January 13, 2004

RICHMOND, Va. - Dominion President and Chief Operating Officer Thomas F. Farrell II Tuesday supported preserving the Virginia Electric Utility Restructuring Act and urged the General Assembly to extend the capped rate period for an additional three years, as outlined in a proposal by the governor and attorney general.

"Dominion believes the act is making substantial progress by producing major savings for Dominion Virginia Power customers," Farrell told the Virginia Commission on Electric Utility Restructuring. "We strongly oppose any and all proposals to suspend the act, re-impose the old cost-of-service framework, or push retail choice into the indefinite future. These proposals could potentially bring about many new rate cases—and rate increases—between now and the end of the decade for Virginia customers."

Farrell pointed to an updated economic study showing substantial customer savings of up to $1.1 billion as a direct result of the act's rate caps until 2007, and even more savings—as much as $700 million—under the proposed extension to 2010. Other proposals before the Commission are less consumer friendly.

"Such proposals, including several before you today, are simply anti-consumer legislation that will eliminate the significant benefits our customers have enjoyed under the act," said Farrell.

He also noted that more than 80,000 Dominion customers have volunteered for the latest retail access pilot program, which has been approved by the State Corporation Commission.

Farrell highlighted other strengths and benefits of the act:

• No base rate increase; residential customers paying 25 percent less than a decade ago;
• The careful transition period to competition;
• Default service, under State Corporation Commission supervision, to protect consumers from market disruptions once rate caps are removed;
• Improved company efficiencies because of the act's prohibition against passing higher costs on to customers through base rate increases; and
• Development of retail customer choice pilot programs that currently have more than 80,000 volunteers.

"We believe the act should be allowed to work. There's no need for suspension, rebundling, re-imposition of cost-of-service rate making or other drastic measures, which would have very damaging implications for our customers and company and for the Commonwealth as a whole," said Farrell.

"An extension of the capped rate period is a vastly preferable option. It protects our customers from price volatility and would allow three more years for retail markets to develop," Farrell continued.

Farrell also showcased the shifting of financial risk from customers to company shareholders under the act, requiring utilities to work harder and smarter to meet obligations because the act prohibits the company from seeking rate increases from customers. Dominion Virginia Power alone will have to cover more than $2 billion in additional costs and investments during the capped rate period. These costs include:

• More than $600 million for generation projects to keep up with Virginia's growth;
• More than $700 million for advanced environmental controls, including new emissions control equipment for our coal-fired power stations;
• Approximately $780 million for transmission and distribution projects, and for connecting new customers, especially in high growth urban and suburban areas; and
• Approximately $200 million for projects to ensure the continued safe and efficient operation of our nuclear units, which continue to supply much of Virginia's low-cost energy.

"We also cannot ask for higher base rates to pay for the massive restoration effort we launched in the wake of Hurricane Isabel," said Farrell. "We've estimated the after-tax cost of restoring power and rebuilding our system as at least $128 million. Without the tax adjustment, the cost is approaching $200 million. This is many times greater than our expenses for dealing with any other storm in our corporate history. But it will not lead to higher rates."

Dominion is one of the nation's largest producers of energy with an energy portfolio of more than 24,000 megawatts of generation. Dominion also serves 5.3 million 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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Editors Note: The full text of Mr. Farrell's remarks can be found on www.dom.com.