..Case Studies

Virginia Power/Dominion Resources

A number of years ago, state utility regulators in Virginia found themselves in an uncomfortable and unprecedented situation; there was an open and bitter conflict between Virginia Power Company, the state’s largest electric utility, and its holding company, Dominion Resources, over the adequacy of holding company focus on supporting utility operations.  Not only were executives at the two entities at odds, but there was open disagreement between the holding company and the utility Board of Directors as well.  The Virginia State Corporation Commission asked Liberty to perform an independent evaluation of the state of affairs, including corporate governance, strategic planning, the sufficiency of resource allocations to the utility subsidiary, and affiliate transactions.  Liberty undertook the very sensitive and challenging tasks of determining the nature and specific causes of the conflict, of assessing whether, and to what extent, short- or long-term utility needs may have been jeopardized, and of assuring that transactions and resource sharing between the utility and its holding company and affiliates did not cross subsidize non-utility affiliates or shareholders at the expense of utility customers.

Liberty made a number of recommendations designed to restore short-term order in the governance process, to provide a transition plan to a longer term governance structure that would fully support and assure utility needs in the context of a diversified holding company, and to create the procedures, reports, and processes necessary to validate arms’-length dealing where utility resources and costs were involved.  Liberty’s work was instrumental in giving the Commission confidence that relationships between the holding company and utility were returning to order and that utility needs continued to be met in the short term, and would be assured for the future.