Dominion Virginia Power seeks rate increases

Dominion Virginia Power filed requests to state regulators Monday for three rate increases that would add $12.76 to the average monthly bills of residential customers.

If approved by the State Corporation Commission, the increases would pay for rising fuel costs, maintaining Dominion's transmission systems and constructing a new natural gas-fired power plant in Warren County, near Front Royal.

The largest increase would come from the fuel rate and would amount to $8.17 for customers who use 1,000 kilowatt hours of electricity per month, starting July 1. Dominion can file to adjust the fuel rate annually based on changes in commodity prices and its expectations for those prices in the next 12 months.

Dominion's forecast for fuel costs last year was too low because of weather extremes, which increased the company's fuel needs, said Fred G. Wood, senior vice president of financial management for Dominion Generation, Dominion Virginia Power's sister company.

Temperatures between April and September last year were the hottest on record since 1895, Wood said. And the winter, from November to January, was the 12th coldest in those 116 years.

"Had the weather been normal, this fuel increase would not be anywhere near this amount," Wood said.

Dominion is seeking to recover its $433 million shortfall on fuel costs last year as part of the requested increase. Otherwise, it would be seeking an increase of $1.56 a month for the 1,000-kilowatt customer to cover rising fuel costs for the coming year.

In its filing to the commission, Dominion offered to spread the fuel increase for last year's shortage over two years. That would increase the fuel rate by $4.86 this year and $3.31 in 2012 - plus any other changes in the fuel rate next year.

Consumers must expect to pay more for electricity because of climbing energy costs, said Irene Leech, president of the Virginia Citizens Consumer Council, who closely watches the state's power companies. She commended Dominion's offer to soften the blow to consumers by spreading the increase over two years.

"I think it's a good thing for them to do," she said.

If applied all at once, the increase would bring the fuel rate to its highest level since summer 2008. The fuel rate jumped 74 percent that year as energy prices soared.

The other big chunk of Dominion's proposed increases would boost the rate customers pay for Dominion's investments in transmission to $10 a month from $6.16 for customers who use 1,000 kilowatt hours. It would go into effect Sept. 1.

Dominion has more than doubled its spending on transmission line replacements, repairs and upgrades - from about $980 million in 2008 to $2.25 billion this year, said Scot C. Hathaway, its vice president of transmission.

About a third of that work would take place on lines serving Hampton Roads, much of it to support growing demand and improve reliability in Virginia Beach, Hathaway said.

One project involves the replacement of towers and wires along about 11 miles of transmission line built between Laskin and Princess Anne roads in 1964 and 1965.

The last increase, for the proposed natural gas plant, would add another 75 cents to the bills of a 1,000-kilowatt-hour customer. Dominion still has to receive commission approval to build the plant and, if that happens, would apply the new charge starting in April 2012.

In total, the three rate hikes would boost bills by 12.3 percent for those customers, who now pay $103.91 per month, not including taxes.

Dominion expects to request increases in two other existing fees that it charges customers to cover continuing costs to build two other power plants, in Wise County and in Buckingham County. If those are approved in coming months, they also would go into effect in April 2012.

The separate charges to cover transmission projects and power plants are allowed under a 2007 state law that established new ways of regulating power companies. All the smaller fees, however, make it harder for regulators to look at the overall impact of rate increases on consumers, Leech said.

In this way, the law favors the power companies, she said. "It's a part of the design to have them make more money."

Dominion Virginia Power contributed $149 million in operating earnings to parent company Dominion Resources Inc. in the first three months of 2011. That's up from $114 million in the same period last year, the Richmond-based company reported last week.

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