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Market Chatter: Fuel Costs Jump 88% for Dominion Energy Utility

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Dominion Energy Inc.'s (D) Virginia utility expects fuel costs to rise sharply as rapid data center growth increases its reliance on wholesale electricity purchases, according to regulatory filings cited by Reuters.

Virginia Electric and Power, a subsidiary of Dominion, forecasts fuel expenses of $4.35 billion through the end of June 2027, averaging 3.95 cents per kilowatt-hour, 88% above the $2.31 billion recorded in 2021, when system fuel expenses averaged 2.59 cents per kilowatt-hour.

The utility expects to purchase 23% of its energy supply from the wholesale market operated by PJM Interconnection, up from 14% in 2021.

Dominion estimates wholesale electricity purchases will cost about 6.28 cents per kilowatt-hour.

The company attributed this to the significant load growth from data centers, which it said was exposing it to wholesale power prices that can surge to several thousand dollars per megawatt-hour during heatwaves and prolonged cold spells.

This is set to push up average monthly consumer bills by 13%, to $195 from $173, largely due to the higher prevailing fuel prices.

According to Scott Gaskill, the company's vice president of regulatory affairs, its best hedge against PJM market prices is its owned generation capabilities. "Every megawatt-hour generated by company-owned resources reduces the need to purchase energy from the PJM market," Gaskill said in a statement to Virginia regulators late last month.

Dominion expects its proposed $66.8 billion merger with NextEra Energy to accelerate the development of power plants and renewable energy, reducing its dependence on wholesale purchases.

Dominion Energy did not immediately respond to' request for a comment on this story.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)

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