RICHMOND—Despite a State Corporation Commission staff report that suggested that Dominion Virginia Power made $523.7 million more than it should have last year, the company said last week its request to increase its base rates “is justified.”

Dominion officials filed a rebuttal to the SCC staff report last week. In the rebuttal, officials said Dominion Virginia Power’s base rates hadn’t been increased on a permanent basis since 1992. They also said that the average Dominion bill is “well below” the national average.

Dominion, which serves 13,106 customers in Isle of Wight County and 5,026 in Southampton County, asked the SCC for approval to raise its base rate revenues by $250.2 million earlier this year.

M. Stuart Bolton Jr., the senior vice president of regulatory accounting for Dominion Virginia Power, said the SCC staff members’ use of historical data to establish future rates is flawed because it doesn’t take into account the rising cost of providing services.

SCC staff members found that the Dominion’s earnings in 2008 produced a 19.12 percent return on average equity, a profitability measure, well above the 10.20 percent return supported by SCC staff. However, Thomas Farrell, II, chairman, president and CEO of Dominion Resources, Inc., said the 10.20 percent figure “would particularly hinder the company in relation to our peer utilities with large capital needs.”

“This proposed (return on equity) would restrict Dominion’s ability to raise capital in highly competitive financial markets still under stress,” according to an e-mail sent by spokesman David Botkins.

In her filing, Kimberly Pate, manager of audits with the SCC’s division of accounting, said the SCC has two options to deal with Dominion’s “overearnings”— it can order rate reductions that will reduce revenue by $365.3 million annually or refund $295.8 million of the 2008 “overearnings.” Pate recommended that a rate reduction be instituted.

“I believe that the proposed revenue reductions advocated by Staff and Consumer Counsel are premised upon improper ratemaking adjustments, and I urge that they not be accepted by this commission,” Bolton said.

The $250.2 million rate increase went into effect on Sept. 1 on an interim basis and is subject to refund, pending SCC approval.

The company maintains that lower fuel prices and subsequent fuel adjustments will help keep customers’ bills stable, even with the base rate increase. For instance, the company says the typical monthly bill for a customer using 1,000 kilowatt-hours was $108.73 as of Jan. 1, 2009, before the rate increase took effect. As of Jan. 1, 2010, the typical monthly bill will be $108.36.

Public hearings on Dominion’s rate case are scheduled to begin in Richmond on Jan. 20.

The SCC will then decide whether or not to pursue its staff’s recommendation.