Virginia legislators have a new road map for reining in electric bills

In the final days before the election, candidates around the country are putting rising electricity bills on center stage — and that’s especially true in Virginia, where voters are on edge about the explosion of data centers and their voracious demand for energy.

But it’s one thing to complain about costs. What can candidates actually do to rein in electricity prices once they’re in a position to govern? A new study from the state’s utilities commission offers a road map for Virginia officials post-election.

Polls generally show Democrats poised to win a trifecta in Richmond, with former U.S. Rep. Abigail Spanberger (D) favored to replace Gov. Glenn Youngkin (R), who is limited to one term, and Democrats likely to retain a majority in the House of Delegates. The party already narrowly controls the state’s upper chamber, where senators are on a four-year cycle that ends in 2027.

Still, the new analysis suggests that winning could be the easy part for whoever prevails Nov. 4. Tamping down electricity prices and decarbonizing in the face of unprecedented demand growth in the world’s data-center capital will be a much more complicated task.

“An affordability challenge is building”

Mandated by a 2024 bipartisan resolution from the General Assembly, the 93-page document was commissioned by utility regulators and conducted by consultants Great Plains Institute and Current Energy Group.

“Although Virginia electricity rates have historically been competitive and relatively low,” the authors write, ​“an affordability challenge is building and looms larger in the years ahead.” Virginians served by the state’s largest utility, Dominion Energy, may be hit particularly hard: the company predicts expenditures to grow a whopping 68% before decade’s end.

“Additional factors will determine the ultimate rates and total bills paid by customers,” the report says, ​“but in general, the forecasted increase in capital expenditures will be directly borne by customers as a commensurate increase to their electricity bill.”

The problem isn’t so much the so-called ​“base rates,” the core per-kilowatt-hour charges that are heavily scrutinized by the utilities commission in exhaustive proceedings, the researchers suggest. Those are mostly stable for now and expected to creep up modestly.

Instead, the analysis shows bills are spiking largely because of a host of add-ons for natural-gas fuel and other expenses. These ​“riders” typically aren’t subjected to the same dissection from regulators and now make up more than half of the monthly electric costs for the average residential utility consumer.

Utilities often tout their relatively low base rates, said Kendl Kobbervig, advocacy and communications director for the nonprofit Clean Virginia. ​“But average customers do not pay rates. They pay bills — that’s what they’re getting in the mail every month.”

In Dominion territory in northern and eastern Virginia, rider prices jumped 27% between 2021 and 2024, according to the report. In the state’s southwest corner, Appalachian Power customers saw even steeper hikes of 63% in the same period, including an eye-popping doubling of fuel charges.

“Weekly, I hear from constituents about $250, $500, $1000, even $2000 monthly energy bills,” Delegate Sam Rasoul, a Democrat running for reelection in Roanoke, part of Appalachian Power territory, wrote on social media. ​“This is a nonpartisan issue — lower the damn bills!”

Indeed, Republican Delegate Jason Ballard, who represents a New River Valley district to the west, also cited the high cost of Appalachian Power bills online, writing, ​“Energy costs are one of the biggest burdens on Virginia families and we’ve been working hard to bring relief.”

Ballard touted an announcement from Appalachian Power that it will lower fuel costs by almost a quarter starting Nov. 1 — undoubted relief for customers who pay 100% of the utility’s expenses for coal, natural gas, and the like.

But analysts propose to change the rate rollercoaster for consumers by requiring Appalachian Power and Dominion to take on some portion of those fuel costs.

Under the current regime, ​“the utility doesn’t have an incentive to responsibly manage fuel — there’s no incentive for efficiency,” Kobbervig said. ​“It also means the utility doesn’t have an incentive to transition away from fuel-based resources to things like solar and wind.”

Like many of the proposals in the report, fuel-cost sharing would need a green light from the General Assembly to move forward. Promoting it is a key legislative priority for Clean Virginia.

“That is directly at the nexus of clean energy and affordability policy,” Kobbervig said.

“A strong path to pursue immediately”

Fuel costs aren’t the only pass-throughs that researchers recommend constraining. Other riders, aka rate-adjustment clauses, are getting out of hand, the authors say, especially for Dominion Energy. And unlike fuel costs, utilities tend to earn a profit on these rider expenses, such as the cost of building renewable energy to comply with the state’s 2020 decarbonization law.

“This creates a ​‘best of both worlds’ scenario for utility cost recovery and earning,” the analysis says, in which utilities can pass on expenses with less regulatory examination and still earn a profit on them.

While the legislature reduced the number of rate-adjustment clauses in 2023, the study concludes that further refinement is needed. ​“Significant improvement opportunities remain,” the authors write.

To restrain costs in the face of unprecedented demand growth, analysts also suggest a new paradigm for building power plants. Currently, the process is utility-led and technology specific: Dominion proposes set amounts of gas-fired plants, solar farms, and other energy sources to supply electricity to data centers and other customers in its long-term plans, followed up by permit applications for certain plants.

For instance, the report notes, in Dominion’s bid to build the controversial Chesterfield gas complex outside of Richmond, it expressly stated that ​“solar wind, and energy storage resources will not be considered.”

In the proposed paradigm, called ​“all-source competitive procurement,” the utility would ask for bids from a variety of different power producers to fulfill a specific need, then select the cheapest proposal that also ensures reliability.

“Virginia will likely need to add significant new generation and capacity in the years ahead to address growing load forecasts and support economic development in the state,” the report says. ​“Such resource additions, however, should not come at the expense of ratepayer affordability.”

“Utilities are not always incentivized to prioritize operational solutions like energy efficiency or cheaper energy alternatives,” said Kajsa Foskey, director of the Virginia Energy Consumer Alliance. ​“The recommendations around competitive all-source procurement would be a strong path to pursue immediately” in the General Assembly, she said.

A one-time legislative aide in the House of Delegates, Foskey believes the new blueprint will be vital in educating part-time lawmakers who meet for only two months next year, starting in mid-January, so that they can hit the ground running. The document was vetted by a host of stakeholders, including many of the alliance’s consumer, environmental, and justice-oriented member groups.

“The authors did a great job outlining each recommendation thoroughly,” Foskey said. ​“If folks want to work on energy affordability in Virginia and make a plan to meet this new demand, this is where we start.”