Dominion Energy Proposes Rate Increase to Improve Service Reliability

Dominion Energy D announced that it has proposed new base and fuel rates in Virginia that should allow it to continue delivering reliable, affordable and increasingly clean energy to its customers.

For a typical residential user, the company proposed base rate increases of $8.51 per month in 2026 and $2.00 per month in 2027. If approved, this would be D’s first increase in base rates since 1992. The company's residential rates have grown at a rate that is around 40% less than inflation over the past 10 years. The increase in rates also reflects the need for investments to serve a growing customer base reliably.

In addition to higher rates, D suggested new consumer protections to guarantee that large energy users, such as data centers, continue to pay the full cost of their service and be shielded against stranded expenses.

The company has also suggested shifting power capacity costs from the base rate to the yearly fuel rate in order to support rate stability. The regional electric grid operator, PJM, has determined these power capacity charges and allocated them to Dominion Energy Virginia. This reflects the growing demand for electricity throughout Virginia and the company's service area.

This requested rate change, along with the fuel cost of extended cold weather in January 2025 and higher forecasted fuel commodity prices, will result in a $10.92 monthly fuel rate increase for a typical residential customer. This includes the scheduled expiration of a $3.99 fuel credit from a previous fuel case.

If approved, the new fuel rate would take effect on July 1, 2025, and the new base rates would take effect on Jan. 1, 2026 and Jan. 1, 2027.

Rate Increase: An Essential Utility Need

Utility regulators in the United States are considering rate increases for electricity as electric utilities seek to cover the investments necessary to maintain and expand their systems. Utilities have requested rate increases in recent years to cover the costs of improvements to transmission and distribution lines, which are designed to withstand increasingly severe weather and fire events, prepare for increased electrification as state and federal clean energy legislation is implemented, and ensure more reliable energy delivery, according to S&P Global Market Intelligence Capital IQ Pro.

Customers are undoubtedly burdened financially by the rate hikes, even though utilities need to revise rates on a regular basis. Infrastructure additions and maintenance are continuous processes. Rates hikes include upgrades to make the grid more resilient and shorten the duration of outages that help serve customers more efficiently. Rate hikes at regular intervals allow utilities to continue with infrastructure spending, as they have funds available.

Highlighting Other Utilities' Rate Hikes

Other utility companies, such as Black Hills Corp. BKH, National Grid Transco NGG, and Consolidated Edison ED, are also focused on improving their service reliability through rate hikes.

In March 2025, Black Hills’ electric utility subsidiary in Colorado received approval for new rates, which took effect on March 22, 2025. The approved new rates will provide for the recovery of nearly $370 million in system investments since the utility’s last general rate filing in 2016, as well as inflationary impacts on costs to serve customers. The rates are expected to generate nearly $17 million in new annual revenues, based on a weighted average cost of capital of 6.90%, with a capital structure comprising 47-49% equity, 51-53% debt, and a return on equity of 9.3-9.5%.

BKH’s long-term (three to five years) earnings growth rate is 5.26%. The Zacks Consensus Estimate for 2025 earnings per share (EPS) implies year-over-year growth of 5.1%.

As of March 25, 2025, National Grid was seeking a 15-20% increase in electric and gas rates for residential customers in New York. The proposed rate reset is scheduled to begin in the spring of 2025. The company stated that the plan aims to maintain infrastructure, improve customer service, support economic growth and prepare networks for a transition to clean energy sources.

NGG’s long-term earnings growth rate is 2.34%. The Zacks Consensus Estimate for fiscal 2025 EPS implies a year-over-year decline of 5.5%.

In January 2025, Consolidated Edison proposed rate hikes that would increase the average electric bill by nearly 11.5% more for electricity and almost 13.5% more for natural gas. The proposed increase will take effect on Jan. 1, 2026. The state's Public Service Commission made the final decision after an 11-month process.

ED’s long-term earnings growth rate is 5.57%. The Zacks Consensus Estimate for 2025 EPS implies year-over-year growth of 4.1%.

D’s Stock Price Performance

In the past three months, shares of the company have risen 2.8% compared with the industry’s 5.2% growth.

D’s Zacks Rank

The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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This article originally published on Zacks Investment Research (zacks.com).

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