Dominion customers could see their monthly bill increase by 12-20% due to rising fuel costs related to the COVID-19 pandemic, inflation and the ongoing war in Ukraine, filings show. Thursday by the company to the State Corporation Commission.
The electric utility, Virginia’s largest, is asking state regulators to approve an increase in its fuel factor, the rate levied on customers to cover the costs of purchasing fuel for power plants.
Depending on whether CSC chooses to spread costs over one, two, or three years — all options Dominion outlined in its application, noting a preference for reimbursement over three years — fuel hikes could increase the customer’s average monthly bill. $24.12 residential. , $17.23 or $14.93, respectively.
“We know this is a tough question,” Dominion spokesman Craig Carper said. “Our focus has been how do we get that number as low as possible?”
Dominion, which serves about five million Virginia residents, said it was aiming to reduce the impact of costs by not only spreading the increase over three years, but by reducing to two separate passengers, an additional charge that s add to customer bills.
First, the utility is asking CSC to approve a decrease in a transportation rider that the company says would lower the monthly bill of the average residential customer by $3.69, defined as a household that uses 1 000 kilowatt hours per month. Scott Gaskill, Dominion’s general manager of regulatory affairs, said in an email that the reduction was due to PJM-related transmission costs being lower than expected in 2021.
Second, Dominion is asking regulators to suspend a fee for its participation in a regional carbon market and folding the remaining costs into the base rate, reducing the monthly residential bill by an additional $2.39.
If the endorsement changes are combined with the proposal to spread high fuel costs over three years, the company estimates that the typical residential customer’s monthly bill would increase by about $9.
“The Company believes that its voluntary fuel factor mitigation proposals recognize customer interests in avoiding abrupt rate increases … and are consistent with the public interest,” Dominion wrote in its application to the SCC. “While either mitigation proposal is preferable to the full recovery rate, the three-year mitigation offers the smallest fuel rate increase in the short term, promotes rate stability over the next few years and offers commission flexibility next year if circumstances surrounding commodity markets have improved.”
But Will Cleveland, an attorney with the Southern Environmental Law Center, said Cavalier’s two petitions were “irrelevant” to the SCC’s decision in the fuel factor case.
“This case association is very unusual,” he said. “The law generally prohibits the commission from considering what happens in one case in deciding another.”
What is not unusual is the dilemma in which Dominion finds itself: as the New York Times reports, electricity bills are rising across the country, largely due to soaring natural gas prices caused by the war in Ukraine and supply chain issues. Coal prices have also increased.
Fuel cost recovery
Under Virginia law, Dominion is allowed to recover its fuel costs from customers, but makes no profit on them.
SCC is responsible for reviewing and updating these costs annually. A 2009 law requires the commission to review fuel costs every six months if a fuel rate increase causes the overall rate for residential customers to increase by more than 20%, but SCC spokesman Andy Farmer , said that this situation had not occurred since the law came into force.
Although less publicized than reviews of the company’s base rates — the costs customers pay for most generation, distribution, and transmission services provided by the utility — annual fuel cases typically have impacts noticeable on customer invoices.
The 2021 fuel factor case, for example, increased the residential customer’s average monthly bill by $3.43, while in 2020 residential customers saw an average decrease of $6.23 due to fuel costs. fuel.
“It’s a sizable sum that we basically take for granted,” said Walton Shepherd, Virginia policy director for the Natural Resources Defense Council’s climate and clean energy program.
The brief filed by Dominion on Thursday is unusual in the size of the proposed increases. The company is looking to cover both a $1 billion gap between forecast and actual fuel costs for the current year and nearly $2.3 billion in projected costs for the year between July 2022 and June. 2023.
Dominion attributes the jumps largely to increases in commodity fuel prices.
“Commodity markets have experienced unprecedented uncertainty over the past two years, and we continue to see the impacts today,” Dominion Manager of Gas Supply Dale Hinson wrote in his testimony to CSC.
“Prices for coal, natural gas and purchased power have increased since last year’s fuel demand,” wrote Katherine Farmer, an energy market consultant for Dominion, in her testimony to the SCC. . In particular, she noted that because 40% of Dominion’s production over the past 12 months was from natural gas, higher natural gas prices were a “main driver” of the $1 billion gap. between the utility’s forecast and actual fuel costs for the current year. .
Long-term plans focus on renewable energy
Shepherd and Cleveland said rapidly rising fuel prices are further evidence of the need to transition the electricity sector from fossil fuels to renewables.
“If natural gas prices continue to be this volatile in the future, Dominion customers are in for a hell of a ride,” Cleveland said. “And unfortunately, the law places all of this risk of fuel price volatility on the captive taxpayer.”
Dominion has aggressively pivoted to renewables in recent years, setting a goal of net zero emissions by 2050, canceling the Atlantic Coast Pipeline and marketing its efforts to investors as the “biggest decarbonization opportunity.” regulated” in the country.
In a letter to CSC attached to the utility’s fuel factor application, Dominion Energy Virginia President Edward Baine also highlighted renewables as one of the company’s long-term solutions to fuel volatility. fuel costs.
“The company is taking significant steps to reduce customers’ exposure to future fuel cost fluctuations,” he wrote. “The continued diversification of its power generation fleet – in particular, the addition of offshore solar and wind resources, including the Coastal Virginia Offshore Wind project which has no associated fuel costs – will mitigate the risk of market disruptions. raw material prices.
Shepherd, however, said the company’s decision to embark on major construction of natural gas plants over the past 15 years has left it vulnerable to turbulence in global fuel markets.
Since 2009, Dominion has added nearly five gigawatts of natural gas to its generating fleet. Some of them, like the Greensville Generating Station which started operating in 2018, are among the largest utility power plants today.
“Double the size of large natural gas plants for nearly a decade was just a very heavy-handed approach to planning that really comes down to biting everyone,” Shepherd said. “Gas is a global commodity, so you’re just asking that it be exposed at some point in a power plant’s life cycle as it is.”
All of these factories have been approved by state regulators.