RICHMOND — The State Corporation Commission (SCC) has ordered Dominion Virginia Power to refund $78.3 million to its customers based on overearnings during the years 2009 and 2010. The action came following a “first-of-its-kind” biennial review of the rates of the state’s largest electric utility, as required by Virginia law.

The refund will come in the form of a rate credit and will apply to those customers receiving service in 2009 and 2010. For a typical residential customer using an average of 1,000 kilowatt-hours of electricity per month, the refund will be an average monthly credit of approximately $2.85. Credits will appear on bills during a six-month period beginning no later than the February 2012 billing cycle.

Dominion Virginia Power’s base rates will remain unchanged at least through December 1, 2013, according to the terms of a settlement agreement among the company and all participants in a 2009 rate case which froze the company’s base rates for four years. That settlement agreement did allow for certain appropriate accounting adjustments to Dominion Virginia Power’s earnings during the rate freeze period.

Under applicable Virginia law, if Dominion Virginia Power’s earnings exceeded a certain earnings limit, a refund is due to customers. The SCC ruled on several accounting adjustments proposed by the company, SCC staff, and other case participants resulting in the refund total ordered by the Commission.

Examples of the numerous earnings adjustments decided by the SCC in its order include:

• Amortizing over 21 months the cost of severance payments made to Dominion Virginia Power employees who were part of its workforce reduction program in 2010. This treatment matched the severance costs with the resulting savings. The company had proposed taking the total charge as an offset to earnings in the year incurred. This particular adjustment reduced the annual revenue requirement by $103 million and increased the refund amount.
• Allowing the company to include in rate base its deferred fuel balances that were held by a separate corporate affiliate. This particular adjustment increased the annual revenue requirement by $47.5 million and decreased the refund amount.

In setting the company’s authorized return on equity for base rates for the next review period of 2011 and 2012, the Commission determined that 10.9 percent is “fair and reasonable … within the meaning of the statute.” The 10.9 percent includes a half-percent (50 basis points) incentive that Virginia law awards to the company for meeting certain renewable energy targets. The company was seeking a combined rate of return on equity of 12.5 percent.

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Case Number PUE-2011-00027
View Final Order