Dominion seeks to recover roughly $300M in polar vortex fuel costs from customers

Rod Kuckro, E&E reporter

The extreme cold during this past winter’s polar vortex and subsequent weeks forced Dominion Virginia Power to spend hundreds of millions of dollars to cover the high cost of natural gas used to produce electricity as well as extra power bought in the PJM Interconnection’s wholesale market.

Now, the Richmond, Va.-based utility is asking the State Corporation Commission for permission to pass through those costs to consumers over two years, starting July 1.

“This winter we saw days and weeks so cold — driven by the ‘polar vortex’ phenomenon — that the price of natural gas and purchased power soared,” Dominion Virginia Power President Robert Blue said Friday.

“While gas was available, there were pipeline constraints at certain points on the coldest days. Had it not been for our diverse sources of generation, including nuclear and coal, electricity shortages might have occurred and this proposed fuel increase be even higher,” he said.

The requested 4.1 percent hike in residential customer rates would raise a typical 1,000-kilowatt-hour bill from $107.99 to $112.45 per month. Dominion said that commercial and industrial customers “should expect to see a proportionately higher impact because fuel makes up a larger component of their bills than it does for residential customers.”

David Botkins, a spokesman for Dominion, said fuel costs are about 27 percent of residential bills, while businesses can pay 35-50 percent of their bill for fuel.

Dominion proposes to collect an additional $133.7 million in fuel costs beginning July 1, 2015, a move it describes as mitigating the impact on consumers who “have already experienced very high energy bills due to the extreme weather this year.”

Under Virginia law, Dominion makes no profit on its fuel charge, which is passed through dollar for dollar to cover the utility’s actual costs for fuels such as coal, uranium, natural gas and oil, as well as purchased power.

The cost of wholesale purchased power soared during several days in January, exceeding the $1,000-per-megawatt-hour price cap. If Dominion had to buy during those relatively brief periods to meet customer electricity demand, it would have paid prices much higher than usual. Last week for example, the wholesale price in the PJM region was roughly $50 per MWh.

Dominion did not provide details as to how much it spent for natural gas during the cold weather in the first quarter or wholesale electricity purchases.

Dominion Virginia Power also wants the commission to approve an increase in its so-called transmission rider that it uses to maintain and improve its network and ensure reliability. The increase would amount to $1.91, or 1.7 percent, for a typical residential customer. It would take effect Sept. 1.

Fifty-eight percent of a residential bill is made up of base rates, which cover Dominion’s operating expenses such as storm recovery, system maintenance, general business and personnel costs. Expenses for specific infrastructure projects, such as new generation, transmission lines and substations, are covered by riders that make up about 15 percent of the bill.

Friday’s fuel rate increase request was not mentioned two days earlier during Wednesday’s presentation to Wall Street analysts on the company’s first-quarter earnings. Record peak demand for electricity in January helped drive earnings per share higher by 5 cents, President and Chief Executive Officer Thomas Farrell said.

The only indication in the earnings report of the added expense for fuel and power was in the cash flow statement that listed a $304 million charge for “deferred fuel and purchased gas costs.”

Regulators have to approve Dominion’s proposed increase in its fuel charge. That was not the case with a proposed one-time charge on residential customers sought by FirstEnergy Corp. in six states.

FirstEnergy’s retail unit withdrew its $5-to-$15 surcharge after an outcry by regulators and consumers (EnergyWire, April 30).

The Ohio Public Utilities Commission has launched a probe into the surcharge “to determine whether it is unfair, misleading, deceptive or unconscionable” to impose such fees.