Manassas has secured stable electricity rates through 2010.
On Monday night, the Manassas City Council unanimously authorized a contract with Richmond-based Dominion Virginia Power Co. that freezes the city's electricity purchase rates from 2007 to 2010. Manassas and six other jurisdictions that operate their own utilities jointly negotiated the deal as part of the Virginia Municipal Electric Association.
The group also includes the towns of Blackstone, Culpeper, Elkton and Wakefield and the cities of Franklin and Harrisonburg. Until those jurisdictions and the Federal Energy Regulatory Commission approve the agreement, the new frozen rate is confidential, a Dominion Virginia Power spokesman said.
"I would say [this] is an extraordinary arrangement," said Manassas City Manager Lawrence D. Hughes. "To have anything as critical as electricity at a flat rate for five years is remarkable."
For example, a typical Manassas home using 1,000 kilowatt hours of electricity a month pays $76.70 now, said Allen Todd, the city's utility director. That is 12 percent lower than surrounding jurisdictions, he said.
The city's existing contract with Dominion Virginia, which runs through 2007, calls for 1.5 percent price increases in each of the next three years. Todd said he hoped the city would not pass those costs to customers.
But other factors could lead to rising rates for customers.
"For years and years, the [city's] electric utility has not had an adequate level of capital," Hughes said. "They would have to borrow money from the general fund."
Boosting the utility's fund reserves could require a rate increase, Hughes said.
The cost of fuel that runs the city's electrical generators could also increase, Todd said. The generators produce about 35 percent of the city's electricity on peak days. The rest comes from Dominion.
"So there are other outside influences that will have an impact," he said. "Those costs would be passed along in the rate structure."
Todd said that rate changes, if necessary, would probably not be excessive. He emphasized the stability and cost savings that the new contract brings the city.
For Dominion Virginia, the deal ensures business.
"In a competitive environment, we want to make sure that we maintain relationships with our customers," said Jim Norvelle, a Dominion spokesman. "And we think it's a good deal for [the Virginia Municipal Electric Association] as well."
Virginia has been pushing for full competition in its electric utility industry since 1998, Norvelle said. "In recognition that competition is not coming as quickly as everybody thought it was going to come, this past [General Assembly] session extended the transition period to the end of 2010."
Electricity rates are capped during the transition period to full competition.
Hughes credited Todd's relationship with Dominion and the municipal association, among others, for securing the contract. Todd, who worked for Dominion for 31 years before serving the city, is president of the association.