Fuel Rate Details Dominion Virginia Power

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Dominion Virginia Power has received the approval of the State Corporation Commission to increase customer rates as a result of higher costs for fuel. The higher costs — caused by an increased worldwide demand for energy — will be passed on to customers with no profit to Dominion, as required by state law. The company uses a diversified mix of fuel to run its power stations to generate the electricity used by its customers.

Rate Details

The fuel rate increase will take effect July 1, 2008, per the SCC order dated June 27, 2008. The following is based on a fuel rate of $.03893/kilowatt-hour:

• Typical residential customer (1,000 kWh/month) — The average monthly bill will increase from $90.59 to $107.20, for a $16.61 increase. This represents an increase of 18.3% in the average monthly bill.
  
  
• Typical small commercial customer (GS-2, 50 kW/15,000 kWh) — The monthly bill will increase from $1,159.97 to $1,409.12, for an increase of $249.15. This represents an increase of 21.5% in the monthly bill.
  
  
• Typical commercial and industrial customer (GS-3, 1,000 kW/200,000 kWh on/300,000 kWh off) — The monthly bill will increase from $26,696.25 to $35,001.25, for an increase of $8,305.00. This represents an increase of 31.1% in the monthly bill.

No change was requested to the rate that covers base costs, such as customer service, electricity delivery, power lines, non-fuel costs of operating power stations and company profit. The base rates were set by the SCC and have not changed since 1999.

Proposed Measures

Dominion recognizes that this rate adjustment will impact all of our customers. Consequently, we are implementing a number of measures to lessen the financial impact of the increase. We are:

• Deferring an estimated $697 million of fuel costs. This deferred amount would be collected over three years, starting in July 2009. The unrecovered fuel costs were incurred since the last fuel adjustment went into effect. It includes $231 million that would otherwise be collected July 1, 2008, through June 30, 2009, plus another $466 million that could be collected by June 2011. Instead, the company would delay collection of the combined amount over three years from July 2009 to June 2012.
  
  
• Contributing an additional $5 million to Dominion’s EnergyShare program, which provides emergency assistance payments to help residential customers in need to pay heating and cooling bills. The donation will allow for a significant increase in the number of families helped.
  
  
• Offering a new billing option for small and medium-size businesses and most non-profit customers to equalize monthly payments. The new billing option is called "Business Advantage." Eligible customers will be able to sign up beginning July 1 for a program that allows them to levelize their monthly bills, much like the Budget Billing option available for residential customers.
  
  
• Making it easier for residential customers to enroll in Budget Billing and expanding eligibility. Eligible residential customers who are current on their bills will be able to enroll automatically in Budget Billing by paying the budget amount on their bills. No additional forms or paperwork need to be filled out. This opportunity will be available from July 1 to Oct. 1 of this year. Also, customers who are no more than a month behind on their bills may be considered for Budget Billing. These customers should contact Dominion customer service toll free at 1-888-667-3000 between July 1 and Oct. 1.
  
  
• Developing plans to partner with non-profit and social service agencies to help promote energy efficiency for senior citizens and low-income clients.
  
  
• Accelerating the rollout of Dominion’s energy-saving pilot programs.

Reason for the Fuel Rate Adjustment

Dominion keeps its operating costs down in areas it can control, but it can’t control global energy prices. Fuel used to generate electricity is our single largest expense. The cost of fuels we use to run our power stations, such as natural gas, coal, oil and uranium, has increased sharply in recent years — more than 200 percent in some cases since fuel rates were last fully aligned with market conditions in 2004. (>> View charts)

Utility customers elsewhere already have felt the pinch of higher fuel costs on their electric bills. That largely has not been the case at Dominion. Our fuel rate was frozen from January 2004 to July 2007 and – as part of the transition back to traditional regulation – was limited to a 4 percent increase in residential rates last year. Additional fuel costs were deferred for collection in the future.

Passing fuel costs along to customers is normal practice across the U.S. About 40 states have similar laws or regulations.

No Profit on Fuel Costs

The fuel rate covers the cost of fuels Dominion uses to produce power, as well as power purchased from other producers for our customers, but Dominion makes no mark up or profit on the fuel used to generate electricity. By state law, fuel costs are recovered through the fuel rate on a straight dollar-for-dollar pass through to customers, and no profit is allowed.

How Fuel Costs Are Determined

A fuel adjustment occurs only after full review and approval of the State Corporation Commission. Just as in the past, the SCC reviews the request; holds a hearing; receives input from experts, customers and consumer advocates; and determines if the request is appropriate before it can go into effect.