Regulation: A New Approach for Virginia

Blending tried and true methods with new approaches to promote a secure and reliable energy system, Virginia has adopted an electric industry regulatory structure designed to meet the Commonwealth's growing need for power in the 21st Century.

In April 2007, the General Assembly overwhelmingly approved and Gov. Tim Kaine signed bills setting up the new regulatory system. The legislation protects consumers by reaffirming the State Corporation Commission's authority to set electric rates. It also works to promote a sound energy future for Virginia by creating incentives for construction of needed new power stations — particularly those using environmentally friendly technology. And it contains strong incentives for utilities to operate more efficiently.

The General Assembly's action brought to an end Virginia's eight year experiment with deregulating its electric industry. Backers of deregulation expected the energy market to do a better job of holding down prices and promoting development of new generation sources than the old "cost of service" system of regulation.

But many states — including nearby Maryland and Delaware — saw rates skyrocket when the temporary price controls that were features of their deregulation plans expired. And deregulation failed to provide investors with the financial certainty they needed to invest billions of dollars in new power stations.

So the General Assembly — with Governor Kaine's concurrence — acted to avoid the problems that plagued other states. Here are some of the major points.

• Under the plan, not one cent can be added to customer rate without the SCC's approval. With a few modifications, the Commission will have the powers it historically exercised before Virginia's deregulation process began. The SCC will have sweeping authority to set rates and review the books, records and costs of utilities — on a frequent and predictable schedule.
  
  
• The plan helps ensure a reliable energy future for Virginia by providing incentives for construction of new power stations. The Commonwealth's utilities will have the opportunity for higher authorized rates of return for major generation projects, especially those using nuclear, clean coal and renewable energy technology.

This will help attract the billions of dollars in capital needed for these projects from highly competitive financial markets.

• The plan recognizes that Virginia must meet its growing energy needs in an environmentally responsible way. It sets up a program to expand dramatically the use of renewable resources to meet the Commonwealth's demand for electricity. It creates an ambitious goal to reduce electricity consumption by retail customers in 2022 by10 percent of the amount consumed in 2006.
  
  And it gives all retail customers, statewide, the right to buy "green" power from their incumbent utilities - or, from competitive suppliers, if their own utility fails to make such an offer.
  
  
• The new plan also promotes greater operating efficiency by Virginia utilities by allowing the companies to keep some of the earnings produced by superior operations - and authorizing the SCC to reward or penalize utilities, based on their performance.

By blending the best of the old and the new, Virginia's "hybrid" regulatory plan works to ensure that the Commonwealth has the affordable, reliable power it needs to maintain its vigorous economic growth in the future.

Global Fuel Prices Climb

Rising worldwide fuel prices have become a significant issue for Dominion. While we can control our own costs, we can't change the cost of fuel worldwide.

As we build new generating facilities, our use of natural gas, coal and uranium increases. And, Virginia is second behind California in the amount of energy we currently buy from other generators to meet customer demand.

As a result, Dominion will ask the Virginia State Corporation Commission for permission to recover the increased fuel costs through a fuel adjustment to its Virginia electricity rates.

Learn more about the fuel rate adjustment that will affect Virginia customers beginning July 1, 2008.