Rate rise tied to coal plant

Dominion Virginia Power customers are seeing rates rise to help pay for a new coal-fired generation plant in Southwest Virginia that is facing legal challenges from environmental groups.

The company implemented a rate adjustment Jan. 1 that increases bills by $1.53 for every 1,000 kilowatt hours of electricity that customers use. For the average customer, that means an increase of $1.84 per month.

The increase will cover $83 million in financing costs this year for what the utility calls its Virginia City Hybrid Energy Center, a plant in Wise County that is scheduled to come online in 2012. Construction on the $1.8 billion plant started last summer and is about 20 percent complete, company spokesman Jim Norvelle said

A coalition of environmental groups is fighting the project, contesting its state air-pollution permits and the State Corporation Commission's approval of the plant. In a case pending before the Virginia Supreme Court, the groups are challenging the constitutionality of a law that declared construction of a coal-burning plant in Southwest Virginia to be in the public interest.

"We knew at the time that [construction] was going to be costly, and this was going to lead to increases in people's rates to pay for the plant upfront," said Sarah Rispin, a staff attorney for the Southern Environmental Law Center in Charlottesville, which is leading the legal challenges.

Under a state law that took effect Jan. 1, power companies can recoup part of the costs of building a plant from customers before it comes online. Previously, utilities could not recoup costs until a plant started operating.

Dominion, which serves about 2.3 million residential and commercial customers in Virginia, has no comment on the specifics of the pending challenges, but the company is confident it will prevail, Norvelle said.

Norvelle said Dominion is putting together another rate adjustment for 2010, but the amount is not known at this time.

Environmental groups argue that energy-efficiency projects would be a better investment than new coal-burning plants.

The Wise plant will use a coal technology designed to reduce emissions, and it also will burn about 20 percent biomass, such as wood chips, Norvelle said.

Contact John Reid Blackwell at (804) 775-8123 or .