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SOURCE Dominion Virginia Power
-- Extreme cold's impact on natural gas prices, purchased power driving 4.1 percent request
-- Proposal would spread increase over two years to ease impact on customers
-- Company earns no profit on fuel charge, only allowed to recover actual costs
-- Smaller increase sought for transmission costs, to be effective Sept. 1
RICHMOND, Va., May 2, 2014 /PRNewswire/ -- Dominion Virginia Power today asked the Virginia State Corporation Commission for a 4.1 percent increase in residential customer rates to cover the higher cost of fuel used in its power stations, primarily during this year's extremely cold winter.
If approved as requested, the increase would take effect July 1. A typical 1,000-kilowatt-hour residential bill would increase from $107.99 to $112.45 per month. Large business customers should expect to see a proportionately higher impact because fuel makes up a larger component of their bills than it does for residential customers.
"This winter we saw days and weeks so cold – driven by the 'polar vortex' phenomenon -- that the price of natural gas and purchased power soared," said Robert M. Blue, president-Dominion Virginia Power. "While gas was available, there were pipeline constraints at certain points on the coldest days. Had it not been for our diverse sources of generation, including nuclear and coal, electricity shortages might have occurred and this proposed fuel increase be even higher."
Purchased power is electricity purchased off the grid from other utilities and power producers. These prices fluctuate according to demand, weather and other factors. At times this winter, natural gas –a major fuel for power stations -- climbed far above normal prices, driven by the frigid weather in the eastern half of the country.
The company proposal would mitigate the immediate impact on customers by spreading part of the requested fuel increase over two years. Pending SCC approval, the company would delay collection of $133.7 million in higher fuel expenses until July 1, 2015.
Without the proposal, a typical residential customer's bill would be $2 higher, making it $114.45 or about 6 percent more. The interest cost of delaying collection of the $133.7 million will be borne by the company under its proposal.
In a second filing today, the company asked the SCC to allow it to increase its transmission rider by $1.91, or about 1.7 percent, for a typical residential customer. The increase is needed to support the company's continuing efforts to strengthen its transmission network and ensure secure and reliable delivery of power to customers. If approved, the increase would take effect Sept. 1.
No rate changes – up or down – can occur without SCC approval. Under state law, the company makes no profit on the fuel charge, only a dollar-for-dollar pass through to cover the utility's actual costs for fuels such as coal, uranium, natural gas and oil, and purchased power.
Even with the requested rate changes, the company's electric rates remain well below national, regional and state averages. The latest information on the company's rates, complete with comparison charts, filings and more, can be found at www.dom.com/varates.
Electricity bills are made up of several components. The fuel charge normally comprises about 27 percent of a typical residential bill and covers the variable cost of fuel for the company's power stations and power purchases on wholesale markets.
About 58 percent of a typical residential bill is made up of base rates, which cover the company's operating expenses, such as storm recovery, system maintenance, general business and personnel costs. Expenses for specific infrastructure projects, such as new power stations, transmission lines and substations, are covered by individual rate clauses called riders and make up about 15 percent of the typical bill.
Dominion Virginia Power is a subsidiary of Dominion (NYSE:D), one of the nation's largest producers and transporters of energy, with a portfolio of approximately 23,600 megawatts of generation, 10,900 miles of natural gas transmission, gathering and storage pipeline and 6,400 miles of electric transmission lines. Dominion operates one of the nation's largest natural gas storage systems with 947 billion cubic feet of storage capacity and serves utility and retail energy customers in 10 states. For more information about Dominion, visit the company's website at www.dom.com.
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