The State Corporation Commission (SCC) has approved a new fuel rate for Dominion Virginia Power that will increase an average residential bill by more than 18 percent. The increase will become effective for electricity used on and after July 1, 2008. The SCC also took several actions in order to minimize future fuel rate increases.

The SCC’s order allows Dominion Virginia Power to raise its fuel factor to 3.893 cents per kilowatt-hour (¢/kWh) from 2.232 ¢/kWh. A residential customer using 1,000 kWh in a month will see an increase of $16.61 on a monthly bill.

Dominion Virginia Power said the increase was necessary to cover the higher costs of fuel used to generate electricity. Virginia law entitles the company to recover its prudently incurred fuel costs. The fuel rate is the portion of the customer’s bill that is designed to ensure dollar for dollar recovery of such costs from customers.

The SCC accepted a stipulation that was agreed to by the company, the Attorney General, and other parties, including industrial customers. The fuel rate taking effect July 1 is dependent on the accuracy of forecasted fuel prices. Any over or under recovery that is likely to occur over the next 12 months will be factored into next year’s fuel rate adjustment.

The SCC also directed that specific steps be taken to ensure that Dominion Virginia Power minimizes its fuel costs – and, thus, its future fuel rate increases – as much as legally possible.
 
During the next year, the company expects to purchase almost $600 million worth of fuel from its unregulated affiliates. To keep customers’ fuel rates as low as possible, the SCC directed an audit to ensure that the company pays whichever is lower – the affiliates’ actual cost of such fuel or the market price.

The SCC also required reports to show the company is making as many off-system sales as reasonably possible whenever it has more generation than it needs to service its Virginia customers. Virginia law requires 75 percent of the margins from these sales to be credited to Virginia ratepayers. The credit reduction is directly applied to the customer’s fuel rate.

Finally, the SCC directed the company to provide a detailed explanation of its current risk management program for obtaining oil, natural gas, and wholesale electricity to show that it is reasonably minimizing such costs.

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