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Dominion Pursues 18 Percent Rate Hike

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By David A. Fahrenthold
Washington Post Staff Writer
Wednesday, May 7, 2008

Dominion Virginia Power announced yesterday that it would seek permission to raise electricity rates 18 percent this summer to make customers pay for part of the increased cost of coal and other fuels.

The request, if approved, would raise the average monthly bill from about $91 to about $107, Dominion officials said. That would be the largest one-time rate increase for the utility since the 1970s, although Dominion customers would still pay less, on average, than many electric customers in Maryland.

Dominion, which serves about 800,000 customers in Northern Virginia, said it wanted the rate increase to begin July 1. The proposal must first be approved by the Virginia State Corporation Commission.

Company officials conceded that the heftier power bills could be painful for many customers but said the price increase was necessary to offset $1.1 billion that the utility would spend on fuel.

"Obviously, we are not keeping pace with the domestic and international commodity market," said Mark McGettrick, president and chief executive of Dominion's generating arm. The company's base rate is capped by state law, but Virginia officials allow Dominion to petition for increases based on fuel costs.

Dominion's request is one of several recent signs that a global increase in energy prices -- driven by Wall Street maneuvering as well as increased consumption in the United States, China and India -- is affecting Washington area consumers. The region's other major utilities, Pepco and Baltimore Gas and Electric, have also cited rising fuel costs in applying for recent rate increases.

Last year, Dominion made a similar argument as it pushed for, and ultimately won, a 4 percent increase in rates.

Since then, the utility said, coal -- which provides 37 percent of the utility's electricity -- has increased in price by 95 percent. Oil and natural gas, which each supply less than 10 percent of the total, have risen 55 percent and 20 percent.

Because rates have not kept up, Dominion officials said yesterday that there would be a $1.8 billion difference between the cost of the power they buy and the money they will receive from customers from July 2007 to July 2009. They said that the rate increase proposed yesterday would recover about $1.1 billion of it and that the rest would be sought from customers in later years.

A spokesman for the State Corporation Commission said yesterday that he had not seen the utility's request. He said the commission will hear public comment and investigate Dominion's finances and costs before making a ruling.

The commission will try to determine whether Dominion's request is reasonable, spokesman Andy Farmer said.

Dominion officials said yesterday that, even if the proposed increase is approved, the company's average monthly bill would remain below the national average of $113.56. It would also be less than the $140.11 that Pepco customers in Maryland pay and the approximately $150 paid by customers of BGE.

The average for Pepco customers in the District is $88.77 a month, a spokesman for that utility said. The number is lower because city dwellers use less electricity than suburbanites, he said.

Dominion officials said yesterday that they would offer ways to ease the burden on customers, including a "budget billing" program that allows customers to pay their bills in 12 nearly equal installments. That way, they said, the bills are not especially high in summer, when usage is greatest. More information is available on the utility's Web site, http://www.dom.com.

They also said that future rate increases might be reduced if Dominion is allowed to build a coal-fired power plant in Wise County in far southwestern Virginia. But environmental groups oppose the plant, citing consumer costs and greenhouse-gas emissions.

The environmentalists have other ideas about how to spend the money.

"If we are going to be paying more for electricity anyway, the increased costs ought to be invested . . . in efficiency and renewable energy," said Glen Besa of the Virginia chapter of the Sierra Club.


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