Dominion quietly adds fee to help finance new power plant

Six months after a significant rate increase, Dominion Virginia Power has added another charge to customers' bills.

The electricity company increased its rates by a small amount as of Jan. 1 to finance construction of its new coal plant in Wise County. Dominion added a charge, known as a "rider," of 0.153 cents per kilowatt-hour to customers' monthly bills. For a resident using 1,000 kilowatt-hours per month, the change adds $1.53, or 1.4 percent, to the bill.

Dominion expects to ask the state for three additional riders this year under a 2007 law that allows the company to recoup various costs from customers. The law, which restored state regulation of power companies, aimed to give them an incentive to invest in new-generation, reliability upgrades and conservation measures to address growing demand.

The new charge follows an increase of about 18 percent in average residential bills that took effect in July. That increase in the "fuel factor," which covers Dominion's spending on fuel to run power plants, reflected rising wholesale energy prices - mostly for coal and natural gas - in recent years.

The new charge doesn't appear as a separate line item on most residential customers' bills, but large electricity users, including many commercial customers, will see it listed as "Rider S." On most residential bills, the charge is built into the supply rates.

The charge will cover Dominion's cost this year of $83 million, mostly interest, to finance the Wise County plant, said Jim Norvelle, a Dominion spokesman. Construction on the $1.8 billion plant began last year and is about 20 percent complete.

Each rider expires after a year. Dominion will request a new charge for 2010 to cover costs for the plant, Norvelle said.

Under Virginia's old regulatory structure, Dominion would have had to begin operating a new plant before it could ask the State Corporation Commission to approve the amount it could recover from customers. State law then allowed companies to set rates to collect a "reasonable" return on their investments.

The General Assembly passed the 2007 law after plans to deregulate the electricity industry and encourage competition failed. The law lets companies spread their construction and operational costs over a longer time, avoiding a bigger increase for consumers after a plant starts running. It also diminishes the company's risk to build a new plant because it starts recovering its costs earlier.

"The law changed to allow us to capture some of the costs of building these power stations," Norvelle said. "It's an easier adjustment for the rates to come, once the program is up and running."

Richmond-based Dominion must get approval from the State Corporation Commission for all riders, including the three it expects to request this spring, Norvelle said.

One would cover transmission service fees that the power company must pay to the regional transmission operator, PJM Interconnection, the agency that oversees wholesale transactions and movement of power across state lines. Another rider would help pay for Dominion's conservation programs. A third would recoup construction costs for a new natural gas-fired power plant proposed for Buckingham County.

Dominion has not yet determined how much it plans to seek for those riders, Norvelle said.

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com