Attorney general urges Va. Power electric-rate cut or refund

Peter Bacque

Nov. 5, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- Virginia's attorney general is urging the State Corporation Commission to either cut Dominion (NYSE:D) Virginia Power's electric rates this year or have the company give customers a refund for over-earning last year.

Experts for Attorney General Bill Mims' office told the SCC that Dominion Virginia Power's rates should be reduced by $238 million or customers should receive a refund of $153 million.

Dominion Virginia Power has asked the commission for a $250 million rate increase, the first in base rates in 17 years.

The difference between the attorney general's suggested reduction and the company's proposed increase is $488 million.

As the state's largest electric company with 2.3 million customers, Dominion Virginia Power's rates and services are regulated by the SCC. The rate case is the first conducted under new state law governing electric utilities.

Neither Dominion Virginia Power nor the attorney general's office would say yesterday what the impact on a typical residential customer's bill might be if the attorney general's recommendations were adopted completely.

Dominion Virginia Power and the attorney general's office declined to comment, saying the case is still in litigation.

A hearing is slated for Jan. 20.

Most -- $439 million -- of the $488 million difference between the two proposals stems from four issues in the rate case, with the remaining $49 million from a number of smaller matters.

The big issues:

--The return on equity. The attorney general's office said it was making no recommendation on how much return on equity Dominion Virginia Power should get.

However, the attorney general's experts used a rate of return of 11.12 percent instead of the 14.0 percent Dominion Virginia Power had proposed.

The difference between the two rates of return is worth $198 million for Dominion Virginia Power customers. As a regulated utility, the company is allowed to recover its costs and earn a reasonable rate of return for stockholders.

--The company's annual costs. The attorney general's office says that utility's annual costs in 2008 were actually $104 million lower than the company's calculation.

--Replacing meters. Dominion Virginia Power wants to replace 2.6 million meters with more expensive "smart meters."

But the attorney general's office contended the $600-million plan was premature and recommended the company be required to evaluate the deployment's benefits. That would save customers $61.4 million, the attorney general's office said.

--Employee compensation. About $75.8 million could be avoided by changes to Dominion Virginia Power's compensation plans.

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Contact Peter Bacque at (804) 649-6813 or pbacque@timesdispatch.com.

Newstex ID: KRTB-0177-39451350