June 25, 2008

Dominion’s 18 Percent Increase Likely Only the Beginning

By Carolyn Shapiro, The Virginian-Pilot, Norfolk, Va.

Jun. 25--RICHMOND -- For a range of Dominion Virginia Power customers, an 18 percent boost in electricity bills would be a heavy burden amid today's other economic pressures.

But the company's requested rate increase covers only a fraction of the total amount it says it has spent and expects to spend on the fuel needed to run power plants. Even paying an additional 18 percent, consumers could face more pain down the road if energy prices continue to escalate.

"Quite frankly, I think we're between a rock and a hard place," said C. Meade Browder Jr., a senior assistant attorney general who represents Virginia consumers in utility rate cases. He spoke Tuesday during a State Corporation Commission hearing on Dominion's fuel rate proposal.

The bulk of the public hearing focused on the possibility that the company would seek greater future rate boosts in order to keep the increase at about 18 percent this year. Dominion, based in Richmond, has proposed collecting an additional $1.1 billion in the next 12 months by raising its "fuel factor," the portion of its monthly supply charges that cover the costs to buy coal, oil, natural gas and uranium. State law allows the company to recoup those costs, which it passes through to customers without a markup for profit.

For residents who use 1,000 kilowatt-hours of electricity per month, bills would climb by $16.61 to $107.20 under the change, scheduled to take effect July 1. Commercial customers would see their electricity costs jump by 40 percent or more.

"We've had so many increases in other areas," said Judy Harris, one of the few consumers who spoke at the hearing. The Chesterfield resident, retired for 10 years and living on a fixed income, said she sets her home thermostat at 82 degrees. "If this increase, the 18 percent, is passed, we may just have to cut our air off."

Since July 2007, Dominion has paid $697 million for fuel that remains uncollected from ratepayers. The company initially proposed spreading the recovery of that amount over three years, starting in July 2009, to minimize the growth of bills this year. The $1.1 billion would have accounted only for the company's projected fuel expenses for the coming year.

The commission staff, however, argued that state law won't allow the company to defer the entire $697 million for another year and requires it to begin collecting the money in 2008. So Dominion presented a different approach Tuesday to recoup about one-third of that amount this year, $231 million, and to reduce its projected fuel expenses so that the proposed rate increase would remain the same.

As part of that new "stipulation," Dominion agreed to forgo asking its ratepayers to cover any interest on that deferred amount in the future.

Dominion's stipulation has the support of the Virginia attorney general's office, representatives of large industrial customers and retailers, and the Apartment and Office Building Association of Metropolitan Washington. At the same time, the commission's staff and some of those representatives raised concerns about putting off the inevitable "rate shock," as Browder put it, that is likely to come later.

The commission is expected to make a decision on the proposal within a week.

Some Hampton Roads residents and city officials sent letters to the commission since Dominion announced the proposed rate increase in early May. Many, like those who commented in person Tuesday, referred to the pain of the power costs in addition to other economic pressures.

"In today's economy, we, the citizens, are feeling the pinch harder than Virginia Power," Robin Smith, a Virginia Beach resident, wrote to the commission. "Please, while considering an increase, remember there is one back these increasing costs end up on: that of the average citizen."

Suffolk and Virginia Beach cited the effect of the new rate on their budgets, possibly leading to cuts in city services. The timing of the fuel factor case, months after the cities developed their budgets, makes the increase difficult to absorb, wrote Selena Cuffee-Glenn, Suffolk's city manager.

"Like most other localities, the city of Suffolk was unaware that Dominion Virginia Power was planning to apply for an increase in its fuel factor until after the 2008-09 operating budget was prepared," she wrote. It would be helpful, she added, if Dominion "gave consideration to delaying the implementation of the fuel factor increase to provide its local government customers with the opportunity to plan for dramatic changes in the cost of service."

Carolyn Shapiro, (757) 446-2270, [email protected]


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