Dominion Virginia Power Seeks Approval of New Power Station, Transmission and Fuel Rates to Continue Reliable Service to Customers

RICHMOND, Va., May 2, 2011 /PRNewswire/ -- Dominion Virginia Power, a subsidiary of Dominion (NYSE: D), today asked its Virginia regulators to approve a new natural gas-fired power station and annual rate adjustments for transmission services and increased fuel costs.

The power station and transmission applications are part of Dominion's "Powering Virginia" strategy, which is designed to ensure continuation of reliable service to the company's 2.3 million Virginia electric customers while meeting demand growth of 4,500 megawatts by 2021. The strategy includes adding a mix of new generation sources and energy efficiency programs, and upgrading and expanding the transmission and distribution network to minimize fuel expenses while improving reliability. These actions also would reduce the amount of electricity imported from other states. The fuel rate application is an annual review and proposed adjustment.

"Dominion Virginia Power understands that its obligation to customers is to keep the lights on and provide reliable service at reasonable costs," said Paul D. Koonce, chief executive officer. "This is exactly what our applications today propose to do. Even with finding new ways to achieve energy efficiencies, the new power station and improved transmission services are needed for us to keep that promise.

"The filings also recognize the need to recover higher fuel costs used to generate electricity, both because of rising fuel prices and the effect of last year's hotter-than-normal summer and colder-than-normal winter. To reduce the impact to customers who are already dealing with higher gasoline prices at the pump, we are proposing to spread this increase over the next two years," said Koonce.

The company asked the Virginia State Corporation Commission to approve:

• The first fuel rate increase in three years. The fuel rate is a pass-through cost with no profit to Dominion. This rate is adjusted annually to recover what Dominion Virginia Power spends on fuel at its nuclear, biomass, coal, natural gas and oil electricity-generating units as well as power it must purchase from the wholesale market.

Dominion is authorized to recover these expenses over a year's time but has proposed spreading the costs over the next two years to reduce the impact to customers. If the SCC approves the two-year proposal, the total amount of the proposed increase for the 12-month period beginning July 1 would be about $319 million. The monthly bill of a residential customer who uses 1,000 kilowatt-hours each month would increase by $4.86, from $103.91 to $108.77, beginning July 1.

If regulators decline the mitigation proposal in favor of full recovery over one year, the total amount of the increase for the 12-month period would be about $536 million. The monthly bill of a residential customer who uses 1,000 kilowatt-hours each month would increase by $8.17, from $103.91 to $112.08, beginning July 1.

• The annual rate adjustment for Dominion's transmission system. Projects include replacing aging equipment, adding new infrastructure, and covering the costs of services for the regional grid operator.  If approved, the transmission portion of the monthly bill of a typical residential customer would increase by $3.84 per month, from $6.16 to $10, beginning Sept. 1.

• The Warren County Power Station near Front Royal. Dominion is planning for the approximately $1.1 billion, more than 1,300-megawatt, natural gas-fired power station to begin operating in late 2014. If approved, the monthly bill of a residential customer who uses 1,000 kilowatt-hours each month would increase by $0.75, beginning April 1, 2012, to pay for the financing costs of the power station's construction for a 12-month period.

Fuel Rate

Dominion maintains a balanced fuel mix, which reduces price volatility when one fuel source is relied on too heavily. New efficient, technologically proven and environmentally responsible electricity generation units being planned by the company will use a variety of fuel sources.

The proposed fuel rate is projected to capture costs not recovered in the last 12 months plus projected fuel costs for the next 12 months. The previous fuel rate is projected not to recover about $433 million in costs largely driven by extreme weather conditions, as winter weather was colder and summer weather was hotter than normal. Dominion has proposed splitting this amount and recovering it over the next two years.

Had the proposed Warren County Power Station been an operating power station during 2010, it would have significantly displaced required market purchases of energy, particularly at peak times associated with higher weather-driven customer demands, resulting in $122 million in fuel cost savings for our customers.   

Transmission

Virginia's 2007 electric re-regulation act authorized transmission costs to be broken out from base rates and recovered through a separate, annual rate adjustment.  Costs have risen as the company has added new transmission lines, substations and other infrastructure to keep up with growing demand and maintain high levels of reliability. Over the past two years alone, the company has completed six major transmission projects, and another half dozen are currently under construction. The company's total investment in transmission facilities more than doubled from 2008 to 2011, rising from about $980 million to about $2.25 billion.

Warren County Power Station

Dominion is seeking approval to build the power station in close proximity to Northern Virginia, which is a growing, high-demand region in the company's service area. It would supply enough electricity for more than 300,000 homes at peak demand. The station has received approval from Warren County, an air permit from the Virginia Department of Environmental Quality and a water agreement from Front Royal. As part of its air permit, Dominion agreed to mitigate potential impact on Shenandoah National Park by agreeing to close North Branch Power Station, a coal-fired power station in West Virginia.

During the construction phase, the power station project would provide direct and indirect economic benefits to the state of about $950 million – approximately $515 million in Warren County – and more than 2,700 jobs – approximately 1,670 in Warren County. Post-construction economic benefits are projected to amount to more than $35 million annually, and approximately 100 jobs will be supported, with most located in Warren County.

The company is seeking approval to begin collecting its financing costs for the power station through a rate adjustment clause as allowed under state law. By collecting financing costs over time as projects begin, Dominion lessens the larger rate impact that would occur when the power station goes into service. The company is requesting that an additional 1 percent return on equity be applied to the power station for the first 20 years of its life as prescribed by state law as an incentive to build such a combined-cycle electricity generating facility.

Budget Billing Programs Offered

Dominion offers Budget Billing programs for its residential customers so they can avoid monthly fluctuations in their electric bills. The budget amount is based on the average of the previous bills for the past 12 months at your address and then adjusted for current rates. Your account is reviewed periodically and your budget amounts may increase or decrease based on changes in usage or rates. About 390,000 Dominion customers participate in Dominion's Budget Billing plan. For more information on this program, go to http://www.dom.com/dominion-virginia-power/customer-service/your-bill/budget-billing.jsp. Dominion will be expanding its Budget Bill program in coming months to include small commercial customers.

For information on Virginia customer rates, pricing and understanding the monthly bill, go to http://www.dom.com/dominion-virginia-power/customer-service/rates-and-tariffs/virginia-rates-and-prices.jsp

Dominion is one of the nation's largest producers and transporters of energy, with a portfolio of approximately 27,600 megawatts of generation, 11,000 miles of natural gas transmission, gathering and storage pipeline and 6,200 miles of electric transmission lines.  Dominion operates the nation's largest natural gas storage system with 947 billion cubic feet of storage capacity and serves retail energy customers in 15 states. For more information about Dominion, visit the company's website at www.dom.com

SOURCE Dominion Virginia Power