The Virginian-Pilot
© December 17, 2009
Electricity customers paid Dominion Virginia Power $523.7 million more than they should have last year, state auditors have concluded.
The auditors on the State Corporation Commission's staff recommended a cut in the company's base rates, reducing its annual revenues by $365.3 million.
The auditors did not calculate how much that would reduce the average residential customer's bill.
The staff recommendation comes about a month after Dominion acknowledged in an agreement with the Virginia Attorney General's Office that the company had earned $397 million more than necessary in 2008. They presented a plan that would give residential customers an average of nearly $100 in refunds and bill reductions.
The State Corporation Commission began looking at Dominion's rates after the company filed in March for the first increase in its base rates since 1992. Base rates cover a utility's costs to operate its plants and distribute electricity, plus a return on its investment.
The commission staff found that Dominion had earned much more than it needed in order to make a reasonable profit in 2008. They determined that the company's return on average equity, a measure of profitability, was 19.12 percent last year. Dominion should be earning a 10.2 percent return, according to their calculations.
Under state law passed in 2007, if Dominion is found to have made too much money, the commission has two options. It can require Dominion to refund customers a portion of the overpayment or reduce its base rates going forward, until its next rate review.
A refund would allow customers to recoup less than 60 percent of Dominion's excess earnings. A rate reduction cuts customers' bills but allows Dominion to keep the extra money it has collected in the past.
http://hamptonroads.com/2009/12/audit-dominion-power-overcharged-customers-524m
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