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Spike In Global Energy Prices Drives Dominion Virginia Power’s Request For Fuel Rate Increase


* Company proposes deferral of $697 million in fuel costs, other measures to help customers
* $5 million additional contribution to EnergyShare will aid residential customers in need
* Request must be approved by State Corporation Commission to take effect

Dominion Virginia Power announced today that it is seeking the approval of the State Corporation Commission to increase customer rates, effective July 1, as a result of sharply higher costs for fuel. The higher costs — caused by an increased worldwide demand for energy — would 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.

“The market prices of fuel used to run our power stations – coal, natural gas, fuel oil and uranium – have risen by more than 200 percent in some cases since fuel rates were last fully aligned with market conditions in 2004,” said David A. Heacock, president of Dominion Virginia Power. “Our electric customers have been protected from most of that impact in recent years. We have worked very hard to keep costs down in areas we can control, and we will continue to do so.”

The company also is proposing a number of measures to lessen the financial impact of the increase on customers. These include:

* Deferring an estimated $697 million of fuel costs. This deferred amount would be collected over three years, starting in July 2009.

* Contributing an additional $5 million to Dominion’s EnergyShare program, which provides emergency grants to help residential customers in need to pay heating and cooling bills. The donation will allow for a significant increase in the number of grants.

* Offering a new billing option for small and medium-size businesses and most non-profit customers to equalize monthly payments.

* Making it easier for residential customers to enroll in Budget Billing and expanding eligibility.

* 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.

“We recognize the impact higher energy costs are having on our customers, and we are committed to doing everything possible to ease the burden,” Heacock said. “We all have seen the impact of skyrocketing global energy prices at the gasoline pump, in natural gas and heating oil bills, and even at the grocery store.”

The SCC must approve the fuel rate increase and deferral of additional fuel costs before they can take effect. The proposed fuel rate adjustment would increase the average monthly bill of a typical residential customer who uses 1,000 kilowatt-hours per month by $16.61, or 18.3 percent, to $107.20. Without the deferral proposed by Dominion, the requested increase would have been 22.2 percent for the same typical residential customer.

No change is being 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.

Dominion has implemented only one fuel rate increase since 2004. It was in July 2007, when the increase to the average residential rate was limited by law to 4 percent. Additional fuel costs due to Dominion at that time were deferred to later years in accordance with the state’s transition back to traditional utility regulation.

“The electric utility reregulation legislation enacted last year is serving to cushion the impact of skyrocketing fuel costs on our customers by allowing for a staged transition to adapt to unprecedented global conditions,” Heacock said.

Dominion’s proposal to defer recovery involves an estimated $697 million of unrecovered fuel costs 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.

Heacock also said the company will continue looking for other ways to help its customers cope with the impact of higher fuel costs.

Dominion’s EnergyShare program is in its 25th year. It is being expanded this year to include cooling assistance. In the past, EnergyShare covered only heating assistance. The company covers administrative costs of the program and has made cash contributions as well.

The new billing option for small and medium-size businesses and most non-profit customers 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.

The two changes in residential Budget Billing are:

* 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.

* 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.

Information about budget billing is available on Dominion’s Web site at by entering the word “budget” in the search box.

“An important way to counter some or all of the fuel increase impact is to conserve energy,” Heacock said. “That is why we are providing discounts on up to five million energy-saving compact fluorescent light bulbs at The Home Depot stores and are continuing to educate our customers about how to use energy wisely.”

Additional information on the customer billing programs, EnergyShare eligibility and how to save money on electric bills also is available at Dominion’s Web site. This includes a free online energy audit for residential and small-business customers that can help identify cost-effective ways to save on electricity.

Because it is a pass-through cost with no profit to Dominion, the proposal to defer fuel costs that would have been recovered starting July 1, 2008 does not change the company’s 2008 operating earnings-per-share guidance or outlook for 2009 and beyond.


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