Virginia power rates may increase

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RICHMOND (AP) -- Dominion Virginia Power, the state's largest electric utility, may raise its residential rates by as much as 10 percent next summer so it can pass on higher energy costs to consumers.

The utility, owned by Richmond company Dominion Resources Inc., has operated under state restrictions that capped rates until 2010, though they allowed a one-time increase in 2007 to recover fuel costs.

But Dominion and state officials fear that a significant bump would prove extremely unpopular, as it has been in neighboring Maryland other states that have deregulated the industry. So earlier this year, Gov. Timothy M. Kaine amended an energy bill so Dominion's increases could annually change its fuel rate -- an increase or decrease, depending on energy costs -- from 2007 through the end of 2010.

The energy measure also allows state regulators to decide whether up to 40 percent of Dominion's increase for 2007 should be pushed back to later years.

Tom Farrell, Dominion Resources' chief executive officer, discussed the estimated rate increase during a question-and-answer session after a presentation last week to Wall Street analysts in New York. An analyst had asked him to estimate the impact of any rate increases in Virginia.

With the boost, the average residential bill of about $91 during the summer would rise by $9.

Mr. Farrell did not discuss electricity rates for businesses during the presentation.

As fuel prices have soared, Virginia Power has lost money in the state on unrecovered fuel costs. Dominion said it expects to lose $291 million this year and $224 million in 2007 on fuel costs, which represent about a quarter of the cost of an electric bill.

Most of the bill reflects the cost of delivering electricity to a home -- and those costs have been capped for Dominion and other large players since deregulation began in Virginia in 1999.

The state placed restrictions on Dominion's fuel prices as part of a 2004 amendment to sustain Virginia's experiment with electricity competition, which has yet to emerge.

Attempts by other states in the mid-Atlantic region to deregulate the electric industry have led to mixed outcomes. In Maryland, where rate caps expired this year, Baltimore Gas and Electric Co.'s plan to raise rates by more than 70 percent stirred up political turmoil, and Monday Republican Gov. Robert L. Ehrlich Jr. called for a special session to deal with prices scheduled to rise July 1.

But Delegate Clarke N. Hogan, Halifax Republican, said Virginians shouldn't be complacent. "It's to be expected and a harbinger of what's to come," he said of Maryland's rates.

Already, utilities are looking to push up rates in Virginia. On Virginia's Eastern Shore, Delmarva Power is asking regulators for an increase of about 42 percent. Appalachian Power Co., serving 500,000 residential and business customers in southwest Virginia, has requested a base rate increase of 25 percent for all customer groups.