Electric Rates Would Rise as Manassas Aims For New Deal

Manassas is looking to enter a new $1.3 billion power supply arrangement with Dominion Virginia Power, a move that would drive up residential electric rates 21 percent in the next few years, city officials said Wednesday.

The contract, which would be arranged through the Virginia Municipal Electric Association and take effect in January 2011 if approved by the City Council on Monday, will replace the agreement the city executed in 1989 with Dominion through VMEA, an association whose primary purpose is to provide power contracts to Manassas and six other jurisdictions. The city's current contract expires at the end of 2010. The new contract is for 20 years.

"We are trying to get the best deal for the customer, but we need to be honest: Costs are going to go up," Manassas Utilities Director Michael C. Moon said. "We spent two years investigating different options, and we think we found the most cost-effective."

Electric bills across the state are expected to increase because of rising fuel costs and construction costs associated with power generation projects that Dominion says are needed to efficiently serve customers.

Because the city acts as the electric supplier, has low overhead, is not-for-profit and sets rates, the bills of the 15,000 Manassas customers will remain low relative to electric users across the state, Moon said. Historically, residential rates in Manassas have been 10 percent below Dominion's and 25 percent below the Northern Virginia Electric Cooperative's, he said.

Manassas residents can expect about a 6 percent increase in their rate annually starting in 2011. In 2014, that increase should drop to about 4.3 percent. Bills in 2011 should average about $101 a month, compared with $95 next year. In the past two years, electric bills for residential customers in Manassas went up 1.5 and 2 percent.

Moon said the city is able to spread the increase out over time instead of hitting residents with a 21 percent increase in 2011 because of its $4 million rate stabilization fund. Over the past few years, the electric department, which spends 72 percent of its budget annually on purchasing power, put money aside to have a "rainy day" fund for when the contract ended and rates inevitably rose.

Dominion spokeswoman Le-Ha Anderson said the average bill for a Dominion customer is about $110 a month for residents using 1,000 kilowatt-hours. Anderson said the company does not predict how much the bill will change over coming years. The base rate of the bill is adjusted every two years, with the next change scheduled for 2011, and fuel costs and infrastructure projects affect it annually, she said.

Under the new contract guidelines, Moon said, the city wouldn't be able to use its diesel generator during peak usage times, something it has done in the past to take demand off Dominion's power system and save Manassas more than $6 million annually.

Customers might, however, be able to take advantage of the "smart grid" project Manassas officials are testing. If the pilot program is successful, the city will begin switching to an advanced metering infrastructure system next year, which is a Web-based application that would allow city officials and residents to read and monitor water and electric usage remotely.

Residents could access the Web site's data for a fee, about $1 to $4 a month. Or they could get free access if they subscribed to the city's Internet service or joined the Demand Response Program, also being tested in the pilot project. That program permits city officials to put a device on home water heaters and thermostats to allow residents and officials to control them remotely.

Participants could expect to shave 10 to 15 percent off their bills through the program, and the city could save more than $1 million annually, Moon said.