Dominion Resources, Inc.
) unit Dominion Virginia Power, a power distribution company in
Virginia filed with the State Corporation Commission of Virginia
("SCC") to reduce fuel charges, thereby lowering the monthly
electricity rate. Mild weather also propelled the company to
revise the rate. The customers who are consuming larger volume of
electricity would get greater reductions.
Currently, the average residential customers, consuming
electricity of 1,000 kilowatt-hours (kwh) per month, pay $112.05.
If the revised rates are approved by the commission, the
customers will have to pay $108.35 per month, down 3.4% from the
previous rate, effective Dec 1, 2013.
Dominion Virginia Power pays fuel charges for power generation at
the power stations. The fuel charges are passed on to the
customers. If the revised rates are approved, the consumers will
be paying lesser amount.
Due to the electricity rates revision, the residential bills will
remain below the state and national averages. If the reduced fuel
charge is approved by the commission, a residential customer's
bill, with monthly consumption of 1,000 kwh, will decease 16% and
22% than the U.S. and the East Coast average, respectively.
Dominion Virginia Power aims to provide uninterrupted utility
services to its customers at lesser prices than its peers.
According to the Energy Information Administration, the average
cost of electricity in the U.S. was $119.50 per month in Jun
2013. The new monthly rate of $108.35 will be approximately 9.3%
lower than the national average.
Dominion Resources has made considerable investments over the
last couple of years to upgrade existing infrastructure,
construct high-efficiency power plants, and acquire assets.
Recently, the company received approval to construct Brunswick
Power Station, and invested substantial amounts to acquire three
solar projects in Indiana and a biomass conversion project at
Altavista Power Station. We believe successful completion of
these projects along with addition of new assets through
acquisitions will enable Dominion Resources to provide
uninterrupted reliable utility to its customers at a lower price.
Moreover, a reduction in fuel charge will enable the company to
trim down operating expenses, which in turn will improve the
margins going forward.
Despite these positives, we remain concerned about stringent
regulations, and higher expenditure for construction of
generation and distribution assets, which may challenge Dominion
Resources' forthcoming performance.
Dominion Resources currently has a Zacks Rank #4 (Sell). However,
other stocks that are worth considering include
Brookfield Infrastructure Partners L.P.
Alliant Energy Corporation
), each carry a Zacks Rank #2 (Buy).
BROOKFIELD INFR (BIP): Free Stock Analysis
DOMINION RES VA (D): Free Stock Analysis
ALLIANT ENGY CP (LNT): Free Stock Analysis
PPL CORP (PPL): Free Stock Analysis Report
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