A Southwest Virginia utility is seeking another rate hike

Old Dominion Power, the state’s smallest investor-owned electric utility serving about 28,000 customers in Virginia’s southwestern tip, is again asking state regulators for a major rate increase, saying its current rates “do not permit it an opportunity to earn a fair rate of return.” 

The utility, a subsidiary of Kentucky Utilities, is asking to increase its revenues by just over $12 million by increasing both the basic service charge all customers pay and the energy charge linked to the amount of electricity they consume. 

If approved, the utility said the average residential customer would see their monthly bill rise by between $24 and $28. 

The increase would follow another significant rate bump approved by the State Corporation Commission in April 2020. That hike, which increased Old Dominion Power’s revenues by $9 million, was expected to increase the average residential customer’s monthly bill by about $21. A hearing examiner, whose findings were accepted by the commission, determined that the outcome was “fair, reasonable and in the public interest.”   

“We understand any sort of adjustment in customers’ bills is tough,” Kentucky Utilities spokesperson Daniel Lowry told the Mercury. “It’s hard, but in order for ODP to continue to provide the service that our customers rely upon, we’re at a point now where we had to ask the Virginia State Corporation Commission to review our rates due to the increasing costs that we have to serve our customers.”

Old Dominion Power is regulated under a traditional cost-of-service model, which requires the State Corporation Commission to set “just and reasonable” rates that allow the utility to recoup its costs and earn a fair rate of return for investors. 

A far more complex system of regulation created by the General Assembly in 2007 governs the rates of the state’s two other major investor-owned electric utilities, Dominion Energy and Appalachian Power. 

In an application filed with the SCC this September, Old Dominion Power said its current rates don’t allow shareholder returns to fall within the 9 to 10 percent range regulators have said is reasonable. The utility is also asking the commission to increase its allowed return on equity to 10.4 percent. 

Lowry said the requested rate hike is the result of significant investments the company has made or is planning to make through November 2022. In its application, Old Dominion Power puts those investments at $1.18 billion of capital spending, with $427 million in generation and $314 million in transmission investments. 

Local and state officials in Old Dominion Power’s territory, which covers Dickenson, Lee, Russell, Scott and Wise counties in Virginia’s coalfield region, have expressed unhappiness in the past few years over rising electricity rates. 

In March 2020, four Republican lawmakers representing the region asked the SCC to “seriously consider the adverse effects that this proposed increase will have on families, businesses, and public/private institutions.” A resolution from the town of Big Stone Gap asked the SCC to deny or reduce the rate increase “to the lowest amount reasonable under applicable law” and requested that it “study whether the sale of Old Dominion Power’s electricity infrastructure assets in the Commonwealth of Virginia to a Virginia-based utility would be in the best interest of current Old Dominion Power customers.”

According to data from the State Corporation Commission, since July 2007, the average residential monthly bill for an Old Dominion Power customer has risen by 82 percent, from $67.57 to $123.25 in July 2021. 

Wise County’s Board of Supervisors, which in 2019 issued a resolution opposing the last rate increase, is scheduled to consider a resolution opposing the current request at its October meeting. 

Lowry said that for “customers that do have a hard time with their bills, we encourage them to utilize flexible payment options and get connected to other agencies that can provide some support.” 

“Financial assistance may be available to help folks catch up if they’re behind,” he said. 

The SCC has scheduled hearings in the case for March 2022. 

“We realize that the current COVID-19 public health issues have caused devastating economic effects that impact utility customers,” the commission wrote in a Sept. 23 filing. “We have responded to this economic emergency by, among other actions, directing Virginia utilities to offer extended payment plans, without late fees for those who are current on such plans, to protect customers from service disconnection. We are sensitive to the effects of rate increases, especially in times such as these.”