Dominion has gotten the OK from the State Corporation Commission to raise electrical rates by 18%, effective immediately. The SCC agreed with Dominion’s assertion that they were simply trying to cover the increased costs of fuel, and I don’t know of any reason to doubt that’s so. (Dominion had to ask permission because they’re regulated by the SCC, after begging to be regulated a few years ago. Remember, kids: industries are regulated not because of big, evil government, but almost always because the industries ask to be regulated.)
I have just one quick thought on this, which might be obvious to some, but is worth calling up. Dominion says that they’re working on efficiency programs, encouraging people to conserve, etc. This is just goofy. Why in the world would a company discourage people from buying their product? Their stockholders would be up in arms if they actually believed Dominion’s claim. Could you imagine Coca-Cola saying we’re really trying to discourage people from drinking our soda, or Apple assuring a concerned public that we want people to understand that they really shouldn’t buy an iPod? Of course not. They’re in the business of selling a product, and their board of directors have a legal duty to act in the best interest of their corporation, maximizing profits. They should not be faulted for doing so.
When Dominion says that they’re committed to getting their customers to conserve power, they’re lying. You wouldn’t expect your dealer to persuade you to cut back on your heroin consumption. Don’t expect Dominion to help you buy less power.
Dominion has not been “incentivised” to promote conservation. But in many states the utilities have had their rate structure “decoupled” which in brief means that utility rates float (1%-3%)to provide an agreed rate-of-return – charging consumers more per unit of energy commodity to encourage conservation and allowing utilities to increase per unit rates to gain an agreed upon profit.
A friend in California, global-warming denier, and former Republican activist was recently “incentivised” to cover his roof with photovoltaics and install net metering by generous tax incentives and low-interest loans from his electric utility to help pay the costs. The utility is betting that his installation will allow them to raise their unit rates as demand decreases.
So there are ways to drive conservation in Virginia, but not until we compel the General Assembly to kick that trollop, Dominion Power, out of their bed. Or at least take charge of the relationship.
Waldo and Bubby are both right. Can’t blame Dominion for playing by the rules the governor and General Assembly write. But when the GA votes nearly unanimously to support (and the gov signs) that horrendous re-regulation bill a couple of years back, aren’t we light years away from representation in Richmond interested in real reform?
There is an incentive for DVP to design and implement EEC programs. They get to recover the cost the programs through rates (i.e., DVP is just helping you help yourself). According to the re-regulation bill at any time (but a max of once per 13-month period), they can file for an adjustment to their tariff for:
Could you create more incentive through decoupling? Sure. But they don’t completely lack incentive. And to prove it, they are making a filing for EEC programs (I presume under the section of the code I quoted).
But Dominion and their stockholders surely know that incentives do not a business plan make. For the long-term success of Dominion, they have to sell electricity, and the amount of that electricity that they sell each year (or, at least, the value of that electricity) must climb annually. My suspicion is that these incentives largely serve to fund the fig leaf of conservation, though my wish is, of course, to the contrary.
Interesting tidbit about the re-regulation bill tariff adjustment, though!
Whether DVP sells more electricity is somewhat outside their control. For the most part, they are reliant on the economic success of their service territories: NoVA and Hampton Roads. And DVP has little influence over federal defense and homeland security appropriations.
High energy prices don’t help DVP or DVP investors either. Higher energy costs dampen economic growth. And to the extent that the economies of NoVA and HR contract, that hurts big D and their investors. So, to the extent that DVP can moderate the increase in energy costs and help level out that growth so that businesses and consumers can effectively plan, DVP helps themselves.
EEC programs reduce demand, but they don’t eliminate growth in demand. California has had successful EEC programs for years, but electricity demand has still grown because California’s economy has grown. EEC has just moderated the increases in their total demand.
To your points about investors in D, they are looking for growth, but steady growth. Utility investors are not expecting astronomical growth. They want good dividend yields and good dividend growth. EEC programs and investor goals are not mutually exclusive. As I note above, EEC programs are a tool to moderate demand and overall energy cost to the consumer. This doesn’t eliminate growth, it just moderates it. I don’t think such programs would impair in any way D’s ability to provide increased dividends.
I certainly wouldn’t agree with you there. But one thing that they can control is what sort of incentives or promotions that they provide for people to conserve energy. There’s simply no sense in them trying to persuade people not to use their product.
As best as I can tell, they’re in about the same boat as gas station owners, except that gas station owners can adjust their prices whenever they want. Assuming that everybody’s being truthful in this rate hike, since they only got 18% (not the 22% that they’d asked for), I can only assume that high energy prices are actually hurting them, though they’ve announced their intention to retroactively compensate for that with another rate hike in a year’s time, and understandably enough.
And presumably that’s why companies like Dominion are OK with them—because they’re ineffective in halting the nation’s growth in demand for electricity.
It’s more than halting demand–it’s preserving the status quo by making it look sustainable for consumers. There are two possibilities for reducing energy pricing at the consumer’s level: decreased demand, or increased supply from other sources. If you reduce your energy consumption by 10% to mitigate an 18% rate hike, Dominion still makes some money, albeit less than they would if you didn’t adjust your consumption at all. If you instead put solar panels on top of your roof and generated your own electricity, Dominion won’t make a dime off of you. And solar panels start looking more and more attractive as rates go higher.
Conservationism is Dominion’s selfish, self-serving way of trying to maintain the status quo of energy supply in Virginia.
With dynamic pricing, smart grid is the hub of the clean energy revolution.
With it comes greater EEC, more renewables and less fossil-fuel. Without, you have a pricing scheme which doesn’t promote EEC, and if it did, it would promote higher utility rates because of a slew of issues. Less renewables would be sited and the energy utility price and grid problem will continue down its merry path.
Without the understanding of the full impact a smart grid through dynamic pricing has, all the posts above fails to understand what is in store – therefore you lack the appreciation of what DVP has certainly proposed for 2009-2014. $600 million for smart grid infrastructure makes DVP at the head of the pack nationwide.
While that’s interesting, floodguy, what is the consequence of us “lack[ing] the appreciation of what DVP has certainly proposed”? Is what they’ve proposed going to result in a decrease in the net state usage of power, or even the average household usage, over the next, say, five years? And if you think that’s so, I’d be happy to make a long bet with you on the topic.
Oh yeah, now I see how you will sort the Talkers from the Players on the Waldo Gilmiracle Challenge! Longbets.org
And I like the part about having to ante up with yankee dollars before you can respond to a bet – none of this “trickle-down, “supply-side”, “gladly-pay-you-on-thursday-for-a-burger-on-tuesday”, “slam-dunk”, “they-will-greet-us-with-roses”, “mission-accomplished” wingnut nonsense. Cash only.