Nov 28, 2023
On November 21, The Capitol Forum hosted a conference call with Brennan Gilmore, executive director of Clean Virginia, to discuss the biggest successes and challenges Clean Virginia has experienced and what he anticipates for the future of Virginia’s electric utility law. The full transcript, which has been modified slightly for accuracy, can be found below.
TEDDY DOWNEY: Good morning and welcome to our conference call with Clean Virginia’s Brennan Gilmore. I’m Teddy Downey, Executive Editor here at The Capitol Forum. And Brennan is the Executive Director at Clean Virginia, which is an independent advocacy organization working to advance clean government and clean energy. He’s talking with us today about the organization’s biggest successes and challenges, as well as what Brennan anticipates for the future of Virginia’s electric utility law. And thank you so much for doing this, Brennan.
BRENNAN GILMORE: I’m happy to be here. Thanks for having me.
TEDDY DOWNEY: And right before I get into questions, just one quick housekeeping item. If you want to submit a question, type it into the questions pane of the control panel. We’ll collect questions throughout the call and address them towards the end. And you can also email us at firstname.lastname@example.org with questions. So, Brennan, you’ve done a lot of work on why Virginia’s monopoly utilities are not properly regulated. And I was wondering if you could start off this chat by giving us a little bit of a history behind the utility regulation of the monopoly utilities, particularly the evolution of the SCC. And then we can maybe get into problems and solutions after that.
BRENNAN GILMORE: Sure. So, we have one major utility in Virginia, and that’s Dominion Energy, which controls two-thirds of the state’s electric service territory. We have one other utility that has a monopoly service territory, Appalachian Power Company, which is a subsidiary of American Electric Power. And then we have much smaller territories that are mostly rural and mostly nonprofit co-ops. But Dominion is the largest utility and certainly the one that drives almost all the energy conversations in the state.
Like most public utilities, electric utilities, Dominion was given a monopoly over its service territory over 100 years ago when electrification was fully underway and the state decided that there was a natural monopoly in electric service. And so, Dominion has, in one form or another, been running electric service in the broadest parts of Virginia since then. Over that last 100 years, a lot has changed, of course. And particularly in the past few decades, Dominion has used this privileged monopoly position to really secure a system of regulatory capture.
In exchange for their monopoly in Virginia, Dominion’s rates, what they would charge for electricity, were to be set by regulators at the State Corporation Commission, the judicial body established in the Virginia Constitution, and reviewed every couple of years. If Dominion charged too much or it took in too much money beyond the cost of their service and a fair profit, they would need to lower their rates and/or refund money to customers. And if they earned less, then they would be made whole.
And over particularly the last decade, 10 to 15 years, after a brief experimentation with deregulation in the 90s, Dominion really began to sort of exert this system of regulatory capture in a very strong way. Every couple of years, their lobbyists would rewrite sections of the code, which essentially constrained their regulators at the State Corporation Commission, putting rather arbitrary provisions in the law that would not let them lower rates if Dominion had over earned. And we can get into the details of how they did it and the sort of tricks they used. But essentially, they would create a “crisis” that required them to keep the money that they had over earned and not give it back. And then the SCC’s authority was gradually winnowed away.
The consequences of this, in terms of the economic hit to customers, the State Corporation Commission itself estimates that over $2 billion during the last decade. So, this is essentially a system of legalized corporate robbery by a monopoly that has steadily eroded its regulation.
TEDDY DOWNEY: And I just want to drill down a little bit into the SCC’s sort of authority and responsibility and get into a lot of those details before we get into the of like how Dominion sort of keeps all that excess money and the things that contribute to it. But they can set rates and they define what a fair return is.
BRENNAN GILMORE: That’s correct.
TEDDY DOWNEY: How do they do that? And who’s involved? Are they staff people? Are they commissioners? What’s the level of capture? Does it go all the way down to like an ideological capture at the staff level? Or is it really like sort of manipulation at a higher level and kind of constraining the regulator?
BRENNAN GILMORE: Yeah, it’s a great question. And no, it’s not the ideological capture of the State Corporation Commission’s judges or staff. And different states have different regulatory models. In some states, the public utility commissions, what we call a State Corporation Commission, that other states call PUCs, these are often elected figures that are subject to more political influence. In Virginia, they’re not. They’re appointed by the General Assembly. And you have professional staff and regulators at the State Corporation Commission.
These rates are set, and the return on equity, the profit margin, is determined through what’s called a rate case. And a rate case, like most of the SCC dockets, are judicial proceedings where the utility goes before the judges, and there are also other interveners in the case. And interveners can include the Attorney General’s Office of Consumer Counsel. It often includes large power purchasers like Walmart or data centers or other industry that has, as an input, huge costs going to electricity, and consumer advocates and low-income advocates as well. And so, there is a proceeding where all of these folks offer testimony and evidence as to where the rates should be set, what the profit level should be.
The regulatory capture doesn’t happen there at that level in Virginia. Where it really happens is in the guidelines that the SCC judges have to, after having heard all this evidence, set that rate. And that is determined by law. And that law, of course, is made in the legislature and Virginia’s General Assembly. And Dominion, this is where their influence is brought to bear. Dominion pours millions of dollars into the General Assembly. And they have in the past decades, had very, very close allies and senior positions in the General Assembly, in essence acting as if they were lobbyists for the electric utility, in pretty shocking ways when energy policy is made.
So, what happened was, through influence, both in campaign donations and personal relationships, and charitable giving and the ubiquity of Dominion in communities—it’s hard to sort of understate just how present Dominion has been in Virginia’s government politics and culture over the past few decades—but through this type of influence, they have been, I would say up until this year when advocates for a cleaner system had a major win—and we can get into that later—they were able to write the laws that regulated them.
So, they redrafted sections of Virginia’s code, which had been relatively simple, and said, let’s have clean rate cases. The SCC judges look at the evidence and if there are over charges of customers, then rates go down. Dominion put in arbitrary limits. The rates could not go up over $50 million even if Dominion had over earned in the previous two years, hundreds of millions of dollars. And they put other arbitrary provisions that said Dominion’s Return on Equity (ROE) was tied not to the economic conditions in Virginia, but to peer groups. So other utilities around the southeast of the United States, Dominion should match their ROE. Completely arbitrary, almost cartel like behavior, when you look at the fact that other utilities beyond Virginia’s borders, are themselves in systems of regulatory capture as well.
So there again, every few years, Dominion would rewrite the code. So that when the SCC was having its rate cases, even if they found that Virginia customers were owed a lot more money or that rates should go down for electric customers across the state, they were not allowed to do that. They were not allowed to go where the logic and the equations and the original cost of service monopoly contract would have had them go.
TEDDY DOWNEY: That’s so interesting. I mean, this tying it to peer groups is really ridiculous when it comes to a regulated utility. I mean, it just makes no sense. So, I want to come back to sort of how they pay off the General Assembly. I mean, that’s one of the problems. You mention in your reports a lot of different problems, excess profits, ad costs, exec comp, lobbying, the Atlantic Coast Pipeline. Can we go through all the problems that you see with the current setup? And then I want to get to your point about the recent win that you had.
BRENNAN GILMORE: Yeah, sure. There are a lot of downsides to the way Dominion has structured our energy in Virginia. I’ll talk about a few of them. First and foremost, the one I already talked about, $2 billion, taking money from Virginians pockets by overcharging them and not returning that money or lowering rates and then transferring that to Dominion shareholders. That has been the story of the past decade, 15 years.
After this past significant General Assembly session, The Atlantic Monthly wrote a great piece called “How Virginia Took on Dominion Energy”, and it details that entire process, if listeners want to read a little bit more of the color behind that. But that was the biggest one and I think the biggest driver, of course. Because Dominion, as a public service utility that is shareholder owned, has a fiduciary statutory duty to shareholders and not to the public interest. That misaligned incentive is at the root of all the negative consequences of the system. So, overcharges, transferring money that belongs in Virginians pockets outside of the state to shareholders is a huge one.
The other one, and our second big motivation as an organization that is focused on environmental issues, is that Virginia has ranked and Dominion has ranked last on energy efficiency and the transition to clean energy because there were misaligned incentives in the public service utility. In theory, the public service utility should set policy based on what’s in the public interest. Well, what is in the public interest? Having reliable, efficient electricity that doesn’t cost that much. But Dominion, working under a cost-of-service model, which says the more they build and the more electrons they sell, the more they earn, is completely incentivized to build as much as they can and to sell as much as they can.
So, this is a key problem. And we can talk about some of the new regulatory methods that are being employed in other states called performance-based rate making, where they try and align utility profit better with the public interest. But that has not been the story in Virginia to date. And so, the public is suffering because we are buying more electricity than we need because it’s a horribly inefficient utility, constantly ranking near the bottom of national objective marks on energy efficiency. And then for years, Dominion pursued costly fossil fuel infrastructure, like the Atlantic Coast Pipeline, that promised large returns, despite the fact that there was no need for it. There was no objective need for new infrastructure, particularly fossil fuel generating infrastructure. But the lure of the guaranteed returns, regardless of whether that infrastructure was actually producing, or moving gas in the case of the pipelines, was just too much to avoid.
So, Dominion used its leverage and its influence in the state to try to ram through these projects and are still trying to do this. It’s remarkable. But in 2020, Virginia finally started to catch up on the clean energy transition, passing a landmark bill called the Virginia Clean Economy Act, which set a goal of going to net zero emissions by 2045, and said Dominion cannot build any more fossil fuel emitting plants. Well, flash forward three years, Dominion is now trying to push through a new gas generating plant outside of Richmond, Virginia, in direct contradiction to the law as stated in the VCEA.
So, the two major categories where we see the negative public impact are on cost, economic impact to Virginia families and then a very, very poor performance as an efficient utility that is leading the transition to a clean energy future.
And the third, I would say, is the incentive to block any sort of competition in the market. And Dominion has been ruthless on this, seeing any type of competition in the energy markets as a threat to their monopoly and thus an existential threat. So, to date they have successfully blocked all but the smallest projects which would provide retail electric service or allow large power consumers to shop around for electric providers. And this is down to even the level of things like rooftop solar, where Dominion has exacted very stringent, frankly ridiculous, interconnection standards for new solar projects—what we call community solar to small and mid-level solar projects—to connect to Dominion’s grid. So, at every turn, they have essentially tried to block the type of what we call distributed energy, localized energy, that is clearly the wave of the grids of the future, that is necessary for transition to a clean energy future. But again, it’s very poorly aligned with an outdated model of Dominion, the type of which Dominion’s monopoly has been purveying.
TEDDY DOWNEY: So, you talk about it’s high costs, poor efficiency. And it sounds like poor efficiency in dirty fuels, like not even talking about clean fuel. It’s just like the high costs and inefficiency when it comes to just generating and distributing dirty fuel, which is interesting. And then I want to talk a little bit more about just the energy transition to clean fuel. They’re blocking competition. Are they doing anything else in how they operate or affect law that deters the transition in addition to sort of blocking competition on the interconnection and community solar and things like that?
BRENNAN GILMORE: Yeah, those are the two big ones. So, when we look at renewable technologies, there are what we call utility-scale. So, these are large, massive megawatt projects that really only the largest companies can provide. And so, these are things like large offshore wind projects, huge solar arrays. And then there’s the non-utility scale, solar and other projects, which can be as simple as what we call net metering. You know, I have a solar panel on my house and any excess energy I produce goes back on to the grid. The grid is two-way in that sense—up to aggregated community solar where a university or a housing compound could provide its own energy.
This is a this is the wave of the future. We would like to see solar panels everywhere possible, parking lots, rooftops, across the state. And they should be allowed to put any excess energy back on the grid. The same way, you know, I think sometimes of this analogy of the road networks. You have a nonprofit public road network manager and anyone who needs to pursue commerce on that road network is allowed to do it in exchange for the fees and taxes.
Right now you have Dominion just having an iron grip on the grid here in Virginia and having very, very high thresholds and costs that make it essentially impossible for smaller companies to use the grid and to get electrons that they produce on that grid to customers in a broader market.
And so those are the two scales by which we talk about how we transition to renewable sources and to have both of those scales. Dominion is essentially trying to make sure it is the dominant and, in many cases, only service provider.
On the utility scale, there’s a few different models of how these projects would put electrons on the grid. One is utility owned. And a much more attractive one is what we call a power purchase agreement, where a third-party vendor pursues a project and then sells the output of that project to the grid. This could be solar field. It could be wind. And in that case, the private company in the market would bear a lot of the risk.
In Dominion’s model, it’s often much more expensive. In fact, one of the most staggering statistics in this area is that the solar projects Dominion pursues are three times as costly as similar power purchase agreement solar projects. And in the case where Dominion is providing all the power, it’s not only more expensive, but the risk is entirely on the shareholder. If something goes wrong, if the project goes offline, it’s still on the—I’m sorry, ratepayer—it’s still on their customer to bear the risk of that project, not the shareholder. And so, pretty much across different measures, it would argue for a more open, more competitive and third party purchased power agreement rather than having the monopoly dictate all the terms.
TEDDY DOWNEY: And one of the things that you mentioned is these big power buyers like a Walmart or like Amazon, in terms of their data centers and things like that, is there any additional corruption or special relationship between those players and Dominion? Do they offer them sweetheart deals or anything?
BRENNAN GILMORE: There are special deals that are worked out between large power purchase consumers and Dominion in many cases. That has not been, I would say, a dominant problem in this space. In fact, last year, when there was a large fight in the General Assembly over Dominion’s self-regulation, the alliance that went against Dominion and went in favor of returning full authority to the State Corporation Commission over the way it set rates included a lot of the largest power purchasers. And in many cases, when we’re at the SCC intervening in cases against Dominion, large power purchasers are often on the side of ratepayer advocates, low-income advocates, et cetera. all trying to have a system that is more sensibly regulated and with full authority given to the State Corporation Commission to do its job.
So, we haven’t seen that problem as much. I will say, however, that Virginia stands on the precipice of a massive problem. And that is that Virginia is currently the data center capital of the world. And data centers run by Amazon, Google and others are huge power consumers. And so, as opposed to the rest of the country where energy demand projections are largely flat, Virginia’s looks like a skyrocketing exponential curve. And that’s because more data centers plan to come to Virginia. And there are large questions now about how we’re going to be able to provide this electricity. Who’s going to do it? Who’s going to foot the bill? Who’s going to pay the cost? What the implications will be for the transition to a clean energy economy in Virginia. And this has a lot of folks watching this space very concerned about what comes in the coming years.
TEDDY DOWNEY: So, let’s get back to the recent big win you had. The elections, obviously, I think people were surprised how well the Democrats did. Can you talk a little bit about what you’ve been working on, what you’ve been successful in, on the political side, the political outlook? And then, after that I want to get into some more kind of specific sort of policy and legal solutions.
BRENNAN GILMORE: Sure. So Clean Virginia started in 2018, and at this point, it was sort of the low point. Dominion had the General Assembly in its grip and was writing the legislation which dictated our energy policy and how much money they were allowed to have. There was a movement that was starting against this. And there were a dozen or so new candidates running in 2017 who said, we’re not going to take money from the utilities that we’re supposed to regulate.
And with this movement building, Clean Virginia started with, at first, a very simple premise, and it was started by our board chair, Michael Bills, a longtime environmentalist and political donor who looked at the situation and said Dominion has put $11 million into the legislature in the past ten years. And there are a number of new candidates that are running on not taking their money. Well, they shouldn’t have to unilaterally disarm.
So, we started a project that said if you are running for office in Virginia and you, by matter of principle, don’t want to take utility money because there’s a direct conflict of interest there, we’ll ensure that you have money to run for office. And so, our first sort of effort, our line of effort against Dominion’s control of the Virginia Assembly was providing an alternative gateway to power, an alternative source of clean campaign finance, so that they could go into office without being beholden to the utility.
And the year before we started, there were, out of 140 Virginia legislators, two who had that as a position. There were two pioneering legislators that said, of course, I’m not going to take money from these utilities who I’m going to legislate on as their ultimate regulator. But 138 other politicians in Virginia took their money.
Now, flash forward five years. This has become a really dominant, I’d say battle, over the heart and soul of Virginia politics. Are you going to continue to be on the side of the utilities? Or are you going to be an independent, objective legislator who, just as a matter of principle, rejects their money? And so, as a measure of our success in getting this message through, we’ve gone from two legislators to over a third of the General Assembly. We work in a bipartisan fashion. Both Republicans and Democrats can get campaign finance support from Clean Virginia if they are not taking regulated utility money. And our efforts to wrest control of the legislature away from Dominion towards a more broad, stakeholder driven energy policy planning process have been bipartisan in nature.
And so, now we have, I think, 58 in the General Assembly who are not, as a matter of principle, taking Dominion money. And in general, this discussion, this conversation, about the proper role of utility has dramatically changed the political environment in Virginia since 2018.
So going into this year’s elections, which were in many ways a sort of generational election for Virginia, a post-redistricting cycle, new maps, a lot of retirements, a lot of former Dominion stalwarts resigned from office. And we go into the next General Assembly session with a drastically different legislature. On the Democratic side of the House, 41 out of 51 Democrats are not taking Dominion money. And on the Senate side, 14 out of 21. And this would have been unheard of three or four years ago. And you’re seeing legislators with just much more independence and objectivity and sense, I think, when it comes to saying, you know what? Maybe the monopoly utility with the most vested profit interests shouldn’t be the one writing our energy laws. Sounds very simple, but in some ways, it was an emperor with no clothes situation.
So, with these sort of shifting political winds, there was a very interesting dynamic last year. Dominion, seeing the shift in trends, put in a bill which would have once again allowed the SCC very little, if any, control over setting their return on equity. In fact, they specified that they should have a return on equity nearly a percentage point and a half above where it was set now and thought that they could ram this through as a last gasp while their closest allies were in charge of power committees in the House and the Senate.
They did not really understand that things have changed. And a big thing that had changed was the governor, the Republican governor of Virginia, Glenn Youngkin, was no fan of Dominion. In fact, in a particularly poor political choice, Dominion, which has a hard time not trying to manipulate Virginia’s elections, had spent a quarter of a million dollars through a dark money PAC trying to run a hit against Glenn Youngkin when he was running against Terry McAuliffe in our last governor’s election.
And so, he had no friends in Dominion Energy. But also, he just understood, I think, inherently the game. Governor Youngkin comes from a private equity background. He knows finance. And he saw that the Virginia ratepayers were getting a really raw deal and the short end of the stick.
So, on one hand, the governor was—as opposed to past governors, both Republican and Democrat—not beholden to Dominion, not going to football games and golf tournaments with Dominion executives and lobbyists, and instead was looking at this, I think, in a very independent way.
Alongside the governor, you had a very sweeping coalition of basically anyone in Virginia who pays an electric bill who said the time has come to restore authority to the regulators. And that included, of course, us, Clean Virginia, but a broad spectrum of folks ranging from the Googles and Amazons and the large customers to the Virginia Poverty Law Center, environmental groups like the Sierra Club and everyone in between. This was a right/left coalition, one of the very few areas, I think, in American politics where the Republicans and the Democrats were co-sponsoring bills and passing legislation that affects everybody’s life in the state. And it was just too much for Dominion’s still significant political power to overcome.
And so, the Dominion bill was essentially gutted. It was replaced by a very clean and simple return to traditional rate making authority for the State Corporation Commission. And we will now go into an unprecedented period, or certainly a period we haven’t seen in decades, where Dominion will go in and the SCC will have its proper authority to set the rates going forward. I think the money savings that Virginia customers will see because of this change in policy is in the range of billions of dollars over the coming decade, just looking at how much money Dominion had gotten, their ill-gotten earnings over the last decade through legislative manipulation and knowing that they won’t be able to do that again.
TEDDY DOWNEY: So, what do you see as likely to pass short term, medium term, long term? What are the goals? And how do you see this playing out?
BRENNAN GILMORE: So, at Clean Virginia, we are focused on one thing above all, and that is the process by which energy policy is made. We don’t think Clean Virginia, as an advocacy organization, or any one single interest advocacy organization should be able to unilaterally dictate the terms, certainly not the utility itself. And so, what we want to see is a process, a deliberative energy planning process, that is not dictated by the utilities. We’ve made some progress in this regard. There is a reinvigorated and properly funded and staffed commission on electric utility regulation within the General Assembly. We’re, of course, seeing an SCC with greater authority to weigh in on these issues.
But really, this is structurally the way things should be done. It should be policymakers representing constituent interests who get together and determine the direction of Virginia’s energy policy, not the other way around. It was backwards in Virginia. It needs to be forward going forward.
So, as a clean energy organization, we want to see the acceleration and the implementation of the Virginia Clean Economy Act that moves us to net zero. We think this is an existential issue for the country and the world and that there should be due attention placed to how we get there.
I mentioned performance-based rate making. Ideally, we align the incentives in the system so that the utility and advocates and others who are looking after consumer interests aren’t constantly battling, that the utilities get rewarded not for manipulating the system and pulling the wool over the eyes of legislators and building as much as they can, but rather the utility is awarded and given a fair but not excess profit for doing what is in the public interest, for being better on energy efficiency, what we call demand side management, reducing the demand of electricity, not by producing more electrons through turbines, but by reducing the need for electrons. This is critical and I don’t think we get there unless we have a regulatory structure that properly incentivizes those types of operations.
And so, we want to see a conversation begun in the state with all necessary actors, including the utilities, to talk about how we can transition Virginia to a system, a regulatory system, that more properly aligns incentives between the public interests and those of our utilities.
What we don’t want to see is the continuation of this trend where these public service utilities use this very sacred, privileged monopoly right and try and run their businesses like venture capitalists. This is not the sector in which you should be having huge returns. This is a sector in which you want stability. You want your fair return. And you want to provide a reliable and efficient service to the public.
I would say to the Dominion executives that are constantly trying to juice their returns, that maybe they should go to Silicon Valley and work in a different business. But we want an electric utility that is properly rewarded and has all the necessary means to provide what is an essential public service in the state of Virginia.
TEDDY DOWNEY: And are there any specific provisions to change the analysis, to accelerate reviews, to sort of kickstart the process of sort of re-configuring all the incentives here away from inefficient production and more and more electrons to a vision that is more competitive, more options, lower rates, less margin for Dominion? And also, I’m just curious, what is Dominion’s return now? And what is reasonable? What is generally accepted to be reasonable according to the law?
BRENNAN GILMORE: So, on the first question, yes, this conversation has already begun. There’s the first, what we call performance incentive mechanisms, which is one element of performance-based rate making. There is a docket at the State Corporation Commission which will begin to look at that next month. And this is a conversation taking place across the country. It started decades ago in many cases. Performance-based rate making has been successfully implemented in Canada, Australia, a number of European countries. And I think a majority of the states in the United States have started to integrate elements if not wholly shifted to that type of system. And so, Virginia should be looking at the examples of other states and forging a path which takes in the best of all these examples on the way forward.
Dominion is currently undergoing its rate case. Their return on equity had been 9.35 as part of the negotiated solution that produced the reset of regulatory authority to the SEC. Their ROE will be set at 9.7 percent return on equity now. And then they will have a subsequent rate case in two years where the SCC will have full authority to set it properly going forward.
Dominion had come in and wanted over 10 percent. I think it was 10.5 or so, which they wanted to unilaterally set, which is just absurd for a utility to request. And so that is around where the State Corporation Commission had set it before. But again, it wasn’t necessarily the number on the ROE. It was how much authority the SCC had to change rates if they had gone over or above in their authority to return money back to consumers when they had exceeded that rate, which had been the problem, which allowed them to get away with overcharging Virginians by $2 billion in the last decade.
TEDDY DOWNEY: And so, are there any things that you sort of adjusted the calculation to address, you know, excess profit, advertising, exec comp, all these other things? Any kind of laws against corruption? What else? Anything more creative than just let the SCC review the rate?
BRENNAN GILMORE: Yeah, there’s a whole suite of utility transparency bills which a number of states have started enacting, and Virginia should as well. I think the first part of this is banning their political contributions. I think there has to be a corporate culture shift in the role in what the utility plays in Virginia’s political system. They should not be a campaign donor. And in many cases, almost half of the states in the country, in one form or another, ban public utilities and public service corporations from contributing to political campaigns, given the direct conflict of interest as a state regulated utility that has its rates essentially set by the General Assembly.
So, we would like to see that happen. I think that’s going to be a critical part of it. More transparency in Dominion’s spending, including their advertising. Dominion says that the money that they spend on political contributions and advertising does not come out of ratepayer funds. But at the very least, ratepayers are subsidizing every element of that. And Dominion has a monopoly. They have effectively suffocated all competition in the sector. But still, they’re running ads during the Super Bowl. What are they advertising for? You know, it’s not like any customer has any choice. It’s all part of a concerted plan to have influence in the legislature, to have them write their own laws. And this just makes no sense.
You know, we think utilities should be technocratically run, should be rewarded as appropriate for doing the right thing. But in some senses, they should be boring. You know, we don’t have stadiums and rock concerts that are sponsored by our Sewer and Water Authority in Richmond, Virginia. Why is our electricity utility any different? And so, we’re trying to sort of un—what’s the right word here? We’re trying to take down a lot of very harmful legislation that Dominion has introduced and a lot of harmful practices and build a system that is cleaner, more transparent, and hopefully, where the utilities are working hand-in-hand with advocates to produce the best energy system we have in the state, rather than trying to earn as much as they can on the backs of, in many cases, hard suffering Virginia families.
TEDDY DOWNEY: Are there any people to watch in terms of who’s going to be the chair of the important committees and assembly and things like that, the newly elected folks? Or is it just such a bipartisan thing at this point that there’s enough of a groundswell that we should be just anticipating legislation, you know, a few bills passing the law this coming term?
BRENNAN GILMORE: I think we will have a refreshingly independent legislature when it comes to energy issues this coming session. You know, the 40-year incumbent Chair of Commerce and Labor and Democratic Majority Leader Dick Saslaw, who retired this year, was by all intents and purposes, a Dominion lobbyist. He had taken nearly $1 million from the utility over the course of his career. He did anything they wanted in the legislature. When there were bills that threatened their bottom line, he would go around and threaten everyone in the committees not to vote on them or he’d kill their bills. I mean, just absurd, almost inexplicable, behavior from a legislator with such a powerful, privileged position to go over there and ensure these utilities were making excess profit. And he’s gone. A lot of people with that similar mindset that just couldn’t see around the utility playing this central role are gone.
And in their place are people that are not beholden to the utility, frankly, and who are going to look at these questions, I trust, with the mindset of putting the public service back in public service corporations. And that’s not to say that nefarious influence has completely ended or that Dominion’s not still trying their old tricks. In fact, they spent $12 million in this last election cycle. And that’s in part in reaction to them having a counterpart in Clean Virginia that is fighting them on the political influence front over energy policy. But that’s about as much as it’s been in the previous decade. So, they have not given up their business model, which is legislative influence through what I would consider legalized political corruption. It’s just I don’t think it’s working as well for them now.
TEDDY DOWNEY: It sounds pretty obviously bad for Dominion having the ability to continue to try to juice its profitability over time. What about accelerating and creating incentives for competitors when it comes to rooftop solar, community solar, and, as you mentioned, kind of utility scale or sort of bigger scale, not just solar, but bigger scale clean energy projects?
BRENNAN GILMORE: Yeah. I think we’ll see a lot of those bills this session, a lot of bills which will accelerate decentralized energy and retail competition. I think there are advocates out there that would love to see us move to a model which is fully competitive, where the utility plays, not the role of a vertically integrated utility like Dominion that is controlling the generation of power, the transmission of power and the distribution of power, and all the self-dealing that goes along with the vertically integrated utility, but rather where the utility is a nonprofit grid manager and everyone has access to the grid and pays fair share to access it.
That’s likely where a lot of energy economies are heading. Clean Virginia is not pushing for that model, despite this being the number one fearmongering tactic for Dominion around our activities. They have sent mailers to almost every household in the state saying that Clean Virginia wants to turn Virginia into a frozen Texas-like deregulated model. But that conversation has started. I think that will continue.
And then the alternative, if it’s not fully deregulated, is a continued vertically integrated monopoly, but one that is properly regulated. We are somewhat agnostic on the question of what that end market structure looks like. We just want to make sure that it is stakeholders and policymakers representing the public interest who are making the ultimate decisions about it and not the utility dictating the terms.
TEDDY DOWNEY: But at some level, whether it’s a more heavily regulated Dominion on the interchange—what did you call it? An interchange fee or interconnection fee.
BRENNAN GILMORE: Yeah.
TEDDY DOWNEY: Or some kind of deregulated amount. It doesn’t seem totally likely that that is on the table, as you point out. You do see more opportunity, one way or another, for community solar, rooftop solar, that the clean energy industries that want to be competitive in Virginia are going likely have an opportunity just given how much they’ve been shut out by Dominion to date?
BRENNAN GILMORE: I would think so. I would think so and I would hope so because of just how restrictive Virginia has been in the past and how that does not serve the state well. I also think that there is a sweet spot here where you have, you know, we’ve got a divided government now. We have a Republican governor, and he has been sort of anti the Virginia Clean Economy Act, has been pursuing an all of the above approach, which includes natural gas and other fossil fuel generating technologies. But now you have Democrats controlling both the House and Senate.
So, there will be some things that the Democratic legislature puts forward on renewable technologies that I think the governor will likely block. But I do think that there is a sweet spot, probably around competitive issues where there will be agreement, and that there will be some legislation that I think will only have opposition in Dominion because of them playing a sort of goal tending role on the energy market. And those things may be able to overcome the Dominion opposition, which had been insurmountable in previous years around these issues.
So, we’ll see. You know, this is a brand new legislature, a lot of new faces. It’s almost 50 percent new in the Senate and it’s over a third new in the House. And so, it’s going to be a very dynamic session regardless. And we’ll see where these conversations go and what makes it across the finish line. But I do think that, without a doubt, the situation and the landscape for energy in Virginia is changing dramatically.
TEDDY DOWNEY: And how popular is the governor? And how politically important is this issue? I mean, it sounds like it’s important, not that it was a big fight in this past election. You know, from a political standpoint, how does this issue influence, you know, sort of box in or sort of affect the governor going forward, just kind of given his current situation? I mean, it seems bad that his party kind of lost, some unexpectedly, in both houses of the state legislature. But I don’t pay close enough attention to really know how important he was in all of that.
BRENNAN GILMORE: Yeah. I mean, I would just say that I think this will continue to be an area of bipartisan cooperation and probably one of the few. You know, I don’t think the election was determined on energy issues. I think it was certainly a dominant theme of the campaign, particularly because Dominion was the largest donor and we were not very far behind from Clean Virginia’s campaign contributions. But I don’t think this was the number one topic on anybody’s mind during the campaigns when Republicans were fighting Democrats over issues like abortion and guns and other things.
But that said, I don’t think that necessarily hurts the chances for moving the ball forward on energy issues, because I do think it is one area, and I think that both parties will be looking for recognizing the veto power in the governor and the control of the General Assembly where things can get done. They still have a job to do as legislators and as governor and moving us towards a fairer, better energy system is one area where they could continue to do that between the parties.
TEDDY DOWNEY: Amazon obviously has the second headquarters in Virginia. They’ve got obviously a lot of data centers throughout the country. It sounded like they haven’t been sort of getting any sweetheart deals. But are you at all concerned about corruption in the data center, businesses trying to get sweetheart deals? And is there kind of policies to prevent corruption on that angle? And then you mentioned this is just kind of a big contributor to electricity demand going forward. How do you see that issue of the data center market playing a role in this conversation and paying for that demand—or how Virginia addresses that demand, I should say—going forward?
BRENNAN GILMORE: Yeah, I wouldn’t say my focus there would be on corruption. We haven’t seen the large tech companies in Virginia play the same sort of politically manipulative role that Dominion has played, or certainly not at the state level. But I am deeply concerned about the future of data centers in Virginia and the impact on electric customers around the state. Who foots the bill? What are the environmental impacts? How are these things powered? Can they be powered by pure, clean energy? These questions we have not answered as a Commonwealth.
And there is the research service, JLARC, in the Virginia state legislature that has started down the path of a planning process or rather a study on these questions. But at this point, it has been way too ad hoc. A lot of the approval is at the local level where it’s really hard to turn down the tax revenue and the promises that these folks bring in when they put in a data center. But the impact of data centers goes far beyond the borders of the localities in which they’re set. And we need to get ahold of this as a state. We need to have a strong centralized stakeholder process and planning inputs and look at this as a holistic problem that affects everyone in the state and make sure that best practices are followed, both on where they’re sited, what energy they use. Is there a customer class? So that it’s not people that aren’t benefiting from those data centers who are footing the bill and approach this in a very deliberative and sensible way. That hasn’t been the story to date and really needs to be, as we look down the barrel of a huge spike in energy demand, which will affect every community in Virginia.
TEDDY DOWNEY: So, in some sense there has been no real regulation of Dominion. And then there’s also been no real thought and regulation of—it’s just kind of like, let’s attract as many data centers as we can and deal with the problem later. And this next government is going to be tackling the Dominion problem and then setting out a path for tackling the data center problem as well. Is that a fair way to characterize it? I don’t want to put words in your mouth.
BRENNAN GILMORE: No, no. I think that is fair. I don’t know how much—going into the next General Assembly session—how much of a hangover there will be from the massive fight we had over energy regulation last year to an appetite to deal with that again. And we’re actually in a much better place than we were. We had a good win for consumers in Virginia last year, for the first time in a long time, on the regulation of Dominion.
I do think there’s going to be a lot of energy around this new Democratic legislature on data centers, particularly from newly elected senators and delegates in some of these communities like Loudoun County, Virginia, Prince William County, Virginia, where these data centers are sited because of the access to the necessary fiber infrastructure. What that looks like, I think, is going to be one of the key and dominant themes of the upcoming legislature.
TEDDY DOWNEY: Okay, great. Anything else that we missed about successes that you’ve had or anything that we didn’t touch that you wanted to mention here?
BRENNAN GILMORE: Well, we’ve been talking about an hour, and I think I’ve probably touched on a lot of the areas.
TEDDY DOWNEY: I’ve got one last question actually. The Atlantic Coast Pipeline, you mentioned Dominion was pushing that. Are there any big projects like that, that are just DOA now? Or do you see that still being something that they’re pushing?
BRENNAN GILMORE: Yeah, the Atlantic Coast pipeline is very much dead. Dominion has actually sold its gas assets to Berkshire Hathaway. Dominion is in the middle of a business review which has lasted over a year now, in terms of how they as a holding company are going to structure businesses going forward.
The major infrastructure project now, which has just reached sort of final approval stage at the federal level, is the offshore wind program. And Dominion is building the largest offshore wind project in America at a massive cost. And from Clean Virginia’s perspective, we are in support of offshore wind. We think it’s a key component of the transition to renewables. We would like to see this done in the most cost-efficient way. And I am not very sanguine in saying that this was the case and this is how things were done. There are ways to improve that for subsequent projects in the offshore wind capacity. But this one is well underway at this point. And Dominion hopes to have it online, I think, by late 2026.
The other one is, as I mentioned earlier, Dominion is pushing to create, to build, a new what they call peaker plant, a gas turbine, natural gas power plant, which is supposed to respond to spikes and demands. We do not think this project should go forward. And a number of environmental and other advocates are similarly opposed to that. This project is now at the locality level for approval by the Board of Supervisors in Chesterfield. But this is in direct contradiction to the very clear law and the path that Virginia set in 2020 to move to a net zero energy economy by 2025. This will set us back. And that project should not go forward. But Dominion is going to continue to push it.
TEDDY DOWNEY: Just given sort of their weakened hand, is the loss of influence in the legislature affect that long term? Or is it to the point where it’s local enough that other factors will decide that?
BRENNAN GILMORE: No, I think it does. I mean, I think the legislature, particularly Democratic legislature, will probably send strong signals, you know, do not deviate from the path that the VCEA has laid out for us. I think the questions now around these issues are how will the implementation of the Virginia Clean Economy Act roll out with this simultaneous massive spike in demand due to data centers? And how do we square that? Those are the questions, I think, which will dominate energy discussions in the coming years.
TEDDY DOWNEY: I guess I do have one last question. So, you have all this demand coming up and Dominion’s currently paid for – paid in, you said by the electron basically. Will that change soon enough so they don’t benefit from that huge spike in demand that is going to happen? Or might they actually, sort of weirdly, just because they’re getting paid this way, benefit from these data centers before they get regulated on performance?
BRENNAN GILMORE: Yeah, well, it’s by no means a foregone conclusion that will change the regulatory structure to something that’s more performance based. That conversation is very much in the inchoate stage and TBD. The fact of the matter is they’re profiting right now. Twenty-one percent of Dominion’s energy sales are to data centers. I mean, that’s a staggering statistic when you also consider that not all the data centers are actually in Dominion service territory. There is a Northern Virginia Electric Cooperative, which is a nonprofit, which also provides electricity to a number of data centers in the Northern Virginia data center corridor. And so, will that 21 percent of energy sales that go to data centers go up even further? It’s likely.
And so, I think having the right regulatory structure now to ensure that there are not misaligned incentives—and we call that a throughput incentive where a utility is rewarded just for selling more—whether or not that throughput incentive can be addressed through a shift in regulatory rate making is going to be, I think, a discussion in the coming years.
And because of all these very important questions, this is again why I go back to the need for a deliberative, broad based, stakeholder driven energy planning process. It’s critical that the right people are in the room, that the experts who don’t have profit motive in these questions and can really, truly look out for the public interest are informing policymakers when they write legislation that are going to govern the answers to these questions.
Dominion just submitted its planning document, what it calls its Integrated Resource Plan, which is just a complete abdication of responsibility to pursue a clean energy transition in Virginia. All of their planning includes more gas buildout, more of the same. And they’re just not taking seriously the mandate that they’ve been given by the public to do this in the right way.
And I think that, again, goes back to corporate culture. They are used to calling the shots. And we cannot have that be the case. We cannot have that type of energy policy planning and implementation if we’re going to really, truly move into a 21st century energy economy fueled by clean sources.
And so, all these conversations will be happening in the coming months. We’re not going anywhere. We’ll still be a key part of them. But more importantly, the public and legislators elected with independent views on these questions are going to be in the room making the laws and passing them.
TEDDY DOWNEY: So, this has been a fascinating conversation. I am always surprised at how little public service commissions take into account the public interest. I think it’s sort of one of the most bizarre perversions of a regulator across the country that I’ve witnessed. I am super interested to see how you all continue to fight this fight going forward. It’s going to be very interesting. I live here in the D.C. area and I’m no stranger to corruption. So, I am super, super interested in seeing how this plays out. And I can’t thank you enough for coming on here and talking about your work.
BRENNAN GILMORE: Absolutely. And, you know, I am heartened by progress we’ve made in the past years. And I think there is there is more attention, I think, than in past years on this. But again, this problem has been with us for a long time. FDR campaigned as New York governor on the corruption of electric utilities in 1932. And now it’s 2023 and we’re still talking about corruption in public utilities. So, I’m not fooled into thinking that this is an easy problem. But I do think we’re making progress. And I think the stakes are incredibly high.
TEDDY DOWNEY: Yeah, I couldn’t agree more. And thank you so much for doing this. And thanks to everyone for joining the call today.
BRENNAN GILMORE: Thanks for having me.