The 2006 Virginia General Assembly voted to allow Dominion
Virginia Power to reset its fuel rate on an annual basis. Prior to the amendment,
the company would have had to reset its fuel rate once for a 3½-year
period beginning July 2007. This would have entailed proposing a complicated
fuel rate adjustment in July 2007 for a 42-month period — until Dec. 31,
2010.
The 12-month adjustments will better track actual fuel prices
and reduce any possible "rate shock." Also, because this would be
the first fuel rate change since 2004, 40 percent of any proposed increase could
be spread over the 3½-year period. This could help mitigate any potential
increases.
The company cannot recover losses from high fuel prices between
2004 and July 2007. However, future adjustments will have a "true-up"
that would either lower the rate if too much money were collected or increase
it if not enough were collected.
The fuel rate, which makes up about 20 percent of a typical
electric bill, pays for the coal, natural gas, oil and uranium used at power
stations to generate electricity, as well as purchased power.
The company does not earn any profit on fuel. Price savings
or increases are passed directly through to customers.
