October 9, 2003

RICHMOND, Va. - Dominion Virginia Power on Thursday reached a tentative settlement of its 2003 fuel rate case with the Virginia Attorney General's Office of Consumer Counsel, the State Corporation Commission staff and others that would minimize the impact on typical residential bills to a 3.4 percent increase.

If approved by the SCC judges, the bill of a typical residential customer using 1,000 kilowatt-hours of electricity would increase from $82.51 to $85.29, effective Jan. 1. The original request filed July 1 would have raised bills by about 8.7 percent, to $89.69.

The fuel rate increase request—the company's first in three years—is because of higher fuel costs and higher electricity use during extreme winter weather conditions in 2002-2003. If accepted, the residential rate would be less than 1 percent higher than it was 10 years ago when it was $84.77. In contrast, the Consumer Price Index rose by more than 26 percent from January 1994 through August 2003.

"This settlement is a major benefit to our customers," said Thomas F. Farrell II, president and chief executive officer of Dominion Energy, which operates the company's power stations. "This settlement allows the company to recoup costs associated with skyrocketing fuel prices, while minimizing the impact on consumers."

In its original request, the company offered a two-year recovery period to lessen the impact of the proposed increase. The recovery period in the tentative settlement is 3 ½-years, ending July 1, 2007, which is when the transition period for electric utility restructuring ends in Virginia.

The total amount of the proposed increase is $386 million—about $56 million less than the original $441.7 million request. The reductions include a $46 million decrease in projected fuel costs and a $10 million net decrease in the balance of deferred fuel costs from the July filing. About $171.1 million of the $386 million would be recovered in 2004, $85 million in 2005, $87 million in 2006 and $43 million for the first six months in 2007. Dominion still expects to seek annual adjustments—up or down—to its fuel rates until July 1, 2007.

The bills of Dominion's Virginia electric customers are composed of two rates, one for base charges, and the other for fuel. The base rate—which is about 74 percent of the typical residential bill—remains capped until July 1, 2007, by the Virginia Electric Utility Restructuring Act. The fuel rate is a regulated dollar-for-dollar pass-through that pays for the fuel used to produce electricity. Dominion is not permitted to make a profit on fuel expenses.

Joining the company, the Attorney General's office and the SCC staff in the tentative settlement were the Virginia Committee for Fair Utility Rates, which represents the company's largest industrial customers, Chapparal Inc., and Food Lion, LLC.

Dominion is one of the nation's largest producers of energy, with a diversified and integrated energy portfolio that includes 24,000 megawatts of generation and 6.3 trillion cubic feet equivalent of proved natural gas reserves. Dominion also serves 5 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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