RICHMOND, Va. – Dominion Virginia Power on Monday filed a request with the State Corporation Commission to adjust its fuel rate on July 1 – the company’s first fuel rate adjustment in 3½ years. The increase is needed to cover the significantly higher costs of fuel used to generate electricity.

If approved by the SCC, the fuel rate adjustment would raise the average monthly bill for a typical residential customer using 1,000 kilowatt hours of electricity by $3.41, from $87.18 to $90.59, an increase of approximately 3.9 percent.

Dominion is prohibited from making a profit on fuel costs. Base rates, which cover the company’s other expenses as well as investment in facilities and profit, remain capped until 2009.

A state law enacted this year caps the 2007 increase in total rates at 4 percent for residential customers. Without the law, the increase would have been significantly higher. Increases for individual residential customers and other customer classes will depend on their current rates and usage. Remaining fuel expenses not recovered in this case will be deferred for recovery in later years, but without added interest.

Even after the proposed July 1 adjustment, Dominion Virginia Power’s residential rates would remain more than 15 percent below the national average for investor-owned utilities. The typical monthly bill is $107.40 for a residential customer using 1,000 kilowatt-hours, according to data from the Edison Electric Institute.

The fuel rate was last adjusted in January 2004 just prior to a sharp escalation in fuel prices. For example, the forward price of natural gas has increased by 90 percent, crude oil by 143 percent and coal by 25 percent since the last adjustment. Only the cost of nuclear fuel, which has risen 8 percent, has increased at a pace in line with general inflation.

The company estimates that it will have absorbed approximately $1.5 billion in increased fuel costs not covered by rates during the 3½ years since the last adjustment. Those increased costs cannot be recovered from customers and are not part of today’s request.

Until 2004, fuel adjustments were made annually in accordance with state law. That year the General Assembly froze Dominion Virginia Power’s fuel rates at January 2004 levels until July 1, 2007.

Fuel costs are passed on to customers without profit. The fuel rate is used to recover the cost of fuel used in electric generating stations and power purchased from other sources to meet customer demand.

The fuel adjustment request would allow Dominion Virginia Power to collect an additional $219 million to cover its fuel expenses for the year beginning July 1, 2007. Another $443 million in costs would be deferred until July 2008, subject to another 4 percent limit on the increase in total residential customers’ rates. In all, Dominion Virginia Power expects to spend nearly $1.9 billion on fuel for the 12 months beginning July 1.

The proposed fuel rate must be reviewed and approved by the SCC. Participants in the review process will include SCC staff, the Office of the Attorney General, industry experts and customers.

Fuel costs currently comprise about 22 percent of a 1,000 kilowatt-hour (kWh) residential customer’s bill.

Customers are reminded that they can reduce their electricity bills by taking measures to conserve energy. This includes setting thermostats at the highest comfortable temperature during the cooling season, closing blinds or drapes on the sunny side of the home or business during daylight hours, and switching to compact fluorescent light bulbs. Additional information about energy conservation and cost-saving measures can be found on the company’s Web site at http://www.dom.com/customer/electric_savings.jsp.

Dominion Virginia Power is a subsidiary of Dominion (NYSE: D), one of the nation's largest producers of energy, with a portfolio of more than 26,300 megawatts of generation.  Dominion serves retail energy customers in 11 states. For more information about Dominion, visit the company's Web site at http://www.dom.com.

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Note: Additional information is available on electricity reregulation in Virginia.