(Bloomberg) -- Dominion Energy Inc., the U.S. utility giant that came under fire for overcharging its customers by almost $380 million, wants to keep the money and spend it on grid upgrades.
The Virginia power company proposed using some of the extra cash to help install almost a million smart meters, create an online “customer information platform” and add more devices to the grid that could help prevent blackouts. It’s part of a plan that the state rejected in January, calling it too costly. The utility on Monday came back with a more modest proposal and a smaller price tag of $594 million, down from more than $1 billion.
It’s the latest twist in the saga over Dominion’s massive overcharges in 2017 and 2018, which were flagged in a Virginia state report in August. Infuriated consumer advocates have called on the company to return the money to no avail, and one ratepayer group staged a “Rally for Our Refunds” in Richmond three weeks ago.
Like most power companies, Dominion is only allowed to earn a certain amount. Some utilities have returned extra cash to customers in the past if earnings exceed the threshold. The latest fight in Virginia is centered on a state law passed last year that allows electricity providers to keep some excess profits so long as they re-invest the money in renewable projects or grid upgrades.
Dominion has already said it plans to spend some of the funds on an offshore wind demonstration project, which broke ground this summer. “What a great way to fund the first utility offshore wind project -- to be able to do it without having a rate increase,” Thomas Wohlfarth, Dominion’s senior vice president of regulatory affairs, said in a phone interview.
Using the company’s over-earnings to pay for such projects will limit rate hikes and cut down on financing costs, saving money for customers in the long run, he said.
There is a hitch: Under the new law, Virginia’s first review of utilities’ excess earnings will cover a four-year period. So if Dominion doesn’t earn as much in the next two years as it did in the last two, there’s a chance the extra cash it has overcollected shrinks or disappears altogether, wiping out the money it’s proposing to set aside for grid improvements and renewable power.
“The two-year look is not the final story,” Wohlfarth said. “We have to see what happens in the next two years.”
Analysts attributed much of Dominion’s excess income to warmer-than-normal weather in Virginia last year, which led to stronger electricity sales. The state report showed that the money came from Dominion’s power-generation business, rather than its distribution system.
“If the weather is warmer than normal and you sell more electricity than normal, you’re going to overearn,” said Charles Fishman, a utilities analyst at Morningstar Inc.
Shares of the company climbed 0.2% to close at $81.22. They have risen about 14% in 2019.
Dominion’s $594 million grid plan will need approval from the Virginia State Corporation Commission. The company is proposing to cover about half of the cost with some of the extra cash and recover the rest through customer rates. The program would help deploy the customer platform and smart meters through 2021.
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