Wal-Mart Stores E., LP v. State Corp. Comm'n

844 S.E.2d 676

WAL-MART STORES EAST, LP, et al.

v.STATE CORPORATION COMMISSION, et al.

Record Nos. 191159 & 191160

Supreme Court of Virginia.

JULY 9, 2020

Carrie H. Grundmann (Spilman Thomas & Battle, on briefs), for appellants.

John F. Dudley, Counsel to the Commission (K. Beth Clowers, Associate General Counsel, on brief), for appellee Virginia State Corporation Commission.

Noelle J. Coates (Erin B. Ashwell ; Woods Rogers, on brief) for appellee Appalachian Power Company.

Robert W. Loftin (Paul E. Pfeffer; David J. DePippo ; Joseph K. Reid, III, Richmond; Elaine S. Ryan, Richmond; Sarah R. Bennett, Richmond, McGuireWoods, on brief), for appellee Virginia Electric and Power Company.

PRESENT: Mims, Powell, Kelsey, McCullough, and Chafin, JJ., and Russell and Millette, S.JJ.

OPINION BY JUSTICE D. ARTHUR KELSEY

Wal-Mart Stores East, LP and Sam's East, Inc. (collectively, "Walmart") appeal from an order of the State Corporation Commission ("SCC" or "Commission") denying Walmart's petitions filed pursuant to Code § 56-577(A)(4). These petitions sought the Commission's permission to combine the electric-energy demand of separate Walmart locations to qualify to buy electricity from sources other than the incumbent public utilities regulated by the SCC. Walmart concedes that the statute provides the Commission with discretion to grant or deny such requests but contends that the Commission "erred as a matter of law" and "acted arbitrarily and capriciously" by denying Walmart's petitions, Appellants’ Br. at 16-17. Walmart also argues that the Commission abused its discretion by denying a motion for reconsideration. Disagreeing with both contentions, we affirm.

I.

Prior to 1999, Virginia operated a vertically integrated, state-regulated monopoly over the generation, transmission, and distribution of electrical power within the Commonwealth. Under this regulatory model, consumers of electrical energy had to purchase it from one of the incumbent public-utility companies regulated by the SCC. See generally William T. Reisinger, Public Utilities Law , 49 U. Rich. L. Rev. 137, 137-43 (2014). The two largest incumbent public utilities were Virginia Electric and Power Company ("VEPCO") and Appalachian Power Company ("APCO").

"In 1999, the General Assembly enacted the Virginia Electric Utility Restructuring Act, former Code §§ 56-576 et seq., which was designed to deregulate parts of the electric utility industry and introduce competition among the providers of electric generation." Appalachian Power Co. v. State Corp. Comm'n , 284 Va. 695, 699, 733 S.E.2d 250 (2012). Under that legislation, at the end of the transition period for deregulation, every retail customer of electrical power, from the largest to the smallest, would be able to shop freely for electrical power from different suppliers. See Reisinger, supra , at 139.

In 2007, "the General Assembly ended the deregulation program" and "established a new regulatory regime." Old Dominion Comm. for Fair Util. Rates v. State Corp. Comm'n , 294 Va. 168, 172, 803 S.E.2d 758 (2017) (discussing 2007 Acts chs. 888, 933, at 2402, 2614); see also Virginia Elec. & Power Co. v. State Corp. Comm'n , 295 Va. 256, 263, 810 S.E.2d 880 (2018). The 2007 reregulation legislation authorizes retail choice in three narrow categories. Two of the categories are mandatory, and the third is discretionary. The two categories in which the Commission has no discretion to approve or reject retail choice are (i) large customers with a demand exceeding five megawatts and (ii) all customers seeking 100% renewable energy if the customer's incumbent utility does not offer the same. See Code §§ 56-577(A)(3) and (5). The third category, in which the Commission has the discretion to approve or reject retail choice, applies to nonresidential customers that aggregate their demand to exceed five megawatts. That third category is codified in Code § 56-577(A)(4).

In December 2017, Walmart filed two petitions seeking relief under Code § 56-577(A)(4). The first requested the Commission's permission to aggregate Walmart's electricity needs presently supplied by VEPCO and to purchase electricity to meet those needs from other suppliers licensed to sell electrical energy within Virginia. The second petition requested the same relief for Walmart's stores within APCO's service territory.

Code § 56-577(A)(4) gives the SCC the discretion to allow certain nonresidential, retail customers to aggregate their electrical load within an electric utility's service territory for the purpose of participating in the wholesale market for electricity and obtaining more competitive pricing. At the time of the SCC's decision in this case,¹ Code § 56-577(A)(4) stated in pertinent part:

A. Retail competition for the purchase and sale of electric energy shall be subject to the following provisions:

....

4. After the expiration or termination of capped rates, two or more individual nonresidential retail customers of electric energy within the Commonwealth, whose individual demand during the most recent calendar year did not exceed five megawatts, may petition the Commission for permission to aggregate or combine their demands, for the purpose of meeting the demand limitations of subdivision 3, so as to become qualified to purchase electric energy from any supplier of electric energy licensed to sell retail electric energy within the Commonwealth under the conditions specified in subdivision 3. The Commission may, after notice and opportunity for hearing, approve such petition if it finds that:

a. Neither such customers’ incumbent electric utility nor retail customers of such utility that do not choose to obtain electric energy from alternate suppliers will be adversely affected in a manner contrary to the public interest by granting such petition. In making such determination, the Commission shall take into consideration, without limitation, the impact and effect of any and all other previously approved petitions of like type with respect to such incumbent electric utility; and

b. Approval of such petition is consistent with the public interest.

Walmart's petitions stated that it operates 120 stores in VEPCO's service territory and 44 in APCO's service territory. After an initial notice and comment period, the SCC consolidated the petitions and ordered the parties to present oral arguments on various legal issues surrounding the proper interpretation of Code § 56-577(A)(4). Following oral argument, the SCC clarified the relevant legal issues, ordered a public evidentiary hearing, and appointed a hearing examiner. The hearing examiner subsequently made factual findings, including that the petitions, if granted, would likely increase the monthly bills of remaining, non-shopping customers. VEPCO customers using 1,000 kilowatts of electricity per month would see a total increase of $0.13 in their monthly bills, and similar customers of APCO would see a total monthly increase of $0.05. Acknowledging the SCC staff's finding that this impact was "de minimis," 2 J.A. at 897,² the hearing examiner concluded: "The question for the Commission is not whether the impact of granting Walmart's Petitions is de minimis, but rather is whether granting Walmart's Petitions will adversely affect the remaining retail customers ... in a manner contrary to the public interest," id. at 898.

After reviewing the hearing examiner's factual findings and recommendations, the Commission took up the ultimate question of whether granting the petitions would be consistent with the public interest. To this question, Walmart advanced an enticingly simple answer: The statute offers Walmart a way to buy cheaper electricity elsewhere, which necessarily means that when Walmart does so, remaining customers who do not have that option may pay a little more. Even if granting its request would result in de minimis cost shifting, Walmart argued, it seems illogical that this presupposed fact could be the sole reason for denying the statutorily authorized option. Apparently, Walmart's point was that making many customers pay a little more so that a few pay a lot less was a public-policy consequence baked into the very text of Code § 56-577(A)(4).

The Commission disagreed. It began its synthesis of the statutory provisions by distinguishing subsection (A)(4) from subsections (A)(3) and (A)(5). Subsection (A)(3) mandates retail choice for large customers having a demand greater than five megawatts. See Code § 56-577(A)(3). Subsection (A)(5) mandates retail choice for customers seeking 100% renewable energy if their incumbent utility does not offer the same. See Code § 56-577(A)(5). Customers need no approval from the SCC under either subsection to leave their incumbent utility and shop for electricity outside the state-regulated monopoly.

These subsections, the Commission held, are quite different from subsection (A)(4). Customers satisfying the aggregation criteria of subsection (A)(4) must seek the SCC's permission to buy electricity from competitors of the incumbent utility and must also satisfy two conditions. Even when a customer meets these two conditions, the Commission "may" — not shall — grant permission for the customer to shop for electricity on the open market. See Code § 56-577(A)(4).

Using the broadest possible language, the statute requires that granting the petitions be "consistent with the public interest." Code § 56-577(A)(4)(b). This delegation of power, the Commission concluded, presupposes that it may consider various discretionary factors in determining what would be consistent with the public interest. Interpreting the General Assembly's intent in this way, the Commission rejected Walmart's view that subsection (A)(4) required the SCC to approve the petitions because, as a matter of law, the Commission could never deem the petitions inconsistent with the public interest when the only adverse impact of granting the petitions was a de minimis increase in cost for the remaining...