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Dominion Virginia Power Seeking Rate Increase for Electric Infrastructure, Energy Conservation Programs

Posted on: Tuesday, 31 March 2009, 15:47 CDT

SEPARATE FILING REQUESTS LOWER FUEL CHARGE

- SCC approval required before any rate changes can take effect

- Net effect, if approved, would be increase of 6.9 percent over 14 months

- If approved, electric rates would still be below national average

- Initial funding sought for 'smart grid' demonstration projects

RICHMOND, Va., March 31 /PRNewswire-FirstCall/ -- Dominion Virginia Power today announced a series of rate filings with the State Corporation Commission (SCC) designed to meet customers' energy needs by funding essential new electric infrastructure and energy conservation programs.

If approved by the SCC, the net result of the requests would be a 6.9 percent increase in rates for a typical residential customer. The increases would be phased in over about the next 14 months.

The electric infrastructure construction projects anticipated in the filings are expected to result in the creation of more than 20,000 jobs over the next three years.

Lower fuel charges effective July 1 would partially offset the higher utility costs in other areas that would be put into rates later this year and next if approved by the SCC. This would be the first increase in Dominion Virginia Power rates in nearly 17 years other than for fuel and a small charge related to construction of a new power station. Fuel costs are passed through with no profit to the company.

The new infrastructure, energy efficiency and conservation programs are designed to increase Virginia's energy independence, improve reliability and stabilize electric rates over the long term. Among the energy conservation efforts announced today are 13 new programs and the initial phase of "smart grid" technology, which will ultimately lead to a new level of energy savings and services for customers.

"We all expect the power to be there when we flip the switch," said David Heacock, president of Dominion Virginia Power. "Behind that switch is an amazing, interconnected grid of electric infrastructure - power stations, power lines, substations and more - that must be continuously maintained, updated and expanded to ensure reliable service. That is what these filings are fundamentally about.

"Additionally, we have a goal shared by the state of Virginia to increase the Commonwealth's energy independence and to reduce the growth in energy use. By having more generation in Virginia and our customers engaged in cost-effective energy conservation programs, we will be better able to hold rates down over the long term and provide a boost to the state's efforts to increase economic development, create jobs and attract new industry."

Virginia is currently the second largest importer of electricity in the United States, behind only California.

Impact on Rates

If all filings are approved by the SCC, the net effect of all the proposed rate changes on a typical residential customer using 1,000 kilowatt-hours a month would be an increase of about $7.54 a month, from $108.73 to $116.27, or 6.9 percent. This would occur through a series of rate adjustments between about July 1, 2009, and May 1, 2010.

If approved, the first adjustment would be a decrease of about $3.64 a month, or about 3.3 percent, on July 1 as a result of lower fuel costs. The decrease would have been greater except for the effect of $755 million in higher fuel costs that Dominion did not collect last year. Those costs were deferred to help customers cope with the sharply higher fuel prices that were in effect last summer.

The proposed base rate increase, if approved by the SCC, would take effect on Sept. 1, subject to adjustments, along with new transmission and related costs; new generation costs on Jan. 1, 2010; and an increase for energy conservation programs on May 1, 2010.

Even after all of the proposed changes, Dominion Virginia Power's residential rates would be 3.6 percent below the national average as of Jan. 1, 2009. Over the past 17 years, the company's rates have gone up only about half as much as other goods and services as measured by the Consumer Price Index.

$7 Billion to Be Invested Through 2011

Dominion Virginia Power plans to invest more than $7 billion between now and 2012 for environmental improvements, building new generation, making reliability and service improvements, and expanding the electrical grid. That is in addition to $10 billion the company invested in these kinds of projects since its last increase in base rates.

Part of the investment is needed to serve new customers. The company expects to connect about 90,000 new customers by the end of 2011. Combined with the 567,000 customers added since the last base case, Dominion's customer base has grown by 31 percent.

"We know our customers expect us to keep electric rates as affordable as possible," Heacock said. "By working hard to improve efficiency, we have been able to keep rates down, improve reliability and meet the demands of customer growth."

"There is a point, however, after nearly 17 years, where adjustments in rates are required to accommodate the multitude of higher costs we face and the need to undertake a significant expansion in infrastructure that must occur to maintain reliable service in the Commonwealth over the next several years."

Dominion Virginia Power is following a balanced approach of upgrading certain existing units, adding new clean-coal and gas generation, increasing renewable power from sources such as wind, and cost-effective energy efficiency and conservation programs, including elements of the new smart grid system, to meet projected load growth. Studies by PJM Interconnection, the regional grid operator, and Dominion continue to show that despite the economic downturn, residential and business customer growth will add approximately 4,600 megawatts of new load over the next decade - enough power for more than 1 million new homes.

"These types of construction projects, high technology systems and customer-friendly energy conservation programs cannot be completed overnight," Heacock said. "As a utility, we must plan well into the future and begin work years before the actual demand will hit the grid."

A study by Chmura Economics & Analytics of Richmond, an independent economics consulting firm retained by Dominion Virginia Power, estimates that more than 20,000 construction and support jobs will be created by the projects over the next three years. The operation of new generating facilities and associated infrastructure will provide an ongoing economic impact of more than $200 million annually and more than 600 permanent jobs.

"Smart Meters" Expected to Save Customers $1 Billion

Among the items proposed in the base rate filing is funding for a large-scale demonstration project of "smart meters," a new generation of electric meters with two-way communications capability. The demonstration in the Midlothian and Charlottesville areas is designed to provide additional data in advance of a plan to install smart meters at all customer locations in future years. Once approved and installed, one of the first benefits of the new meters would be to save customers an expected $1 billion or more over 15 years through the delivery of more efficient operating voltages to their homes.

Other benefits of the new meters include improved outage reporting and the prospect of new time-sensitive pricing that would give customers the option of using electricity when it is less expensive.

Additionally, the company announced today that it plans to file for SCC approval of 13 new energy efficiency and conservation programs in July. The programs, including some that have already been market tested, are designed to reduce peak loads and overall demand by about 150 megawatts by 2011.

Customer Options to Reduce Impact

Dominion Virginia Power is encouraging customers to take steps to lessen or eliminate the impact of higher rates. This includes:

• Using the energy conservation information available on Dominion's Web site, www.dom.com. An online home energy audit, advice on how to reduce energy use and an energy conservation blog are among the features.
• Taking advantage of the compact fluorescent light bulb discount program the company has in partnership with The Home Depot.
• Switching to Budget Billing to equalize monthly bills.
• Seeking financial assistance through Dominion's Energy Share program for qualifying low-income customers who are unable to pay heating or cooling bills regardless of the energy source.
• Providing energy gift certificates to relatives, friends, churches and charitable groups to assist customers in need.

Any customers having trouble paying their electric bill for any reason should call the company as soon as possible, toll-free, at 1-888-667-3000.

Details on the Filings

Base rates pay for existing electric infrastructure such as power stations and other facilities to serve customers; operating costs such as maintenance, payroll and benefits; and a return for utility investors. Dominion's last base case adjustment was a decrease in 1998, and the last increase in base rates went into effect in 1992.

Fuel charges pay for fuels used to generate electricity and by law cannot include any profit.

A law that re-regulated Virginia electric utilities in 2007 sets forth specific times for utilities to seek base rate adjustments, and this case is being filed under that statute. The law also allows utilities to make separate filings as needed for specific new infrastructure projects.

Five filings, which each must be approved by the SCC before it can take effect, include:

• A decrease of $236 million, or about $3.64 a month for a typical residential customer, for lower fuel costs, to take effect July 1.
• An increase of $298 million, or about $6.29 a month, in base rates to take effect Sept. 1, subject to refund and adjustments by the SCC.
• An increase of $77 million, or $1.40 a month, for the Bear Garden Power Station in Buckingham County, effective Jan. 1, 2010. The SCC approved construction of the project Friday.
• An increase of $78 million, or $1.26 a month, to pay for transmission projects and related expenditures, to take effect Sept. 1.
• An increase of $99 million, or about $1.78 a month, for the Virginia City Hybrid Energy Center in Southwest Virginia, to take effect Jan. 1, 2010.
• A notice of intent to file for an increase of about $20 million to $30 million, or about 40 cents to 50 cents a month for new energy efficiency and conservation programs. This case is scheduled to be filed on or after July 1, and, if approved, will become effective by May 1, 2010.

For further information on the rate filings, visit www.dom.com.

Dominion Virginia Power is the principal subsidiary of Dominion (NYSE: D), one of the nation's largest producers of energy, with a portfolio of more than 27,000 megawatts of generation. Dominion serves retail energy customers in 12 states. For more information about Dominion, visit the company's Web site at http://www.dom.com/.

Editor's note: For radio and television media, audio clips featuring David Heacock, president of Dominion Virginia Power, are available for download at http://www.dom.com/news/media_downloads.jsp. Video b-roll also is available.

SOURCE Dominion Virginia Power

Source: PR Newswire

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