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Dominion Pursues Another Rate Hike
Utility Requests 6.9% Increase for Costs And Boost to Profits

By Anita Kumar
Washington Post Staff Writer
Wednesday, April 1, 2009

RICHMOND, March 31 -- Dominion Virginia Power is seeking to raise electricity rates 6.9 percent during the next 14 months to pay for equipment, salaries, plant construction and conservation projects.

The request comes a year after the state's largest energy provider raised rates by 18 percent to cover fuel costs, the largest one-time rate increase in three decades.

Virginians, already confronting the economic downturn, would face a phased-in increase between September and January.

"This is one more issue that low-income folks have to worry about in this economy," said the Rev. C. Douglas Smith, executive director of the Virginia Interfaith Center for Public Policy, which logged many complaints about last year's increase.

Before Dominion won approval for last year's boost, the average home electric bill was $91. If the Virginia State Corporation Commission approves this one, the average monthly bill will hit $116 by May 2010.

"I know 6.9 percent is going to be tough for some people," said Dominion President David Heacock. "But this will allow us to keep our rates as low as possible into the future. It's a long-term investment."

Dominion, which serves nearly 2.4 million homes and businesses statewide, including 800,000 customers in Northern Virginia, filed the request with the three-member regulatory panel Tuesday afternoon.

Even with the increase, Dominion customers will pay, on average, less than customers across the nation, according to the Edison Electric Institute, an association of U.S. shareholder-owned electric companies that represents about 70 percent of the nation's electric power industry.

Institute spokesman Jim Owen described Dominion's request as "quite modest."

"One wants to be sensitive to any pain out there, but it's a relatively mild increase,'' he said.

Gas and electric bills have been rising in Maryland and the District since rate caps imposed with deregulation were lifted, starting in 2004.

Customers of Baltimore Gas and Electric were hit with the biggest increase, 72 percent, in 2006. The average bill for Pepco customers in Montgomery and Prince George's counties jumped 86 percent between June 2005 and June 2008, officials with the utility said. The increase was 65 percent for customers in the District. Maryland's average Pepco bill was $168 in January.

Pepco is expected to seek a rate increase in the District later this month. Spokesman Robert Dobkin said the amount of the request was not set. He said there are no plans to file for a rate increase in Maryland.

Dominion said incremental increases proposed for Sept. 1 and Jan. 1 will pay for operating costs, power plants in Buckingham and Wise counties and conservation programs. The increase also includes a 13.5 percent profit for the company and its investors.

As Dominion seeks to raise rates, the company will also ask the commission to reduce by 3.3 percent a pass-through fee for fuel expenses starting July 1. That fee could have decreased further, but company officials said Dominion is still trying to recoup $500 million in fuel costs from previous years.

Dominion rates have risen three times, a total of 25 percent, since 1993. The national average is a 49 percent increase during the same period, according to Dominion officials. This is the first rate increase since 1993 that is intended to offset overall costs and boost profits.

The commission will proceed with the case much like a trial -- with public hearings, staff studies, a review of costs and investments, and comparisons with a dozen similar utilities in the Southeast. The state attorney general's office represents consumers in rate cases.

In Virginia, a business-friendly state where consumers have not been a forceful voice, few groups are expected to organize against the increase. Consumer advocates say residents do not usually get directly involved in electric rate cases because of the legal complexities. And they say that few see the point of challenging Dominion, considered one of the most powerful and influential companies in the state. Dominion contributed $675,000 to lawmakers, candidates and political committees in 2008 and spent $282,211 on lobbying in Richmond between mid-2007 and mid-2008.

Gov. Timothy M. Kaine (D), who does not have a formal role in reviewing the request, said Dominion officials informed him they would be seeking an increase.

"The SCC is a strong body with a great staff, and I think they will do due diligence on this," he said. "It's difficult because the cost of energy is going up."

Irene Leech, a Virginia Tech consumer studies professor and president of the Virginia Citizens Consumer Council, has been critical in the past of state law that would allow Dominion to collect far more than a 13.5 percent profit. But she said she was relieved Tuesday that the figure was not higher.

"I frankly expected it to be far worse. It's a fair interim rate," Leech said. "They have paid attention to what's happening to people."

Staff writers Lisa Rein and Michael E. Ruane contributed to this report.

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