THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, July 6, 1994 TAG: 9407060372
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: By TOM SHEAN, STAFF WRITER
LENGTH: Medium: 71 lines
Dominion Resources Inc., whose board of directors has been split over the management of Dominion's Virginia Power subsidiary, contended Tuesday that state regulators have no right to involve themselves in the dispute.
Dominion, a Richmond-based utility holding company, also described in detail the evolution of a bitter power struggle involving Thomas E. Capps, its chairman, president and chief executive officer, and Virginia Power president and CEO James T. Rhodes.
In a lengthy response to the State Corporation Commission, Dominion provided a chronology of the struggle between two factions on its board of directors.
The SCC told Dominion two weeks ago to explain why it should not be held in violation of a 1986 order that created a wall between Dominion's board and the management of Virginia Power.
In its June 17 order for an investigation into relations between Dominion and its subsidiary, the SCC expressed concern that the divisiveness among directors had provoked management disaffection at Virginia Power.
That, in turn, could jeopardize the delivery of reliable electric service to Virginia Power's customers, said the SCC, which has power over rates, levels of service and other matters affecting utility customers.
Dominion, however, contended that the quality of Virginia Power's service had not been affected by the boardroom battle. The dispute among its directors was ``beyond the jurisdiction of the Commission,'' Dominion insisted.
In the process of explaining its case, Dominion said relations between two factions on its board became strained last October when the Virginia Power vice president for regulation suggested that the utility's in-house lawyers be consolidated into a single law department.
``Rhodes reacted angrily to this proposal,'' Dominion's reply to the SCC said. ``He claimed surprise at the suggestion although it had been discussed in his presence on a number of previous occasions.''
Virginia Power employees, who have declined to speak with attribution, have said Rhodes grew increasingly dissatisfied with Capps's drive to cut costs and impose changes that would hamper the utility's ability to deliver reliable service. Rhodes has not been available for comment. Capps, when recently asked about the SCC's order, declined to comment.
In April, Rhodes told certain members of the Dominion board that he would take early retirement unless he was able to report to someone on the board other than Capps.
``This threat was parlayed by a small group of DRI directors into an attempt to take over control of DRI,'' Dominion said in its response to the SCC.
The group, which included retired Dominion chairmen William W. Berry and T. Justin Moore, eventually drafted a proposal for Capps to retire as Dominion's chairman, the Dominion document said.
But a faction that included Capps and director John Snow, chairman and CEO of the transportation holding company CSX Corp., had the necessary votes at a board meeting June 16 to expand Dominion's board from 12 directors to 15. In a move that surprised some members of the board, this faction elected four new directors, including one to replace a director who had stepped down for health reasons.
Virginia Power, the state's largest electric utility, has more than 1.7 million customers in eastern, central and northern Virginia. It also has customers in northeastern North Carolina.
Dominion was created in 1983 as a vehicle for Virginia Power to enter other lines of business, including non-utility power generation. by CNB