from their customers as possible.”
Advocates seeking sunlight
Solar United Neighbors and its allies have long been convinced that while electric co-ops pride themselves on being democratic, member-controlled institutions, in reality they function more like monopolies. In fact, they say, co-ops have less SCC oversight because their member model is supposed to be distinctly different from investor-owned utilities.
In SVEC’s case, SUN is concerned that the co-op’s board of directors and managers are too opaque with their members about the proposed increases, Sutch said. For instance, questions about visibility and accountability arise because customers are prohibited from attending board meetings.
Advocates have been “doing the work SVEC should have been doing” by organizing webinars and other outreach tools to educate members about the intricacies of demand and fixed charges, Piontek said.
But Knight, the co-op spokesperson, said SVEC hasn’t fallen down on that front.
He pointed out that instead of placing a printed insert in members’ billing statements, the co-op chose to give the proposed rate increases prominent play in its monthly magazine, Cooperative Living, “to make sure the information could be delivered clearly.” As well, the co-op added a detailed frequently asked questions segment to its website.
Knight also noted that SVEC did extensive outreach for a telephone town hall on Nov. 18 where the rate case was highlighted as the primary topic. It drew 43 participants.
“SVEC remains firmly committed to communicating with our members about any issue related to the cooperative that impacts them,” he said. “Our work in this area is ongoing.”
He emphasized that SVEC asked regulators to delay the launch of the new rates from Jan. 1 to March 1 of next year “to give us sufficient time to make sure our members are aware of the changes, understand them, and can act accordingly.”
Still, advocates say those outreach attempts aren’t enough when members are barred from the room where agreements are reached.
“The real barrier to member control is when customers aren’t allowed to go to meetings where the board is making these decisions,” Piontek said. “This is a pretty substantial fixed charge increase and members were not made aware they were seeking it. Then suddenly, the case is at the State Corporation Commission.
“The transparency just isn’t there.”