Virginia Tomorrow

Bits of Evidence

I received a heads-up prior to Saturday’s debate that this might happen at his matchup with McDonnell.

In the post-debate spinning contest, the Deeds campaign distributed an email calling attention to the utility rate increases that have been supported by Bob McDonnell.

Barnie Day’s post this afternoon calls for a freeze, or a moratorium and possibly legislation to enact it (and when Barnie writes, Democrats take notice).

Why Might Deeds Make the Call?

1. It is becoming increasingly difficult to believe that Deeds can win simply by promising to carry on the policies of Mark Warner and Tim Kaine. In today’s unsettled political and economic environment, the public wants to hear how their concerns are going to be addressed. Voters are not likely to be impressed with candidates requesting admission to office as a “legacy.”

2. Deeds must reorient the contest away from the national issues on which McDonnell is pounding him to matters of everyday significance to Virginia voters. Endorsing limits on utility rate increases could enable Deeds to deflect McDonnell’s attacks on federal “Cap and Trade” legislation by focusing attention on the multiple rate increases proposed by Dominion and Appalachian that are under consideration right now.  The Roanoke Times has done an excellent job of describing the prairie fire that is emerging in Western Virginia and Southwest Virginia about the rate increases.

3. Deeds may believe that highlighting utility rate increases could be an effective means of criticizng McDonnell’s performance as Attorney General, something which Democrats have unable to accomplish to date. Deeds is likely to suggest that the AG’s office was not  proactive in defending consumer interests during the “Reregulation Debate ” of 2007.

4. The issue is consistent with Deeds’ instinctive populism.

Would the Call be Credible?

This could get very interesting. Let me try to explain an immensely complicated matter in simple terms.

1. There are two essential pieces of legislation that established the framework under which we’re operating today. The first was Senate Bill 1269 passed in 1999 when both Deeds and McDonnell were in the House.  This was the bill that made “deregulation” a reality. One implication of “deregulation” was that ultimately the State Corporation Commission (SCC) would no longer have the power it once possessed to be the ultimate arbiter of utility rates in Virginia.

McDonnell supported deregulation.

Deeds opposed it.

2. Deregulation never proceeded as expected because genuine competition between electrical providers did not fully develop. In 2007, the General Assembly passed Senate Bill 1416 that provided for a measure of “Reregulation” of the utility industry. Reregulation ensured that utility rate increases would be limited for the next few years (by, I think, capping the rate of return that utlity companies could receive for a specified period), but it also ensured that there would be no return to the pre-1999 status quo. In particular, the 2007 “Reregulation” legislation  restricted the authority of the SCC to deny future rate increase requests. 

Bob McDonnell was Attorney General during this period and did not vote on the legislation, but the AG’s office was an important player in the process and, in its role as representing consumer interests, did not express any serious reservations about the bill’s implications.

Creigh Deeds was in the Senate at the time. The Senate supported the bill 35-3.  Deeds voted for it.

Edd Houck, Philip Puckett, and Roscoe Reynolds opposed it. Puckett and Reynolds opposed it even after the Governor’s amendments were added.

The bill passed 83-15 in the House.  The 15 negative votes all came from Republicans, a number of whom I believe were worried about the ultimate rate increases and were siding with the coops who opposed the legislation against the larger power companies.

3. In recent months, public response to the proposals by Dominion and Appalachian for rate increases have led a number of legislators (including Deeds) to call upon the SCC to reject the requests and to disallow the increases. But it would be almost impossible for the SCC to do so legally under the rules the Assembly passed in 2007.

4. The bottom line is that any call for a moratorium and/or freeze that is not just a gimmick cannot simply re-pass the buck to the SCC and judges who are charged with interpreting the laws that the Assembly has approved. It would require specific legislative action. This could either be in the form of a time-limited proposal or a  more permanent initiative that might restore some of the SCC’s pre-1999 authority and possibly call for the establishment of an independent consumer agency.

Would a Freeze, Moratorium or Cap on Utility Rate Increases Be Good for Virginia and Virginians? 

If Deeds goes down this route, he’ll have to successfully counter the following arguments:

1. Do we really think that state government should be setting prices?

2. Isn’t this a bit too reminiscent of what Obama has tried to do with the automobile and banking industries?

3. If people start paying less for a good than they would be able to acquire it in the marketplace, won’t this make individuals less likely to conserve and companies less likely to fund innovation?

A Risk-Reward Moment

Given the email the Deeds campaign sent out over the weekend about McDonnell’s support for utility rate increases, it is clear that it is an issue central to the strategists’ thinking about the race.

It is a classic risk-reward moment.

Will Deeds run a conventionally “safe” campaign that portrays his candidacy as the third term of Warner-Kaine and spends millions depicting Bob McDonnell as a right-wing extremist?

Or

Will grab a populist issue that will make the rationale for his candidacy crystal clear even if the ultimate outcome will be even less predictable?

The answer’s coming soon.