Dominion Rates Are on the Rise
Fuel costs are one thing, but the monopoly utility hasn’t justified higher profit margins.
Homeowners facing a 12.3 percent hike in their monthly electric bills won’t get much comfort out of knowing that the proposed rate increase is largely a technicality.
Most of the new charges requested by Dominion Virginia Power would cover fuel costs. Last summer’s extreme heat, followed by a frigid winter and the surge in energy costs, have combined to make a substantial boost in power bills inevitable.
The remaining fees would cover needed investments in a natural-gas-fired power plant near Front Royal and improvements to the utility’s transmission network. Dominion executives expect growth will generate nearly 200,000 new customer connections between now and 2015.
None of that is meant to suggest Dominion customers should take their attention off their electric bills. A far more important decision affecting their wallets will be made this fall in Richmond.
Two-thirds of each monthly bill, known as the base rate, covers Dominion’s operational costs.
Under an agreement with industrial customers last year, that rate cannot change until December 2013. But Dominion executives are asking judges with the State Corporation Commission to raise the ceiling on the utility’s earnings from 11.9 percent to 12.5 percent.
Dominion leaders insist they have not exceeded the current 11.9 percent maximum return on equity, which could trigger a future rate reduction. But their request raises questions about whether their profits are poised to surpass that cap.
If the SCC acquiesces, Dominion will have lessened the chances that the monopoly utility will be forced to lower rates in 2013 or thereafter.
Thomas Farrell, CEO of the utility’s parent company Dominion Resources, argued in a legal filing with the SCC against what he calls a “tyranny of the immediate.”
A modest reduction in electric rates in the short term, he contended, will harm customers over the long haul because the utility will find it more difficult to provide quality service and attract investors for its $14 billion in planned capital improvements over the next five years.
Dominion needs its earnings to be “relatively stable and not swing drastically with every shift in the economic winds,” he said.
But Farrell, whose total compensation package rose 44 percent in 2010 to $14.9 million, isn’t asking for stable earnings. He is seeking permission for Dominion to earn more.
How many of his customers are earning 11.9 percent on their retirement funds and complaining that it’s not enough? How many of them had a raise of any magnitude last year? How many small businesses – or big ones – are operating at an 11.9 percent profit margin?
Under a 2007 law heavily influenced by utility lawyers, the SCC cannot consider the multiplicity of extra charges added onto each monthly bill when making decisions about the base rate. But those extra charges are starting to pile up, and more are on the way as a new coal-fired plant begins operations next summer.
Dominion customers will pay higher electric bills regardless of the SCC’s final decision on the utility’s earnings.
But that’s not a good reason to grant Dominion yet another concession that could keep rates artificially high for years to come.
Recent Comments
