Dominion Virginia Power seeks rate increases - Waynesboro News Virginian: Special Reports

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Dominion Virginia Power seeks rate increases

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Posted: Sunday, May 4, 2014 6:00 am

Dominion Virginia Power's residential bills would increase $6.37 a month by Sept. 1 as a result of two rate increases the company is seeking from state regulators.

Residential customers would see their bills go up 4.1 percent — $4.46 a month for a typical subscriber — under a rate increase proposal the company filed with state regulators Friday.

If the State Corporation Commission approves the fuel factor adjustment request, the typical residential electricity bill would increase from $107.99 to $112.45 per month starting July 1, the company said.

The winter's unusually cold weather, which pushed up the price of natural gas and purchased power, is driving the rate increase request, the Richmond-based utility said. Dominion Virginia Power hit a record winter peak load on Jan. 30.

In a second filing Friday, the company also asked the SCC to allow it to increase its transmission charge by $1.91, or about 1.7 percent, for a typical residential customer. If approved, the increase would take effect Sept. 1.

The utility said it needs the increase to strengthen its transmission network and ensure reliable delivery of power to customers.

Large business customers would see a greater impact from the fuel factor increase because fuel makes up more of their bills than it does for residential customers, Dominion Virginia Power said.

The utility wants to spread the requested fuel charge increase over two years to ease the impact on its customers, officials said. By law, the fuel charge only recovers, on a dollar-for-dollar basis, the company's actual costs.

"We don't make any money on the fuel factor," said Steven A. Rogers, senior vice president for financial management in Dominion Resources Inc.'s Dominion Generation business. "It's strictly a pass-through to our customers."

If the fuel charge increase is not spread over two years, the company said, a typical residential customer's monthly bill would go up about $2, or 6 percent, making it $114.45.

Dominion Virginia Power, the state's largest electric utility with nearly 2.4 million customers, expects to spend $267.8 million more in the 12-month fuel year that ends June 30 than it will recover through the current customer fuel charge.

The deferred fuel cost issue has been exacerbated, Dominion Virginia Power said, by the fact that the company voluntarily reduced its fuel charges in December after collecting too much in the first half of the fuel year because of mild weather.

The company reduced its customer charges for fuel costs by 3.3 percent on Dec. 1. The typical residential customer saw a savings of $3.70 a month from that reduction.

Dominion Virginia Power projects its fuel expenses will be $1.9 billion during the 2014-15 fuel year. The fuel charge normally comprises about 27 percent of a typical residential bill, the utility said, covering the variable cost of fuel for its power stations, as well as power purchases on wholesale energy markets.

Dominion Virginia Power, not customers, would bear the financing costs for delaying collection of half of its 2013-14 fuel year expenses, Rogers said in testimony filed with the SCC Friday.

The fuel charge pays the utility's costs for fuels such as coal, uranium, natural gas and oil, and purchased power. The company says its fuel mix is about equally divided now between nuclear, coal and natural gas.

Dominion Virginia Power is considering using more long-term contracts to hedge against natural gas price volatility, Rogers said. "The company believes it is prudent to expand its approach to securing the supply of natural gas necessary to fuel its power plants."

"Dominion is gambling with their customers' money with their overreliance on natural gas," said Glen Besa, director of the Sierra Club's Virginia Chapter. "When the price of gas goes up, the customers get stuck with the bill."

"There are no fuel rate adjustments with solar and wind power," Besa said, "because the fuel is free."

In September, Dominion Virginia Power won the right to develop the first wind energy farm off the Virginia coast in a federal lease auction. But the earliest Virginia offshore commercial wind development could occur would likely be 2022, or even five years later than that, energy officials have said.

"This winter we saw days and weeks so cold — driven by the 'polar vortex' phenomenon — that the price of natural gas and purchased power soared," Dominion Virginia Power President Robert M. Blue said in a statement.

"While gas was available, there were pipeline constraints at certain points on the coldest days," Blue said. "Had it not been for our diverse sources of generation, including nuclear and coal, electricity shortages might have occurred and this proposed fuel increase be even higher."

Natural gas is a major fuel for Dominion Virginia Power's power stations. Though low by world standards, U.S. natural gas prices have more than doubled in the past two years, from about $2 per million BTU, and spiked at nearly $8 during this winter's unusual cold, according to the U.S. Energy Information Administration.

Dominion Virginia Power's rates can't be changed — up or down — without SCC approval.

The state regulatory agency has no deadline to rule on the fuel case. The potential timing of any order will depend on when the SCC sets the case for hearing.

The commission has three months to decide the transmission rate application, and a Dominion Virginia Power spokesman said the company expects a ruling by the beginning of August.

Even with the requested rate changes, the company said its electric rates would remain well below national, regional and state averages.

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