Dominion Virginia Power bumps up customer power prices


Dominion Virginia Power proposed a $441.7 million fuel rate increase Tuesday — the first in three years — because of higher fuel costs and extreme winter weather. To lessen the impact on its 2 million customers, the company intends to present an unprecedented plan to spread a portion of the higher rate over the next two years.

If the State Corporation Commission approves the two-year recovery, the monthly bill of a typical residential customer using 1,000 kilowatt-hours of electricity would increase by 5.6 percent, from $82.51 to $87.17, effective Jan. 1. This would be only slightly higher than it was 10 years ago when it was $84.77. In contrast, the Consumer Price Index rose by almost 26 percent from January 1994 through May 2003.

If the new fuel rate is approved for recovery in a single year, the typical residential bill would rise by $7.18, to $89.69, next January, which is an increase of about 8.7 percent.

“Just as consumers have seen increases in the price of natural gas, fuel oil and gasoline, so has Dominion and other users of natural gas and petroleum products,” said Thomas F. Farrell II, president and chief executive officer of Dominion Energy, which operates the company’s power stations. “The fuel rate that went into effect in January 2001 has been unable to keep pace with fuel costs, especially the marked increase in natural gas prices.
“We are very aware of the magnitude of this request, so we hope that all parties can agree to the two-year recovery that we believe is fair to customers and the company,” Farrell said.

The bills of Dominion’s Virginia electric customers are composed of two rates, one for base charges, and the other for fuel. The base rate — which is about 74 percent of the typical residential bill — remains capped until July 1, 2007, by the Virginia Electric Utility Restructuring Act. The fuel rate is a regulated dollar-for-dollar pass-through that pays for the fuel used to produce electricity. Dominion is not permitted to make a profit on fuel expenses.

From July 2002 through Dec. 31, 2003, Dominion said the cost of natural gas was 39 percent higher than projected last summer. Prices for light oil increased by 13 percent and heavy oil by 31 percent. Higher fuel prices also increased the price of electricity on the wholesale market.

Fuel price increases occurred simultaneously with the 2002-03 winter that was colder than projected. From September 2002 to February, the company sold 1.3 million more megawatt-hours of electricity than projected and included in the present fuel rate. Dominion’s Virginia customers set a winter peak demand record of 16,133 megawatts on Jan. 23. The 2002 summer was also hotter than expected and included an all-time peak demand of 17,084 megawatts last July 29.

During much of the winter, Dominion also was engaged in the first of four reactor vessel head replacements at its North Anna and Surry nuclear power stations to respond to industry-wide safety concerns. The replacements were scheduled to occur during 2004-05, but were accelerated to take advantage of available vessel heads. The first three projects have been completed, and the final is scheduled for this fall. The $91 million additional cost of buying power to replace output from the nuclear units contributed to the proposed fuel rate increase. But the decision to replace vessel heads now — rather than repair them and replace them later — saved more than 200 outage days and $88 million in marketplace power costs from the original plan.

Dominion is one of the nation’s largest producers of energy, with a diversified and integrated energy portfolio that includes 24,000 megawatts of generation and 6.1 trillion cubic feet equivalent of proved natural gas reserves. Dominion also serves 5 million retail energy customers in nine states. For more information about Dominion, visit the company’s Web site at

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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