DATE: Tuesday, September 30, 1997           TAG: 9709300291

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: AKWELI PARKER, STAFF WRITER 

DATELINE: RICHMOND                          LENGTH:   76 lines

ENERGY INDUSTRY ADDRESSES RESTRUCTURING

``Chaos'' could ensue if Virginia rushes headlong into opening its electricity market to competition, Virginia Power President Norman Askew said Monday.

At a joint General Assembly subcommittee hearing, Askew and other energy industry officials put forth the merits and demerits of deregulating or ``restructuring'' the $200-billion-a-year electric power market.

As with the reformulation of the telecommunications and airline industries, electric restructuring promises customers a lot: lower energy prices, more choices and better service.

But it'll take much preparation. The biggest question facing the industry is: `` How much?''

``We need to make sure we don't bulldoze our way into retail competition without knowing where we're going,'' said Askew, who took the helm at Virginia Power Aug. 1.

It will probably be years before full, retail electric competition comes to Virginia. From the risk of unreliability to the demise of universal service, deregulation done the wrong way could prove a mess.

``It must be achieved in a way that does not produce chaos,'' Askew said.

The state's largest electric utility would like more time to recoup its ``stranded costs,'' infrastructure investments it made years ago to meet the demand for power. The company argues that when competition arrives, power-marketing rivals, unencumbered by the debt of such investments, will have an unfair edge.

Other speakers didn't share the Richmond-based utility's trepidation.

If Virginia tiptoes into competition, it will have to eat the dust of faster-moving states whose low energy prices are better able to attract business, said Washington Gas & Light President James DeGraffenreidt.

He said Virginia ``won't have the opportunity to play'' with big companies looking to place operations in states where power comes cheaply.

The state ``will be at a disadvantage from an economic development standpoint,'' said Bill Axselle, counsel for the Alliance for Lower Electricity Rates Today. ALERT represents several commercial, industrial and government power users in Virginia.

Axselle suggested the General Assembly hustle to create legislation that would bring competition to Virginia as early as 2001.

But Askew derided what he described as ``the blowtorch-to-the-belly approach'' advocated by many power marketers eager to cash in on the chance to sell power and other products to customers outside their traditional service areas.

Committee members grilled Askew on Virginia Power's alternative regulatory plan, the company's blueprint for switching to competition. Among other things, the plan proposes to freeze Virginia customers' rates until 2002.

On the surface it appears to be a good deal - accounting for inflation, customers will have seen a decade of falling rates. But, asked committee chairman Jackson Reasor Jr., D.-Bluefield, what would happen if the market price of electricity - a volatile commodity - plummeted, leaving Virginia Power customers paying higher prices than everyone else?

And what if, Reasor asked, the company sold cheaper electric power to out-of-state customers at those low, market prices?

``That is something I have a problem with,'' said Reasor, ``if the cost is less - or God forbid - considerably less, than what the (Virginia) customer is paying.''

Responded Askew: ``It is inconceivable that we would use our generation assets to sell power at lower cost than we would here.''

In other words, juice generated by Virginia Power power plants wouldn't be sold elsewhere for less.

However, the company could - and does - buy power wholesale from other generators and sells it to third parties. Those parties - municipalities and other utilities, for example - could conceivably sell that power to their customers for less than what Virginia Power customers pay.

The difference, says the utility, is that its customers pay for the guarantee that when they flick the switch, the lights will come on.

The committee also discussed ways to deal with tax revenue losses that could result as out-of-state power brokers skirted Virginia's gross-receipts tax on utilities; and concerns arising from electric utilities muscling in on so-called ``unregulated'' lines of business such as engineering and selling fuel oil.

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