THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, January 23, 1995 TAG: 9501210091
SECTION: BUSINESS WEEKLY PAGE: 4 EDITION: FINAL
SERIES: Forecast '95
SOURCE: BY DAVE MAYFIELD
STAFF WRITER
LENGTH: Medium: 79 lines
Slowly, ever so slowly but unarguably, the ``C'' word is starting to have meaning in the energy-utility industry.
Competition.
The heads of two of Virginia's leading utilities - Virginia Power and Virginia Natural Gas - say much of their focus in 1995 will be on getting their companies positioned to prosper in a more freewheeling climate.
That means becoming more attuned to customers' needs, especially the needs of their largest customers.
``We want to stay a step or two in advance of the bandwagon,'' said James T. Rhodes, president and chief executive of Virginia Power, a unit of Richmond-based Dominion Resources Inc.
``What I think you see with utilities these days is more of an appreciation that we're in a national or global economy,'' said William A. Fox, president and CEO of Virginia Natural Gas, a subsidiary of Pittsburgh-based Consolidated Natural Gas Co.
Virginia Power is one of the more aggressive electric utilities in preparing for competition.
Late last year, it asked the State Corporation Commission to allow its 25 largest industrial customers to shift up to 20 percent of their power purchases into a more flexible pricing scheme. Virginia Power proposes to tell the customers the day before what it will charge them for electricity hour by hour the next day. The intent of its so-called ``Real Time Pricing'' plan is to allow users to schedule their plants to operate in the hours when electricity is the cheapest.
If the commission approves the plan this year, Virginia Power's revenues from the participating customers will likely drop initially, Rhodes said.
But in the long term, he predicted, the utility will sell more to the customers because they'll expand their Virginia plants, rather than plants elsewhere in the U.S. or overseas, in order to take advantage of the pricing scheme.
VNG's Fox said utility executives have to think more creatively these days in order to hang onto customers. That's especially true for industrial users, which have the economies of scale and the expertise to capitalize on the deregulatory changes that have swept through the wellhead and pipeline segments of the gas industry.
VNG's parent company last summer formed a subsidiary to purchase and then re-sell electricity, gas and other energy services to a variety of utilities and factories.
Eventually, both Rhodes and Fox expect that residential customers will be able to choose among various energy suppliers, much in the same way as they can choose from different long-distance phone companies. But that may be a decade or more away.
Here's a quick look at the companies' outlook for 1995:
Virginia Power. It expects about a 2 percent increase in sales of electricity and roughly 40,000 new connections, about the same as last year.
Rhodes said the utility is better-prepared to avert blackouts in cold weather this year, after some problems in January '94. More power is available. And non-utility generating plants, from which it buys electricity, should run more reliably.
Work force reductions will slow. Virginia Power cut from 14,000 to under 11,000 jobs in the past five years. About 1,400 were eliminated last year alone.
VNG. No sales projections, but it expects new customer connections in '95 to come close to matching its record 10,001 new connects last year.
Two new local pipelines, part of a $35 million three-year capital expansion, will be completed by fall, greatly increasing VNG's reach in Hampton Roads.
VNG will put more emphasis on sales of natural gas to vehicle fleets, on converting commercial customers to gas air conditioning and on supporting the sale of new dual gas heating/AC units for residential use.
Several major pipelines are considering expanding into Virginia, which could hold down VNG costs later.
KEYWORDS: UTILITIES GAS ELECTRIC by CNB