Dominion Resources Inc
) unit Dominion Virginia Power (Virginia Power) has decided to
freeze its electricity base rate for at least the next two years.
This move speaks highly of operational efficiency and cost
management skills of Virginia Power. Keeping the base rate
unaltered will definitely come as a relief for its electric
customers in Va.
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However, Virginia Power had ample reason to file for a rate hike
as it incurred expenses of $450 million in the last two years due
to natural calamities and other factors. The base rate comprising
60% of the residential bill can be adjusted every two years.
Virginia Power has not revised the base rate since 1992, which
consists of non-fuel operational costs, salaries and other
expenses. Its decision to shut down six coal-fired generation
units for environmental reasons also affected earnings.
In spite of the increasing expenses over the past two decades,
the efficient and effective use of its resources made it possible
for the company to keep its base rate stable. Over the next three
years Virginia Power will invest $8 billion in infrastructure
improvements, service reliability, and the generation of more
power to meet increasing customer demand.
However, the company will continue to file for the increase in
non-base rates which have increased significantly over the last
two decades. Since the base rate does not change, the electric
bill of Va. Dominion consumers continues to be lower than the
national and regional averages. This will surely help the company
to add more customers to its existing base.
Dominion presently has a Zacks Rank #3 (Hold).Other utilities
Otter Tail Corporation
Brookfield Infrastructure Partners L.P.
) are better placed with a Zacks Rank #1 (Strong Buy).
Richmond, Va. based Dominion Resources Inc. was founded in 1909.
The company together with its subsidiaries engages in producing
and transporting energy in the U.S. With approximately 15,500
employees, the company's market capitalization is $33.53 billion.