Dive Brief:

• Virginia regulators on Thursday denied Costco's request to leave Dominion Energy's electricity service.

• The State Corporation Commission (SCC) in its ruling said the company's exit would cost ratepayers $1.57 million annually, and it "does not find it consistent with the public interest" for "captive customers," which "cannot escape" the incumbent utility's rate structure to bear those costs.

• The commission similarly rejected Walmart's request to leave Dominion's service in February. Kroger, Harris Teeter, Target, Albertsons and Cox Communications all currently have exit applications pending at the commission, Virginia SCC Director of Information Ken Schrad told Utility Dive.

Dive Insight:

Centralized utility structures are becoming less appealing to large businesses as decentralized power options become cheaper.

The businesses lined up to leave Dominion's service are the latest complaints against the utility's policies and practices. Earlier this month, tech giants Microsoft, Apple, Salesforce and seven other tech companies wrote a letter to Dominion, criticizing it for not including more cost-effective, renewable options in its latest integrated resource plan.

While Costco did not call out the utility for its procurement practices, it did express concern that Dominion's "excessive costs" compounded through "piling on" rate adjustment clauses were unfair.

"[U]nder the current statutory structure Dominion has been over-earning on its frozen base rates for a number of years," the company wrote in its request to the SCC. "[I]t is enormously frustrating that an incumbent utility has an incentive to keep what [Costco views] as the customer's money."

In order to avoid further costs the company believed would be imposed through the utility's $870 million energy efficiency program, Costco requested it be allowed to procure power through a third party provider instead. The efficiency program unfroze Dominion's rates and was approved by the state legislature in April of last year.

Businesses in Virginia that generate more than 5 MW of electricity are permitted to seek alternative power providers, pending regulatory approval. However, customers that generate under 5 MW have to receive their electricity from Dominion. 

The commission said permitting Costco to leave would subject "captive customers" to the cost shifting practices the business lays out.

"The Commission respects the economic and business goals reflected in Costco's pleadings and testimony herein," the commission wrote. "As discussed in the Walmart Order, the Commission also recognizes the ongoing upward trajectory of rates, as chronicled by Costco."

But, the commission said, any "unreasonable" rate structure would need to be handled legislatively rather than through the commission.

Decisions on the other five companies are pending and will be decided "based on the facts presented in that case," said Schrad.