Dominion Virginia Power Requests First Fuel
Rate Adjustment Since January 2004
State Corporation Commission must review and approve
New law limits total increase in residential rates to 4 percent in 2007
Residential rates would remain 15 percent below national average
Company prohibited from profiting on fuel
costs
RICHMOND, Va. – Dominion Virginia Power on Monday
filed a request with the State Corporation Commission to adjust
its fuel rate on July 1 – the
company’s first fuel rate adjustment in 3½ years. The increase
is needed to cover the significantly higher costs
of fuel used to generate
electricity.
If approved by the SCC, the fuel rate adjustment would raise the
average monthly bill for a typical residential customer using 1,000 kilowatt
hours of electricity by $3.41, from $87.18 to $90.59, an increase of approximately
3.9 percent.
Dominion is prohibited from making a profit on fuel
costs. Base rates, which cover the company’s other expenses as well
as investment in facilities and profit, remain capped until 2009.
A state law enacted
this year caps the 2007 increase in total rates at 4 percent for residential
customers. Without the law, the increase would have been significantly higher.
Increases for individual residential customers and other customer classes will
depend on their current rates and usage. Remaining fuel expenses not recovered
in this case will be deferred for recovery in later years, but without added
interest.
Even after the proposed July 1 adjustment, Dominion
Virginia Power’s
residential rates would remain more than 15
percent below the national average
for investor-owned utilities. The typical monthly bill is $107.40 for a residential
customer using 1,000 kilowatt-hours, according to data from the Edison Electric
Institute.
The fuel rate was last adjusted in January 2004 just prior to a sharp
escalation in fuel prices. For example, the forward price of natural gas has
increased by 90 percent, crude oil by 143 percent and coal by 25 percent since
the last adjustment. Only the cost of nuclear fuel, which has risen 8 percent,
has increased at a pace in line with general inflation.
The company estimates
that it will have absorbed approximately $1.5 billion in increased fuel costs
not covered by rates during the 3½ years since
the last adjustment. Those increased costs cannot be recovered from customers
and are not part of today’s request.
Until 2004, fuel adjustments were
made annually in accordance with state law. That year the General Assembly
froze Dominion Virginia Power’s fuel rates
at January 2004 levels until July 1, 2007.
Fuel costs are passed on to customers
without profit. The fuel rate is used to recover the cost of fuel used in electric
generating stations and power purchased from other sources to meet customer
demand.
The fuel adjustment request would allow Dominion Virginia
Power to collect an additional $219 million to cover its fuel expenses for
the year beginning July 1, 2007. Another $443 million in costs would be deferred
until July 2008, subject to another 4 percent limit on the increase in total
residential customers’ rates.
In all, Dominion Virginia Power expects to spend nearly $1.9 billion on fuel
for the 12 months beginning July 1.
The proposed fuel rate must be reviewed
and approved by the SCC. Participants in the review process will include SCC
staff, the Office of the Attorney General, industry experts and customers.
Fuel
costs currently comprise about 22 percent of a 1,000 kilowatt-hour (kWh) residential
customer’s bill.
Customers are reminded that they can reduce their electricity
bills by taking measures to conserve energy. This includes setting thermostats
at the highest comfortable temperature during the cooling season, closing blinds
or drapes on the sunny side of the home or business during daylight hours,
and switching to compact fluorescent light bulbs. Additional information about
energy conservation and cost-saving measures can be found on the company’s
Web site at http://www.dom.com/customer/electric_savings.jsp.
Dominion
Virginia Power is a subsidiary of Dominion (NYSE: D), one of the nation's largest
producers of energy, with a portfolio of more than 26,300 megawatts of generation. Dominion
serves retail energy customers in 11 states. For more information about Dominion,
visit the company's Web site at http://www.dom.com.
