Dominion power proposes boosting its rates in Virginia

Electricity bills would go down, then up, under a series of rate changes that Dominion Virginia Power has proposed.

The changes, which would roll out over 10 months starting in July, would mean a 6.9 percent increase in bills for a residential customer using 1,000 kilowatt hours of electricity per month. The total bill, not including taxes, would climb by $7.54 to $116.27 by May 2010.

Virginia's largest utility company filed several of the rate proposals late Tuesday with the State Corporation Commission, which would have to approve each of them.

They include the company's plan to raise base rates by about 9 percent - the first increase in Dominion's basic charges since 1992. Base rates cover Dominion's operating costs, plus a return on its investments for transmission, distribution and generation. That increase of $6.29, with usage of 1,000 kilowatt hours, could go into effect as soon as Sept. 1.

Dominion also filed plans to reduce the portion of its rates that covers the cost of fuel to run power plants, known as the "fuel factor."

The fuel change, which would take effect July 1, would drop the monthly bill by $3.64, or about 3.3 percent, for a customer using 1,000 kilowatt hours.

The fuel factor accounts for about 34 percent of a Dominion customer's monthly bill. Base rates make up the remainder of the bill, not including taxes and surcharges.

The proposed fuel decrease reflects falling wholesale energy prices over the past year. Since July 2008, Dominion customers have been paying increased fuel rates to cover a surge in prices for coal, natural gas, oil and uranium at that time, leading to an 18 percent increase in monthly bills.

The fuel decrease this year would help offset the increases to come later. In September, when base rates would go up by 9 percent, the increase in the bill would be 5.8 percent.

Other proposed Dominion rate increases would come in September, January and May 2010. The first would cover transmission service fees the company must pay to the regional operator that oversees wholesale transactions and movement of power across state lines.

Additional charges would cover construction of two new power plants. A third would help pay for Dominion's conservation programs. If they're all approved, th e charges would add an estimated $4.89 to bills by spring next year.

In its base rate proposal, Dominion has requested that state regulators approve a 13.5 percent return on equity for the company's shareholders. State law allows the company a rate of return comparable to that of other electricity providers in the Southeast.

Dominion officials said they need the base rate increase and other charges to make adequate investments in new power plants, transmission upgrades and conservation measures to address growing demand.

The company said it plans to spend $7.5 billion over the next three years on such improvements.

Since 1993, Dominion has added about 567,000 customers and expects to add another 30,000 by the end of this year.

Meanwhile, its residential rates have risen 25 percent, compared with a 52 percent increase in the average residential U.S. electricity rate, according to the Edison Electric Institute, an industry research group.

"It's pretty amazing that we've been able to go 17 years without a base rate increase," David Heacock, president of Dominion Virginia Power, said Tuesday. "The best thing we can do for Virginia and for the citizens of Virginia is to build the infrastructure that allows us to keep our costs down."

Dominion's base rate last changed in 1998, when the company agreed to a settlement with the State Corporation Commission and returned its rates to the 1992 level. In 1999, when the state began its efforts to move to a deregulated electricity industry, base rates were frozen.

A 2007 law returned Dominion to a new type of regulation, requiring it to file for new base rates by today. Under the law, Dominion has the right to implement its proposed new base rate Sept. 1. If the commission later approves a lower base rate, customers would get refunds retroactive to September.

Dominion Resources Inc., the utility's parent company, earned an operating profit of $1.83 billion in 2008, up almost 9 percent from the prior year.

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