This story was reported and written by VPM News.
Dominion Energy asked state regulators in filings this week to raise customer power bills by about 15% over the next two years — a product of fuel costs, new construction, infrastructure upgrades, and the cost of doing business on the grid.
The company says it’s the first time it has increased its base rates since 1992. As VPM News has previously reported, those base rates don’t include riders, which have been the main driver of Dominion’s bill increases since 2007. These bill add-ons cover costs for specific projects, like coal ash removal or the CVOW offshore wind farm.
For a typical residential customer — defined as a person using 1,000 kilowatt hours (kWh) in a month (you can check how much you use on your Dominion bill) — that looks like an $8.51 increase starting January 1, 2026 and an additional $2.00 increase starting a year after that, in 2027, on average.
Dominion is also requesting a $10.92 hike based on that typical monthly bill to cover fuel and capacity market costs. The fuel rate is adjusted yearly and would take effect this July.
Altogether, that’s a climb from $140.65 monthly to $162.06 on average.
On top of all that, Dominion is requesting a brand new customer rate classification for the commonwealth’s biggest energy users.
The filings set up a monthslong process of hearings, court filings, fact finding and public comment — that will result in new rates set by the State Corporation Commission over the next year.
Let’s break this down.
Base rate increases
Ed Baine, president of Dominion Energy Virginia, wrote in filings with the SCC that the company understands the gravity of raising rates.
“We do not ask for this lightly, as we understand the economic pressures on our customers and the need to maintain rates that are cost-effective and a good value for them. Many elements of our cost of service that are creating rate pressure are beyond the Company’s control, and all are necessary to serve,” Baine wrote.
The company told regulators that investments in generation and distribution infrastructure are the main drivers of these increases. The company is projecting 3% annual demand growth on average over the next 15 years.
Dominion plans to increase output from four natural gas plants — Possum Point (Prince William), Ladysmith (Caroline), Remington (Fauquier) and Bear Garden (Buckingham) power stations — through efficiency measures and other upgrades. This would add 210 MW of capacity to its grid.
Reliability upgrades and maintenance will also take place at Dominion’s nuclear facilities, hydroelectric dams and its Bath County Pumped Storage Station.
Inflation is a factor, too: Baine wrote that the rising cost of goods and labor both contribute to the increase.
Natural gas is a hot commodity
The bigger, more immediate bill increase comes through the utility’s rising fuel rate, proposed to go up $10.90 this summer on a typical 1,000 kWh bill. That increase covers fuel costs and something called the capacity market.
The fuel part is straightforward enough. Dominion, which doesn’t make a profit on fuel costs the way it does on other expenditures, says it needs more cash to cover fuel it used during extended winter cold spells. The company set single-day demand records three days in a row during that cold weather.
Higher natural gas cost projections — a result of those winter cold spells eating into supply, combined with higher gas demand globally — also contribute to the proposed hike.
Fuel costs make up the majority of the jump, but what about those capacity market costs?
Dominion’s grid is part of PJM Interconnection, a grid operator that oversees a large chunk of the system that powers the Eastern United States. PJM runs capacity market auctions where utilities like Dominion buy and sell electricity.
Recently, supply and demand have been getting closer on PJM’s grid, as data centers come online and fossil fuel plants go offline in some states (like Virginia). That caused market prices to spike last year.
In its filings, the company said that translates to $1.98 a month.
Many elements of our cost of service that are creating rate pressure are beyond the Company’s control, and all are necessary to serve
A new class
Dominion also took a stance on what will likely be one of the biggest points of contention in the upcoming base rate case: whether system costs are distributed fairly among customers.
The company splits its customers into rate classes — think residential vs. commercial vs. industrial users. But the new industrial-scale customers it’s adding to the grid, mostly in the form of data centers, are often much larger than their peers. These facilities are basically giant server rooms that handle the globe’s internet traffic and artificial intelligence queries.
Company witness Robert Miller stated that some of Dominion’s industrial customers have peak loads of about 500 kW. The new “High Load” customers coming online demand peak loads of over 25 MW — more than 50 times as much energy as those industrial customers.
“The High Load customers, because of their size, require the Company to make significantly larger infrastructure investments in order to provide service to these customers,” Miller, whose title is listed as a regulation manager, wrote.
As of December 2024, the company provided 3.6 GW of power to data centers, enough to power about 900,000 homes. The company also has about 40 GW of capacity requests “in hand,” according to Stan Blackwell, director of Dominion’s data center practice. That’s more than double the company’s current peak demand.
Because the individual investments for each new data center can be so high, Dominion is proposing a new customer class for High Load facilities. It’s also seeking a 14-year contract agreement that would protect other ratepayers from bearing the costs of unused infrastructure — should a data center developer decide to build somewhere else or use less electricity than requested.
The state Legislature took interest in cost allocation this year, though a bill requiring state regulators to study if the current rates are fair failed.
Dominion said its own analysis of cost allocation didn’t show an unfair division. It said instead that the new proposed rate class would protect against the possibility of other ratepayers subsidizing High Load facilities in the future. Miller pointed out potential for smaller industrial users to subsidize their larger counterparts if changes aren’t made.
The SCC itself started formally looking into this last year with a stakeholder conference on High Load customers and has expressed an interest in taking action in other proceedings this year.
The commission hasn’t yet announced when hearings will be held in Dominion’s base rate or fuel rate cases.
Copyright 2025 VPM
