Dominion Virginia Power Files First Fuel
Rate Increase Request in Three Years
RICHMOND, Va. - 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 www.dom.com.
