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SVEC is a regulated, not-for-profit utility.
The latter part is self-explanatory. But the one about regulations can bring a field day of questions.
We can easily address the most basic one. Who regulates SVEC? That’s the Virginia State Corporation Commission.
After that, questions are best answered with more explanation, in terms of why the current state of regulations exist. And you probably do not want to hear it from us.
To provide the appropriate neutral perspective, we consulted Samuel T. Towell, one of the SCC’s three commissioners. In March 2024, he was sworn in as the 38th commissioner in SCC history.
‘Natural Monopolies’
SVEC: Consumers view Virginia electric utilities as monopolies, but they may not understand there is a regulated part to it via the SCC. Why does Virginia operate as it does with its electric providers?
Towell: Because they are capital-intensive and provide a commodity product, electric utilities are what we call “natural monopolies.” It would be inefficient and worse for society to have multiple power lines going to individual residences, businesses and industries—that sort of infrastructure redundancy gets expensive fast.
And so rather than have duplicative capital-intensive infrastructure sprawling throughout our communities, Virginia (and every other state) has elected to engage in what is called a regulatory compact: a utility is granted an exclusive right — called a franchise — to serve all customers in a specific geographic area. In exchange for that state-sanctioned monopoly, the utility has a duty to serve all comers (within reason) and submit to state regulation of the rates it can charge its customers.
SVEC: How can this be a positive for consumers?
Towell: While no system is perfect, Virginia’s current method does have a number of advantages for consumers. The duty to serve has helped bring electrification to all corners of the Commonwealth. And the regulated utility model has helped ensure reliability at a rather high level. If electricity were a purely competitive market, more parts of Virginia — especially rural areas — would likely have trouble attracting a provider. And even if a provider initially arrived, it might determine that certain areas were no longer economically viable to maintain and serve.
And protections also exist for consumers with respect to prices. In general, the prices utilities are allowed to charge their customers are regulated by the SCC. Utilities are only allowed an opportunity to recover their prudently incurred costs and the opportunity to earn a reasonable rate of return (or profit) on their invested capital. Importantly, these are opportunities, not guarantees. This system helps ensure that utilities cannot use their monopoly position to overcharge consumers.
Of course, in part because they are member-owned, electric cooperatives enjoy greater latitude in rate-setting than investor-owned utilities such as Appalachian Power Company and Dominion Energy. Under Virginia Code, cooperatives can set their own rates, so long as those changes do not result in a cumulative net increase or decrease in excess of 5% in any three-year period (exclusive of fuel costs).
SVEC: Why might internet, phone or cable providers be regulated differently?
Towell: Before the federal Telecommunications Act of 1996, traditional wireline telephone companies were regulated in a similar fashion. And certainly policymakers could have elected to treat internet and cable providers similarly to electric utilities. However, those technologies arose in a time in which regulation was largely out of fashion, and the infrastructure costs (for fiber) are markedly lower than powerlines.
It is interesting to ponder how the footprint might have been different had broadband been placed under a more regulated regime, and what other tradeoffs might have been necessary to allow for that expansion.
Drawing the Line
SVEC: How, exactly, were service boundary lines drawn and determined over time?
Towell: Most original electric cooperative service boundaries were established around the 1930s, as electric service providers in rural areas started to take hold with federal loans from the Rural Electrification Administration. The SCC granted those original charters and mapped exclusive distribution boundaries. There is occasionally some tweaking around the margins, as economic growth can suggest that certain developments are more easily or efficiently connected by a neighboring provider. But because of the regulatory compact, largescale changes to service territories are not permitted.
SVEC: Are there any lessons learned from states/areas with electric choice that helps explain Virginia’s regulatory setup?
Towell: There is no one perfect model for electric regulation. Aspects of Virginia’s market are deregulated for certain customers, but on the whole, Virginia is classified as a regulated state. We explored more significant deregulation in the 1990s and early 2000s, but policymakers ultimately elected to (more or less) maintain the status quo.
There are a lot of challenges in the electric space at present, but in the current environment of relatively scarce capacity and significant load growth in our regional grid, it appears that Virginia is, in general, faring better from a customer bill standpoint than most of our fellow citizens in deregulated states within our regional grid.
About the State Corporation Commission
The SCC is a state agency with regulatory authority over many business and economic interests in Virginia. Created in 1902, its powers are outlined in the Virginia Constitution and state law. These include regulation of public utilities, insurance, state-chartered financial institutions, securities, retail franchising and railroads. It is also the state's central filing office for corporations, limited partnerships, limited liability companies and Uniform Commercial Code liens.
The SCC's structure is unique – it is constitutionally organized as an independent department of state government with delegated administrative, legislative and judicial powers. Commission decisions may be appealed to the Virginia Supreme Court. The SCC has three commissioners and nearly 750 full-time staff.
The SCC's commissioners are elected by the General Assembly for six-year terms. The terms are staggered in increments of two years.
Source: scc.virginia.gov