Faced with higher costs for fuel and imported power driven largely by rising commodity prices and January’s cold snap, Dominion Energy says it might need to increase the average residential customer bill by about $22 per month for a year starting this summer.
Dominion has proposed an alternative under which that bill would instead go up about $8 per month for a year, plus another $1.80 per month for 10 years. Virginia’s largest electric utility says that would reduce the short-term impact on customers.
Dominion described the two scenarios in its application to the Virginia State Corporation Commission for approval to adjust its fuel factor, which is what it pays for natural gas, coal and other fuel for its power plants, plus electricity that it buys on a multistate wholesale market. Dominion passes this cost directly to customers without profit, and the SCC decides the parameters for how Dominion can do so.
Dominion attributes a large part of its higher fuel costs to this past January, when Arctic air swept through Virginia, plunging temperatures below freezing for days and coating much of the commonwealth with a hard shell of snow, sleet and ice.
As the atypically long stretch of deep cold wore on, Dominion had to buy more fuel and more wholesale power to supply to customers keeping their homes and businesses warm. At the same time, that higher demand increased the price for natural gas and purchased power.
“In other words, the Company must reliably serve a higher than expected load at a time when the costs to serve that load are the highest,” Scott Gaskill, vice president of regulatory affairs for Dominion, said in written testimony submitted to the SCC.
[Disclosure: Dominion is one of our donors, but donors have no say in news decisions; see our policy.]
Dominion generates much of its own electricity but buys additional power during high-demand times such as January’s deep freeze. Dominion spokesperson Aaron Ruby said that the cost of purchased power increased nearly 30% year over year.
“Over the long term, the solution is generating more of our own power in Virginia and reducing our reliance on purchased power. That will make Virginia more energy independent and deliver savings for our customers,” Ruby said.
On Thursday, Dominion announced that it hopes to build a 3-gigawatt natural gas power plant in Cumberland County, which, if approved, would come online in 2033 or 2034. State regulators recently approved new solar and battery storage projects for the utility, and its 2.6-gigawatt offshore wind project began producing electricity in March.
Richmond-based Dominion Energy has more than 3.6 million customers in Virginia, North Carolina and South Carolina. Of those, more than 2.5 million are in Virginia, including in Central and Southside Virginia and the Alleghany Highlands.
Rising fuel costs by the numbers
Dominion projects that it will need $2.691 billion to pay for new fuel and purchased power for the period of July 1, 2026, through June 30, 2027.
It also projects that as of June 30, 2026, it will have built up a balance of $1.078 billion for prior fuel costs. That balance built up because previously purchased fuel and power cost more than the utility was authorized to recover.
More than half of that figure — about $567 million — was incurred this past January.
Under the first scenario that Dominion has put in front of the SCC, Dominion customers would pay the new and old fuel costs combined, all in the one-year period of July 1, 2026, to June 30, 2027. That would raise the average residential customer’s bill by $21.79 per month for that year.
Under the second scenario, which Dominion favors, the average residential bill would go up $7.97 a month starting July 1 to pay for both the new fuel costs and a small part of the old fuel costs — about $66 million. The rest of the more than $1 billion in old fuel costs would be financed, for which the average residential customer would separately pay an estimated $1.80 per month for 10 years starting in early 2027.
Dominion defines an average residential customer as one who uses 1,000 kilowatt-hours of electricity each month. That customer’s monthly bill stands at about $170 today after the first of two parts of a rate increase took effect Jan. 1.
New law scrutinizes ‘pass-through’ nature of fuel costs
Dominion’s fuel factor is what’s called a “pass-through” cost because it passes through the utility to customers without markup. Appalachian Power’s fuel factor is handled the same way.
Legislation that passed this year’s General Assembly — SB 505, from Sen. Creigh Deeds, D-Charlottesville, and HB 1256, from Del. Irene Shin, D-Fairfax County — directs the SCC to examine whether Dominion and Appalachian are sufficiently managing their fuel expenses.
Shin said during a Feb. 10 House subcommittee meeting that the pass-through nature of the fuel factor means that “customers bear 100% of the risk when fuel prices spike but utilities have little financial incentive to minimize those costs.”
“A model that guarantees cost recovery after the dollars have already been spent offers very little incentive to control future spending,” Shin said.
Part of Dominion’s plan awaits a decision from the governor
The financing process to spread the old fuel costs over years is called securitization. Another example of securitization has come from Appalachian Power, which is working to securitize costs associated with two coal power plants in West Virginia, plus recent storm damage.
Dominion securitizing its old fuel costs requires the passage of SB 253, from Sen. Louise Lucas, D-Portsmouth, and its companion, HB 1393, from Del. Destiny LeVere Bolling, D-Henrico County. The bills deal with multiple energy-related issues, including extending a Dominion program to bury certain power lines and expanding access to energy-efficiency and weatherization programs.
Those bills were the focus of multiple amendments that were variously approved or rejected, including one amendment that the General Assembly accepted that removed a directive for the SCC to consider whether certain costs should be shifted to data centers. The bills cleared the General Assembly and await action from Democratic Gov. Abigail Spanberger, with a deadline of the end of the day May 23.
Should Spanberger decide to veto the bills, the securitization option would be off the table. Should she sign the bills — or do nothing, which would also have the effect of putting them into law — Dominion said it anticipates filing its plan for securitization around June 1, putting customer charges for the old fuel costs on hold temporarily while the SCC reviews the application.
The SCC would then rule on whether securitization is an appropriate option. If it decides it is, the commission would also decide details such as whether Dominion’s proposed 10-year financing period is appropriate.
Dominion has securitized fuel costs before. In November 2023, the SCC approved the securitization of $1.3 billion of unrecovered fuel costs over seven and a half years.
