STATE WAS WISE NOT TO TELL VIRGINIA POWER WHERE TO BUY ELECTRICITY

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, March 13, 1993                   TAG: 9303150542
SECTION: EDITORIAL                    PAGE: A-9   EDITION: METRO 
SOURCE: LARRY W. ELLIS
DATELINE:                                 LENGTH: Medium
STATE WAS WISE NOT TO TELL VIRGINIA POWER WHERE TO BUY ELECTRICITY
VIRGINIA Power takes strong exception to Mark P. Barry's letter (Feb. 24, "Economic-development benefits lost") on the dispute over the proposed Tom's Creek power plant.
Our company used carefully analyzed, factual information to oppose House Bill 2129, which would have forced us to buy unneeded and uneconomical power from the Tom's Creek project. Barry's assertions were an affront to our efforts to protect our customers from unnecessary costs.
Despite claims made by Tom's Creek developers, we cannot be certain when - or even if - new generating capacity of the type the plant would offer will be needed in the first decade of the 21st century.
Our forecasts now tell us we will not need an additional coal-fired plant at least until 2002. It is highly unlikely, however, that such a plant will be needed that soon. Because of the sluggish economic recovery and our increased emphasis on energy conservation and other programs to manage the demand for electricity, there is a definite trend toward delay. Just two years ago, for example, we predicted we would need another coal-burning unit in 1997 - and that has now been pushed back at least five years.
Signing an agreement with the Tom's Creek partnership would also be bad business because it would limit our options. The technology of power production is rapidly changing, and a better, even more environmentally sound means of generating electricity may be available in the next decade. We would not be able to take advantage of that new technology if we were locked into a Tom's Creek contract.
Such an agreement would also pre-empt our competitive bidding process, one of our chief means of making sure we obtain necessary power supplies at the lowest possible cost.
Whenever we need new capacity, we ask private power producers to submit proposals for new plants. Their costs are often lower than ours. Signing a contract would deprive our customers of those potential savings; we would never know if some other power producer could supply our needs for a lower price than could the Tom's Creek partnership.
Under such circumstances, it would be totally irresponsible for us to sign a contract with the Tom's Creek developers for power purchases begining in 2002. If we had signed such a contract, we would have faced the prospect of burdening our customers with hundreds of millions of dollars in unnecessary costs.
We must also defend the State Corporation Commission's role in analyzing the Tom's Creek project. Upon request of the Virginia Coal and Energy Commission, the SCC staff found Virginia Power could add the same amount of generating capacity for $75 million to $150 million less than the Tom's Creek project.
The SCC staff is well-known for its thorough, impartial analyses of utility issues. Innuendos that the staff failed to give the Tom's Creek developers a "fair trial" or conspired against the project behind "closed doors" are unfair and unfounded.
Finally, we stand by our warning that House Bill 2129 would have set a dangerous precedent. The legislature must not be in the business of determining when and where generating plants should be built.
Legislation ordering a Tom's Creek project would have been an open invitation for other developers to flock to the General Assembly. The prospective plant builders, no doubt, would have argued that their projects were also worthy efforts to bring jobs and economic revitalization to needy areas of Virginia.
Our customers' interests are not served by using plant construction as part of an involuntary and subsidized economic development program.
Virginia Power is sympathetic to the needs of Southwest Virginia. We already buy 2 million tons of coal a year from Virginia mines; by 1996, that figure should rise to 3 million tons. We have been a strong supporter of the tax credit for Virginia coal purchases and are eager to work with local governments around the state to promote economic development.
In the end, however, the Tom's Creek project was rejected because it was not in the commonwealth's best interest. Government interference in the power-production marketplace would have been poor public policy. It also could have meant substantial, unnecessary costs for the 1.8 million customers we serve. That's not good business, and that's not good for Virginia.

Larry W. Ellis is senior vice president in power operations and planning at Virginia Power in Richmond.

by Archana Subramaniam by CNB