When the power company gives to groups employing politicians, so do its customers

Energy Associated Press

Virginia residents have been billed tens of thousands of dollars to pay for donations the state's most powerful electricity company has made to politically connected charities, according to company records obtained by The Associated Press.

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Recent Dominion Resources Inc. donations subsidized by customers include a $10,000 gift to a college that was solicited by a powerful state lawmaker who is also the school's paid fundraiser, and a $40,000 donation to a tort reform group that pushed for business-friendly legislation with the help of a longtime Dominion lobbyist, the records showed.

Adding the cost of certain charitable contributions — though not lobbying expenses — to electricity consumers' monthly bills is legal under longstanding and little-noticed regulatory rulings. The practice is not unique to Virginia, though it's barred in some states. Dominion, the state's largest electricity utility, has passed well over $1 million dollars in donations onto consumers in recent years.

The situation roils some current and past state officials.

"Why should captive ratepayers, who have no option to get electricity from another company, be compelled to fund the charitable choices of a company?" said former Virginia Republican Attorney General Ken Cuccinelli. "Leave the ratepayers their money, and let them make their own charitable choices."

Cuccinelli said donations to groups that employ lawmakers were "additionally dicey."

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Dominion is the digital age's answer to the tobacco and railroad industries that once ruled Virginia politics. The $40 billion energy conglomerate is the biggest corporate donor to state political campaigns and has some of the most well-connected lobbyists.

Katharine Bond, director of public policy for Dominion, said the company is following well-established precedent by including some donations in the base rates, which make up the majority of customer's bills. And she said the company feels it "is important to support the communities in which we do business."

Many analysts said Dominion's broad charitable giving is a large reason for its outsized influence.

"Dominion is the 800-pound gorilla," said state Democratic Sen. Creigh Deeds. "They contribute to charities, they make lots of friends ... It's just awfully hard to oppose them when they have that kind of support."

The Virginia State Corporation Commission sets the rates regulated monopolies like Dominion charge after reviewing the companies' expenses, including some donations. Details about those expenses are largely private, but AP obtained specifics about some of Dominion's giving through public records requests with the attorney general's office.

The company's shareholders fund donations made by its charitable foundation — $15 million in 2013. But its customers help pay for hundreds of contributions to civic, educational, and religious groups Dominion makes separate from its foundation.

For 2011 and 2012, the SCC allowed Dominion to include $1.37 million before taxes in donations as part of the cost of service it charges customers, according to a commission spokesman.

SCC staff recently filed testimony saying Dominion should not be able to pass on any of the $3.3 million in donations from 2013 and 2014. SCC staff said "many of the donations made by the company were to organizations that conduct political or lobbying efforts" and that Dominion had recorded charitable contributions inconsistently, including in accounts for "office supplies & expenses" and "employee pensions and benefits."

Company spokesman David Botkins disputed the SCC staff testimony and said the company will file a detailed rebuttal later this month.

The SCC's three commissioners will rule on the charitable contributions later this year.

Dominion's political power was on full display earlier this year when the General Assembly passed, and Democratic Gov. Terry McAuliffe signed into law, a major revision of how Virginia regulates electric utilities. The measure suspends until 2022 biennial reviews of Dominion's base rates. The company said it provides a "needed transition period" while Virginia sorts out how to deal with new federal pollution rules.

Critics, including Democratic Attorney General Mark Herring, said the legislation could let Dominion charge excessive rates unchallenged. An expert witness for Herring told the SCC that Dominion's rates are currently too high by about $630,000 a day, while SCC staff said the figure was about $860,000 a day. Dominion disputes both figures.

"Really, I think the bill was ludicrous," said Clint Miller, a former Republican lawmaker and SCC commissioner. "But because of (Dominion's) political clout they got it through."

Del. Terry Kilgore, the Republican head of the powerful House Commerce and Labor Committee, helped usher the bill through the House of Delegates.

Customers paid $4,000 of a $10,000 gift Dominion gave to the Appalachian College of Pharmacy in 2012. Kilgore is a fundraiser for the school with $126,000 annual salary in recent years, tax records show.

Kilgore said Dominion's donation aimed to help the community, not curry his favor.

"Dominion is a giving company," said Kilgore, whose largest campaign contributor is Dominion. "They give a lot."

The Peninsula Council for Workforce Development, where Democratic Del. Matthew James is the CEO, gets regular Dominion donations. Dominion is currently seeking approval to pass the cost of a $7,500 donation to the group to its customers. The money paid for a workforce development seminar by The Walt Disney Co.

Earlier this year, James sponsored legislation at Dominion's request that mirrored part of the larger rate review freeze legislation. Dominion is also James' biggest campaign donor.

James said Dominion was one of several corporate members of his group and the donations don't affect his role as a delegate.

"That's my day job. And it has nothing to do with the General Assembly," James said.

Bond, the Dominion executive, said political connections don't factor into the company's giving.

"Who is on the payroll is not part of the equation when we are evaluating where grant money goes," she said.

A diverse mix of nonprofits and trade groups that received customer-subsidized donations, including the Virginia chapter of the NAACP and the Virginia Chamber of Commerce, also testified in support of Dominion's rate-freeze bill.

Dominion's $25,000 donation accounted for more than 10 percent of the Virginia Hispanic Chamber of Commerce's income in 2013, tax records show. Michel Zajur, the chamber's CEO, said his group supported the bill on its merits.

State regulators don't let Dominion bill consumers for lobbying costs, but some customer-subsidized donations went to a group that shares lobbying ties with the company.

In 2012, Dominion gave $40,000 to the Virginia Alliance for Tort Reform, a short-lived group that lobbied for business-friendly legal reform. The SCC let Dominion pass $16,000 of that onto customers. One Alliance lobbyist, Bill Thomas, is a longtime Dominion lobbyist.

Neither Thomas nor W. Heywood Fralin, a businessman who organized the Alliance, returned calls seeking comment.

State regulators will decide later this year what 2013 and 2014 Dominion contributions can be passed to customers. After that, thanks to the rate freeze legislation, the company will not have to justify its ratepayer-subsidized charitable spending to regulators for the next seven years.