Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 3, 1991 TAG: 9103020176
SECTION: BUSINESS PAGE: E-1 EDITION: METRO
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: LENGTH: Long
But in the 14 months since the company named him president of its Roanoke-based Appalachian Power Co. subsidiary, Vipperman has had to juggle long-range programs along with daily challenges.
Last week, for example, he faced the latest of a series of attacks on the company's plea for higher electricity rates. A State Corporation Commission examiner contended the utility should get only a third of its requested $43.3 million-a-year rate increase.
Yet Vipperman is managing a company that last year saw its profits decline 34 percent in an economy that may take a bigger bite out of short-term demand for electricity.
"We have a challenge a day," he said on one of the few days his schedule left him in his Roanoke office.
Vipperman, 50, has worked for American Electric Power for almost 30 years, starting as an electrical engineer in Roanoke in 1962. He transferred to AEP's Service Corp. eight years later and rose to executive vice president of operations in 1984. He coordinated operating functions of the seven-state system for five years.
From his corner office on the fourth floor of the company's downtown Roanoke headquarters, he now directs a $1.4 billion-a-year company as chief executive of 5,000 employees serving 800,000 customers in Virginia and West Virginia.
Managing with a style that is alien by tradition in most large utilities, Vipperman is known simply as "Joe" by many employees. Some were fellow workers when he was an engineer in the Roanoke office in the 1960s. But others know him personally because Vipperman intentionally spends much of his time in the field, visiting employees who work out of Apco's 35 offices in Southwest Virginia and West Virginia. "It's important to get to see operations . . . to identify problems and jointly seek solutions," he said. "I don't set poles or read meters but I try to get to each division office two or three times a year."
The result is that Vipperman is regarded as a warm and straightforward executive. He said he wants to fill the gap between corporate managers who have the power to make changes and employees who know what needs to be changed.
"I try to bring them together," he said.
His most immediate job, however, is to turn around Apco's serious drop in earnings last year. As soon as the decline was calculated at the end of the year, he ordered a hiring freeze, cut the company's advertising and corporate contributions, reduced contract work and right-of-way maintenance and limited employee travel.
"It is most important," Vipperman wrote his employees, that such a "disastrous" financial year not happen again.
When earnings dipped from $141.6 million to $93.7 million last year, Apco had to tap its reserves to pay its annual dividend of $115.6 million to its single stockholder, AEP. The dividend is based on an AEP formula for its member companies.
The company's 1991 goal of turning declining earnings into a 3 percent annual growth in income relies heavily on Apco's requests for rate increases of more than 8 percent, currently pending in both Virginia and West Virginia.
If granted, they would raise the monthly power bill of $60.27 of an average Virginia customer by about $5.60. In West Virginia, Apco's average residential customer's bill would increase by $5.49 under the request. That request for an increase of $43.9 million or 8.8 percent was filed in January.
The Virginia rate case, filed a year ago, has drawn not only challenges from the SCC's staff but opposition from consumer groups and Virginia Attorney General Mary Sue Terry. She contends Apco's rates should be even lower than they are. "No increase is justified," she said.
If the SCC doesn't grant Apco's rate request, Vipperman said the utility's financial position "will continue to deteriorate or we'll go back" to the commission with another request.
The utility blamed its poor financial showing last year on its share of costs for an expensive new generating plant at Rockport, Ind., warmer weather that limited electricity usage, inflation and a tax increase in West Virginia.
As a deficit company in power generation, Apco is obligated to pay for electricity it receives from its seven sister AEP utilities. Apco's share increased as a result of a peak reached in a cold December 1989 period. Also, high startup costs are expected at a plant like Rockport, Vipperman said.
Aside from the earnings decline and an unsatisfactory disabling injury rate for employees, Apco had a good year, Vipperman said. None of the accidents was life-threatening but the safety rate was unchanged from 1989, he reported.
Warmer-than-usual weather has hurt Apco's earnings while easing consumer's fuel bills.
Apco's revenues are particularly sensitive to the weather because about 40 percent of its customers have electric heat, a relatively high ratio.
Aside from that impact, Apco's annual electricity load is projected to grow 1 1/2 to 2 percent a year, based on projections of population and economic growth in the early 1990s.
To meet the utility's expected power needs by the end of the 1990s, its planners say another generating station will be needed.
The most promising possibility is a plant using a complex technology designed to burn high-sulfur coal more cleanly. Using the pressurized fluidized bed combustion method, such a plant would probably be located near the West Virginia coal fields.
Vipperman said his company has on its drawing board a commercial version of the plant as a demonstration project in Ohio. It would be a smaller plant and it would have a lower capital cost than traditional coal-fired plants. Its dry waste can be used as fill and possibly as an agricultural supplement or roadbed filler, the company said.
"If you look at the capacity today, we wouldn't need more generation, but in the future, somewhere around the end of the decade, we will need capacity," Vipperman said.
If the company decides to construct the new-process plant, he said, Apco has a commitment from the Department of Energy for partial funding for the commercial project.
If such a plant is built, it will generate about 330 megawatts, about the size of Apco's coal-fired Glen Lyn plant in Giles County. Another alternative to provide electricity needed in the late 1990s would be replacement of a couple of older units at the company's Sporn plant, near Charleston, W.Va.
Apco faces more opposition on yet another project it says is necessary to supply future demands for electricity and revenue.
Environmentalists in Craig County and several areas of West Virginia are gearing up to fight Apco's plan to build a 765,000-volt line over 110 miles of mountainous terrain from Wyoming, west of Beckley, W.Va., to Cloverdale. The line of 765 kilovolts carries the largest amount of electricity of any in use today. Many lines are 345-kv or 138-kv.
The controversial line, labeled a hazard to human health by some critics, would cross the Jefferson National Forest, Appalachian Trail, New River Gorge and other environmentally important areas.
Virginia Tech and West Virginia University planners have a contract to recommend a routing for the line with minimal impact on the landscape. The company's target date for the line's completion is 1998.
The major reason Apco needs to move ahead on the transmission line planning now, Vipperman said, is that Richmond-based Virginia Power, its partner in the project, needs the electricity. "If it were for our own needs, it would be five years later," he said.
A 765-kv line is more environmentally acceptable, Vipperman said, than several lower-voltage lines. A 765-kv line requires a right-of-way that's 200 feet wide, while each 345-kv line needs 150 feet and a smaller 138-kv line has a 100-foot right-of-way.
Apco had to overcome tough environmental opposition when it built a 765-kv line through Floyd County several years ago. The SCC authorized that line after several hearings on the health issue. Both sides have used considerable evidence for and against health hazards.
Vipperman said the West Virginia line would give the utility a significant increase in reliability of its service in the Roanoke area and for sale to Virginia Power. "The line is not only for normal times but for emergencies," he said.
After Apco's statement explaining why it needs to build the line is approved by the regulatory commissions in the two states, he said, engineering work will take a couple of years and construction will require about two more years.
Another feature of the transmission line, he said, is that it will provide opportunities for independent power companies to build generating stations in Southwest Virginia. Several independent plants are planned in Virginia Power territory but none has been proposed in Apco's service area.
Virginia Power has encouraged construction of cogeneration power plants in eastern Virginia but additional transmission line capacity has not been available in Apco territory, according to Vipperman.
However, cogeneration may not be economical for independent companies in Apco territory "because the rates at which we would purchase power are so low," he said. Apco is required by law to buy electricity generated by a qualified independent generating company but its payments are at the level of Apco's actual cost.
As Apco prepares to comply with regulations on acid rain and other features of the new Clean Air Act, the company expects a 10 to 15 percent increase in expenses, the executive said. `Hopefully, these federally mandated regulations will allow us to recover the costs . . . We have a challenge a day." Government regulations under the new act have not been formulated yet.
Apco's future will bring no changes in fundamental operations, Vipperman said. "We'll continue as a coal-based company and we'll do everything we can to meet customers' needs in a cost-effective manner. Rates will go up but not any faster than anybody else's."
Only five utilities had lower residential rates than Apco in a national listing of 60 power companies in January, as prepared by the Jacksonville, Fla. Electric Authority. Apco's rates in January were about 25 percent lower than Virginia Power's figures, mainly because Apco's generating plants are closer to the coal fields, the source of its primary fuel.
Apco is seeing the effects of the recession as companies go to shorter work weeks and lay off workers. The impact on its sale of power to industry has not been deep so far, Vipperman said. However, if consumers don't build houses or buy cars, all business will be affected, he said.
A company considering restocking its inventory has a tendency to say, "I want to make sure the economy is OK before I crank up again," Vipperman said. Then they don't use as much electricity.
Usually, this part of the country "is impacted late and we come out later" from a recession, he said. "Typically, our loads lag by a few months" from urban areas like Northern Virginia.
The bright spot in Apco's territory is coal mining. Significant requests have come in for more electrical service to low-sulfur mines, which are big power users. And the company president said he expects the recently amended Clean Air Act will bring Apco more business as tighter regulations force the use of cleaner coal. Most of Apco's power is generated at coal-fired plants, fueled by coal purchased from other companies and partly supplied by AEP mines.
Vipperman says he sees a difference in perceptions about the economy within the two states in his company territory.
"Virginia properly sees itself going in a negative direction while West Virginia was expecting a record year and most mining and construction companies are optimistic."
Vipperman is a Patrick County native. A graduate of Virginia Tech, he later earned a master's degree from Massachusetts Institute of Technology. He is married to the former Patricia Beasley of Stuart. They have two children, a daughter, Joannah, who works in marketing for IBM in Boston, and a son, Robert, who is a paralegal in Washington. In his year back in Roanoke, Vipperman has joined the boards of United Way, Roanoke Valley Business Council, Virginia Tech Corporate Research Center, Virginia Manufacturers Association and a handful of other organizations.
Vipperman places a lot of emphasis on the company's testing of an employee involvement program. "We put groups together to look at responsibilities, to determine what are the inhibitors to performance and solutions," he said.
In the first program at Bluefield, employees sought ways to be more efficient. They came up with plans to get additional repair tools for maintenance, an improved system for tracking engineering projects, development of a user guide to operate office equipment and better training for meter readers.
The Bluefield employees are looking for better ways to communicate with crews who work out of hearing distance from radios in their trucks.
Vipperman said the company continues to expand its use of computers for design and drafting techniques and work is under way on a customer accounting system that will be more responsive to customer inquiries. An inventory control system will be used for to manage the supply of materials at generating stations and in transmission and distribution operations.
For his management style, Vipperman draws a good rating from his nearest competitor. James Rhodes, Virginia Power president in Richmond, called Vipperman "a very experienced utility executive." Rhodes said their "good relationship is not only the result of the joint transmission line project. It is a good personal relationship, one that is drawing our two companies closer together."
Richard Disbrow, president and chief executive of the parent American Electric Power, said Vipperman is missed on the corporate management team in Columbus.
"I think Joe enjoys being back in his native Virginia," he said. "It is comforting to know that our largest company is run by such an outstanding utility manager. His impressive personal and professional standards are just what we need to meet the challenges of the '90's" at Apco.
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