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Virginia Power Proposes Freeze

Fortnightly Magazine - May 15 1997

Virginia Power Co. has asked the Virginia Corporation Commission to freeze its base electric rates through 2002, which would set the average residential electric bill in 2002 at virtually the same as it was in 1992.

The base rate freeze is part of an alternative regulation plan submitted to the commission on March 24, which is designed to ensure stability for electric customers and shareholders during the move toward more competitive markets. Legislation adopted in 1996 by the Virginia General Assembly allows the commission to approve alternative regulation plans for utilities if such proposals will further the public interest. Virginia Power calculates that when adjusted for inflation, the average residential bill in 2002 will have decreased by 20 percent or more when compared to the 1992 bill.

The alternative regulation proposal would adopt a two-phase approach to electric competition. In the first, five-year phase, base rates would be frozen and some company earnings would be used to offset potentially high costs associated with the transition to competition. VP anticipates that profits between 11.5 percent and 13 percent return on equity would defray transition costs. Any profits over 13 percent would be split between customers and shareholders.

The second phase would begin when competition arrives. VP would apply a transition-cost charge to customers who want to leave the system. VP also would impose a transition charge of $0.01 or less per kilowatt-hour to recover the cost of power purchases from nonutility generators and cost of nuclear plant decommissioning from all users of its transmission system rather than just those buying power from the utility. A residential customer using 1,000 kWh per month, would see a bill increase of $10 per billing cycle over seven years. (em LB


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