THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Thursday, February 1, 1996 TAG: 9602010291
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Long : 105 lines
Consumer advocates say the state's largest electric utility wants to gouge customers by charging unnecessarily high rates. Heating and cooling contractors fear it wants to take over their businesses. Private power producers say it's trying to make it harder for them to operate.
Since Virginia Power announced a sweeping set of legislative proposals to the General Assembly early last month, opponents have been many and varied.
But at the center of the opposition is an obscure group with a very exclusive membership: the Virginia Committee for Fair Utility Rates.
The committee is comprised of 20 of the state's largest industrial companies, including such names as DuPont, AlliedSignal and Reynolds Metals.
These companies, through their committee and like-minded organizations in other states, are pushing lawmakers and regulators to let them shop for power. They say government controls are protecting utilities rather than utility customers and are keeping electricity prices unnecessarily high.
``Competitive markets are more efficient than monopolies,'' said Robert Allen Cunningham, who oversees power purchases for 12 DuPont plants in the Southeast. ``Everybody would stand to benefit from that.''
Cunningham and his industry cohorts complain that Virginia Power's proposals would help it enjoy many new freedoms - including venturing into a host of new businesses - while further insulating it from potential rivals.
Claiming that all utility ratepayers stand to lose if Virginia Power gets its way, the large industrial customers led the formation of a far-ranging coalition that's now fighting the utility's proposals. Members include the Air Conditioning Contractors of America, the American Association of Retired Persons, the Virginia Citizens Consumer Council and the Southern Environmental Law Center.
But some Virginia Power executives think that those groups, while having honest concerns of their own about pieces of the multibill legislative package, have been misled by lobbyists for the Virginia Committee for Fair Utility Rates. They say the state's big factories stand to disproportionately benefit from defeating the utility's initiatives.
``Virginia Power is not opposed to deregulation in principle,'' James T. Rhodes, the utility's president, told a Senate committee earlier this week. ``What we are opposed to is any deregulation scheme that will benefit one group of customers at the expense of other customers.''
The issue over which the utility and its big customers are battling hardest is something known as ``stranded investment.''
To supply its customers, Virginia Power and other electric utilities in the state have invested tens of billions of dollars in generating plants and other facilities in the past several decades. If their customers get power from other sources, some of the utilities' investments could become ``stranded.''
The question then becomes who bears the cost of these unutilized facilities? The utility itself and its shareholders? Or the customers - and if so in that case, those that leave the utility system or those that remain?
``We need to wrestle with that issue and resolve it or we'll never get to a true competitive marketplace,'' said Gary Groner, an AlliedSignal power-purchasing manager.
Shopping for power is already available to wholesale customers like municipalities and electric cooperatives. Federal regulators, who are overseeing that competition, are grappling with the stranded-investment issue.
But the issue is even more pressing now that a few states are beginning to authorize so-called ``wheeling'' experiments for retail customers as well - industrial, commercial and residential users of power. Virginia's State Corporation Commission is itself studying what to do.
At the same time, there are moves afoot in Congress to open up retail power competition nationwide. An amendment that authorized Defense Department facilities to shop for electricity nearly became part of a recent DOD spending bill.
One of Virginia Power's measures in the General Assembly would give the State Corporation Commission authority to seek compensation from the federal government for ``any and all costs stranded'' at utilities by a federal facility in Virginia that buys power elsewhere.
The measure, which is tentatively scheduled for a vote in the full Senate today, raised the hackles of Virginia Power's largest industrial customers.
They said that the bill might discourage the Defense Department from continuing to move facilities to Virginia as the military consolidates and downsizes. But the bill also sets a precedent for sticking other customers who pull away to buy power elsewhere for 100 percent of the utility's stranded investment, DuPont's Cunningham said.
That worries companies like his because, even though he contended all customers will eventually benefit from competition, large industrial customers are likely to be first in the shopping line.
``In a competitive market,'' he said, ``the big dog eats first.''
Cunningham said the General Assembly should take at least a year before acting on the measure. He said a lot of study is needed to identify the amount of potential stranded costs.
John Hughes, a spokesman for the Washington-based Electricity Consumers Resource Council, said the problem with utilities' typical approach to stranded costs is that they try to shift all the blame.
Hughes' group, which also represents large industrial companies, said utility customers should bear no more than half of the cost of stranded investments - and in that case only when the utility can prove it built facilities prudently and managed them as efficiently as possible.
When customers are assessed part of the cost, he added, all, not just the customer who exits the utility system, should pay on a pro-rated basis.
Virginia Power's Rhodes disagrees. Stranded costs should be ``recovered from the customers who created them by leaving,'' he told the state Senate committee this week.
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