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Dominion ordered to reduce utility bills statewide as fuel costs decline

SoVaNow.com / December 04, 2013
Customers of the state’s largest provider of electricity, Dominion Virginia Power, will soon see a reduction in their utility bills thanks to lower fuel costs. Over the next two months, the average utility customer will see a reduction of nearly $3.81 in their monthly statements. Customers using more than 1,000 kilowatt-hours of electricity a month should see greater reductions.

Starting December 1, the average bill will decrease by $3.70 as customers benefit from a voluntary rate reduction sought by Virginia Dominion Power. On October 15, the company asked the State Corporations Commission (SCC) for permission to reduce the fuel rate it passes on to its customers since lower commodity fuel prices and milder weather reduced its projected fuel expenses.

The fuel charge pays for fuel Dominion uses in its power stations to produce electricity, including natural gas, coal and uranium. It is charged on a dollar-for-dollar pass through without any mark-up or profit to the company.

Dominion Virginia Power spends about $2 billion annually on fuel and related expenses for its Virginia customers, and projects that its customers will save approximately $140 million because of reduced fuel rates.

A second reduction of approximately eleven cents will take effect January 24, 2014. The SCC ordered this change following a biennial review of Dominion’s rates for calendar years 2011 and 2012. The SCC directed Dominion to pass on to its customers the $7.9 million it was saving from having discontinued three different management program.

In a press release following the SCC decision, Dominion spokesperson David Botkins said, “With the change, Dominion’s overall electric rates will be at virtually the same level they were more than five years ago, despite major investments by the company in new power stations and electric grid infrastructure to increase reliability and meet growth.”

The SCC’s final order calls for Dominion Virginia Power to make various financial and accounting adjustments to ensure that its customers continued to pay fair and reasonable rates for electric service. Among them is the requirement that the Dominion file revised tariffs.

The SCC also lowered Dominion’s minimum authorized return on equity from 10.4 percent to 10 percent, calling a 10 percent return on equity “fair and reasonable to the company,” and found that the Dominion’s current rates could generate annual revenues greater than what is needed to cover the cost of service and earn a fair return. This finding potentially signals a future rate reduction after the next biennial review.

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