January 6, 2006

RICHMOND, Va. - The fuel rate freeze put in place two years ago by the Virginia General Assembly will save the typical Dominion residential customer about $260 during 2005 and 2006, a Dominion executive told the state Commission on Electric Utility Restructuring Friday.

“We believe the Commonwealth’s restructuring program has produced clear and substantial benefits for Virginia’s consumers,” said Mark McGettrick, president and chief executive officer of Dominion Generation, the unit that produces electricity for the company’s 2 million Virginia customers. “Through this act, our electric customers have been protected from the impact of higher fuel prices during the past two years.

“Furthermore, capped base rates have protected consumers from higher rates that could have been sought through the old system to pay for billions of dollars of new investments to improve reliable service, clean the air, and ensure the Commonwealth’s energy future,” McGettrick added.

In a presentation to the Commission, McGettrick highlighted savings resulting from the fuel rate freeze resulting from the legislative action. Senate Bill 651, passed by the General Assembly in 2004, froze Dominion’s fuel rate through mid-2007. He outlined a new company analysis of what the fuel rate likely would have been in the absence of the freeze.

• The typical Dominon Virginia Power residential customer that uses 1,000 kWh per month will save about $260 during the two-year period of 2005 and 2006. This is an average of about $10.80 per month.
• A small commercial business will save about $2,600 during the two-year period, with monthly savings averaging about $108.
• A small industrial customer will save about $100,000 during 2005 and 2006, with monthly savings averaging about $4,166 per month over the two years.
• A large industrial customer will save about $6.8 million for all of 2005 and 2006, or an average of about $283,000 per month. Fuel makes up a much larger portion of the bill for industrial customers than for smaller ones, such as homes and small businesses.

“The results of this analysis demonstrate that Senate Bill 651 has produced very significant savings for all groups of customers,” McGettrick told the Commission.

“The rate stability in Virginia stands in sharp contrast to the recent rate increases for many other utilities,” said McGettrick. “Those customers have not been shielded from the increase in commodity prices and the impact on rates has been huge, especially in areas that depend on natural gas-powered generation.”

The fuel factor will be reset in 18 months. At that point, the State Corporation Commission will reset the fuel rate based solely on anticipated fuel prices. The new rate will not allow Dominion to recover any fuel expenses it failed to collect from customers during the 2004-2007 period. Before passage of Senate Bill 651, the fuel rate was reset annually and allowed the company to pass through, on a dollar-for-dollar basis, its fuel expenses to customers.

The new fuel rate will be in effect until capped base rates expire on December 31, 2010. Base rates make up about 80 percent of a residential customer’s bill and cover all expenses except fuel.

The base rate cap has also provided significant savings for consumers across Virginia, including Dominion customers, McGettrick told the legislative commission.

He noted that, since the 1990s, Dominion has invested or committed more than $2 billion in projects that protect and improve air quality. The company in November 2005 committed an additional $500 million to meet new federal clean air standards. In recent years, Dominion also has made more than $1 billion in other investments to serve customers, including projects such as new generation, transmission and distribution facilities. Because of capped rates, the vast majority of these expenditures have been borne by the company, not customers, McGettrick said.

Both the capped base rates and the fuel rate freeze are part of Virginia’s effort to restructure its electric utility industry. The restructuring initiative has produced a long period of price stability for consumers across the Commonwealth. The passage in 1999 of the Virginia Electric Utility Restructuring Act capped – and effectively froze – incumbent utilities’ base rates through July 1, 2007. Two years ago, Senate Bill 651 extended capped base rates through 2010.

Dominion is one of the nation’s largest producers of energy, with an energy portfolio of about 28,100 megawatts of generation. Dominion also serves retail energy customers in nine states. For more information about Dominion, visit the company’s Web site at www.dom.com.

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