Dominion power rates going up as credits expire

Dominion Virginia Power customers will see their bills rise next month when the credits that they have received for most of this year as part of the company's rate settlement expire.

The bulk of the credits erased the surcharges that the company would have otherwise imposed to cover its costs to build power plants. Dominion waived those charges through 2010 as part of the rate settlement, but they will go back into effect in 2011.

The return of the surcharges, also called "riders," will add $4.50 to the bills of customers who use 1,000 kilowatt-hours of power per month. As of Saturday, those customers' monthly electricity costs will increase by about 4.6 percent, from $98.36 to $102.86, not including taxes and regulatory fees.

In 2009, Dominion proposed raising base rates, which cover the company's operating costs, plus a return on its investment as profit. But after State Corporation Commission staff concluded that the company earned more than it should have in 2008, it reached an agreement to leave rates where they were and refund customers some of the excessive earnings.

The monthly credits started in April and end today. They contributed to a total of $268 million returned in 2010 to customers, who also got one-time refunds early in the year.

The riders resuming on bills next month cover the financing and construction of a coal-and-biomass station in Wise County and a natural-gas-fired generator in Buckingham County. The company adjusts the riders annually to reflect its actual costs.

Dominion has received the commission's permission to increase the riders in April by an additional $1.39 per month for customers using 1,000 kilowatt-hours.

Allowed by state law, a power company can use a rider to start recouping its investment while a plant is under construction rather than waiting until it begins operating. State legislators reason ed that the ability to collect the money - plus a profit on that investment - earlier in the process gives the company more incentive to address growth.

Dominion has projected that electricity demand will grow 28 percent by 2020. In a bill insert to be mailed to customers in January, the company will announce plans to spend $7.6 billion over the next five years to build new power plants, upgrade the transmission system and develop new technology to help consumers conserve.

"Growth is not the only reason we need to invest," Paul D. Koonce, president and chief executive of Dominion Virginia Power, wrote in the insert. "The typical customer also uses more electricity. In 1980, the average U.S. household had just three electronic products. Today, the number is 25."

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