Dominion Files Proposed Electric-rate Settlement With Regulators; Backs FY09, FY10 Operating Earnings View - Update

(RTTNews) - Natural gas and electricity provider Dominion Resources Inc. (D | Quote | Chart | News | PowerRating) said Thursday that it has filed a proposed electric-rate case settlement with the Virginia State Corporation Commission that will return about $400 million to customers and reduce monthly electric bills. The company said that the proposed settlement agreement, if approved by regulators, would have a negative impact on its fourth quarter and full-year 2009 reported earnings, although it isn't expected to hurt operating earnings. The company affirmed its operating earnings outlook for fiscal years 2009 and 2010.

Under the terms of the agreement, Dominion will return $268 million of its fiscal year 2008 earnings to customers through the end of 2010, and will also credit $129 million of prior-period Financial Transmission Rights, or FTRs, and fuel expenses to customers. In addition, the company's authorized return on equity applicable to its base rates would be set at 11.9%, with an earnings collar and sharing mechanism established by Virginia law.

The Richmond, Virginia-based company, which is the parent of utility Dominion Virginia Power, noted that the agreement would resolve the pending proceeding to set base rates for Virginia jurisdictional customers of Dominion Virginia Power, as well as the Virginia fuel case proceeding.

The agreement would also resolve the authorized return on equity for the rate adjustment clauses for the Bear Garden Power Station and the Virginia City Hybrid Energy Center. Under terms of the proposed settlement, the return on equity incorporated in the rate adjustment clauses for these two facilities would be set at 12.3%.

The company said that Dominion Virginia Power's base rates would not change from the level that existed prior to the filing of the base case. Also, an increase in base rates that was implemented on an interim basis September 1 would be returned to customers. Dominion Virginia Power is Virginia's largest electric company with 2.3 million customers. Further, Dominion said that the cost recovery for several of its construction projects would be achieved through separate rate adjustment clauses approved by the Virginia State Corporation Commission. These include the Virginia City Hybrid Energy Center and Bear Garden Power Station.

Dominion Virginia Power had asked state regulators for a $250 million rate increase, the first in base rates in 17 years, but state Attorney General Bill Mims contends that the utility should return funds to customers for over-earning in 2008. Mims said that rates should either be reduced by $238 million or customers should receive a refund of $153 million. The rate case before the Virginia State Corporation Commission is the first under a new Virginia law governing electric utilities.

According to Dominion, if approved, the proposed settlement would result in savings of about $80 for a typical residential customer who uses 1,000 kilowatt-hours of electricity a month. This includes a one-time credit of approximately $24 and monthly bill adjustments totaling $56 through December 2010.

If proposed energy conservation programs are approved by the Commission, the monthly bill for a typical residential customer would reduce to $103.83, down 4.5% from March 2009 when Dominion proposed a base rate increase and other rate adjustments.

Thomas Farrell, chairman, president and chief executive officer of Dominion Resources said, "We are pleased that these parties were able to reach this comprehensive agreement and hope the Virginia State Corporation Commission will approve its terms. It keeps base rates stable while recognizing the need to invest in Virginia's energy infrastructure to meet the needs of our customers."

Dominion also said that the proposed settlement agreement, if approved by the Virginia State Corporation Commission, would have a negative impact of $267 million to its fourth quarter and full-year 2009 reported earnings that would not be included in operating earnings. For fiscal year 2009, Dominion affirmed its operating earnings outlook in a range of $3.20-$3.30 per share. On average, twelve analysts polled by Thomson Reuters expect the company to report earnings of $3.24 per share for the year. Analysts' estimates typically exclude special items.

The company also affirmed its operating earnings outlook for fiscal year 2010 in a range of $3.20-$3.40 per share. Analysts expect the company to earn $3.24 per share.

However, the company said it would be in a better position to provide details for fiscal year 2010 after it receives a final order in the Virginia base rate case proceeding.

Last Friday, Dominion reported a 17% increase in profit for the third quarter from the prior-year period, helped by higher contributions from the company's regulated electric utility and gas transmission businesses as well as its unregulated retail energy marketing operations.

The company's reported earnings for the third quarter increased to $594 million or $1.00 per share, from $508 million or $0.87 per share, in the year-ago period. Operating revenues for the quarter declined 16% to $3.65 billion from $4.37 billion in the previous-year quarter.

At that time, Dominion forecast operating earnings for the fourth quarter in a range of $0.55-$0.65 per share. This compares to operating earnings of $0.72 per share in the same period of the prior year. Analysts expect earnings of $0.62 per share for the quarter.

D closed Thursday's regular trading session at $35.81, up $0.71 or 2.02% on a volume of 3.50 million shares. In the past 52 weeks, the stock has been trading in a range of $27.15-$38.24.

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