Dominion Rates to Rise 18%

By Anita Kumar
Washington Post Staff Writer
Saturday, June 28, 2008

RICHMOND, June 27 -- Dominion Virginia Power will raise electricity rates 18 percent starting Tuesday to pay for soaring fuel costs, the largest one-time rate increase in three decades.

The three-member Virginia State Corporation Commission, the state's utility regulator, approved the increase in a ruling issued Friday.

Dominion, which serves about 2.3 million homes and businesses statewide, including 800,000 customers in Northern Virginia, will raise the average resident's monthly bill from $91 to $107.

"Our concern remains about the impact on citizens, especially older citizens, on fixed incomes,'' said Tony Hylton of AARP Virginia, which has more than 1 million members.

Dominion officials say they will offer ways to offset higher bills. The company will provide $5 million in emergency grants and allow more customers to take part in a program that allows bills to be paid in 12 nearly equal monthly installments.

"We recognize the impact higher fuel prices will have on our customers,'' Dominion spokesman David Botkins said. "We will do everything we can to minimize the effect by increasing efficiencies, expanding conservation programs and helping those in need."

The commission's decision was expected. State law requires that fuel costs, which make up about a quarter of a customer's bill, be passed on to customers with no profit.

In the past year, Dominion estimates that coal costs have risen 95 percent; oil, 55 percent; natural gas, 20 percent; and purchased power, 28 percent.

"I don't think the State Corporation Commission had a choice,'' said Irene Leech, a Virginia Tech consumer studies professor and president of the Virginia Citizens Consumer Council.

Across the nation, electric companies are seeking rate increases as a result of a global spike in energy prices. The Washington region's other major utilities, Pepco and Baltimore Gas and Electric, also have cited rising fuel costs in applying for rate increases.

Even with the latest increase, Dominion customers would still pay less, on average, than customers across the nation, including those in Maryland.

Dominion had the option of asking for an increase of more than 22 percent this year, but company officials say they limited the increase to 18 percent to minimize the impact on residents and businesses. The company will seek approval to raise rates again in July 2009 as part of a three-year plan to make up for $700 million it could not collect last year because of a state-imposed cap.

Next year, Dominion can seek an increase in its base rate, which funds delivery, power lines, plants and company profit and makes up the remaining 75 percent of a customer's bill. The General Assembly froze those rates in 1999 when legislators embarked on an ambitious rewriting of utility law, but those restrictions expire this year.

"Many people are asking why it is that Dominion has to raise rates right now,'' said the Rev. C. Douglas Smith, executive director of the Virginia Interfaith Center for Public Policy, which received many complaints about the increase. "The answer is simple. The costs are going up at the corporate level, just as they are on the consumer level . . . But we hope it will encourage people to get serious about conservation."

For decades, Virginia's power companies operated under commission regulations that controlled prices because companies held monopolies. But in 1999, the General Assembly voted to cap or freeze rates while phasing out some of those regulations in favor of a deregulated industry, hoping to foster competition and keep prices low. That idea was pursued across the nation.

But the competition never materialized, leading to huge rate increases in some states, including Maryland. So in 2007, Virginia legislators abandoned the shift to deregulation and again embarked on rewriting the complex laws that govern the power companies.

"It's painfully apparent that the General Assembly made a mistake when it handcuffed the commission's ability to do a holistic review of rates and costs,'' said Shaun Pharr, senior vice president for government affairs for the Apartment and Office Building Association. He estimates that the average monthly bill for Dominion's commercial customers will rise as much as 20 to 44 percent over the next few years.

In its ruling Friday, the commission required Dominion to conduct an audit to ensure that it is paying the lowest fuel costs, to report how it is compensating customers for the sale of surplus electricity and to provide details of its risk management program.

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