Dominion Virginia Power has asked its Virginia regulators to approve a rate hike to cover the costs of power generation and transmission.

The company says the additional infrastructure, which would include a new natural gas-powered station near Front Royal, is needed to provide reliable service to the company’s 2.3 million Virginia customers while meeting demand growth.

The strategy includes adding a mix of new generation sources and energy efficiency programs and upgrading and expanding the transmission and distribution network to minimize fuel expenses while improving reliability. These actions also would reduce the amount of electricity imported from other states. The fuel rate application is an annual review and proposed adjustment.

“Dominion Virginia Power understands that its obligation to customers is to keep the lights on and provide reliable service at reasonable costs,” said Paul D. Koonce, chief executive officer. “This is exactly what our applications propose to do. Even with finding new ways to achieve energy efficiencies, the new power station and improved transmission services are needed for us to keep that promise.”

“The filings also recognize the need to recover higher fuel costs used to generate electricity, both because of rising fuel prices and the effect of last year’s hotter-than-normal summer and colder-than-normal winter. To reduce the impact to customers who are already dealing with higher gasoline prices at the pump, we are proposing to spread this increase over the next two years,” said Koonce.

The fuel rate increase would be the first in three years. The fuel rate is a pass-through cost with no profit to Dominion. It is adjusted annually to recover what the company spends on fuel used to generate electricity, as well as power it must purchase from the wholesale market.

Dominion is authorized to recover these expenses over a year’s time but has proposed spreading the costs over the next two years to reduce the impact to customers. If the State Corporation Commission approves the two-year proposal, the total amount of the proposed increase for the 12-month period beginning July 1 would be about $319 million. The monthly bill of a residential customer who uses 1,000 kilowatt-hours each month would increase by $4.86, from $103.91 to $108.77, beginning July 1.

Capital projects include replacing aging equipment, adding new infrastructure, and covering the costs of services for the regional grid operator. If approved, the transmission portion of the monthly bill of a typical residential customer would increase by $3.84 per month, from $6.16 to $10, beginning Sept. 1.

In addition, the Front Royal power station, if approved, would add about 75 cents to the typical customer’s monthly bill beginning in April 2012 to pay for financing costs of the station’s construction. The new station will supply enough electricity for 300,000 homes at peak demand.

For more information on Virginia customer rates, pricing and understanding the monthly bill, go to www.dom.com.