Senate committee backs substitute for bill tying utility rate returns to grid reliability

The committee agreed to a committee substitute for Senate Bill 505 and voted to report it to the full Senate with a recommendation that it pass, with an initial referral to the Committee on Government Organization.

The substitute would add "bulk power system reliability" as a factor the West Virginia Public Service Commission must consider when finding rates "fair, just and reasonable," and require the Commission to adjust allowable rates of return using a formula tied to an asset's effective load carrying capacity.

Committee counsel explained that the substitute explicitly lists reliability attributes the Commission must consider, including "energy capacity, on-demand dispatchability, useful life of relevant assets, intermittent operational nature, and overall operational costs." The counsel said the Commission would be required to find in its approval orders that the statutory requirements were met.

Isaac Orr, a senior researcher with Always On Energy Research, testified in support of the bill. Orr said rising energy prices have focused attention on reliability and said the substitute would direct the Commission to consider reliability when deciding which costs utilities may recover from ratepayers. "We support Senate Bill 505 because we firmly believe that families and businesses should only pay for what they get and this bill encourages the West Virginia Public Service Commission to consider the reliability attributes of all resources," Orr said.

Orr cited PJM capacity-value figures during questioning: coal at about 84 percent, nuclear at about 95 percent, natural gas plants ranging roughly 62–79 percent depending on fuel, with onshore wind at about 35 percent and solar roughly 14 percent. He said the substitute would scale a utility's allowed rate of return for a proposed asset by that capacity-value percentage so that rate recovery better reflects an asset's reliability contribution.

The committee also discussed a conflict-of-interest matter after one senator identified himself as an electric-utility employee. The chair ruled that the senator, described in the hearing record as the "junior senator from the second," would be directed to vote because he falls into a class of more than five members affected by the bill.

The committee agreed to the substitute by voice vote and then approved a motion to report the substitute to the full Senate with the recommendation that it pass, with first referral to the Committee on Government Organization.

If passed by the Legislature, the measure would change the factors the Commission must weigh when evaluating rate-increase requests and would require the Commission to include specified findings in any order approving a rate increase. The measure defines those findings and prescribes a mathematical adjustment tied to effective load carrying capacity for cost-recovery of proposed generation or transmission assets.

The bill will next go to the full Senate and, per the committee motion, be referred first to Government Organization for consideration there.