ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Tuesday, March 5, 1996 TAG: 9603050026
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
Both houses of the Virginia General Assembly have passed legislation that would relax the state's regulation of rates charged by natural gas companies.
The bill, which awaits Gov. George Allen's signature, was introduced in the House of Delegates by Del. Clifton "Chip" Woodrum, D-Roanoke, and is supported by Roanoke Gas Co. and other gas utilities.
Currently, rates charged by natural gas companies are approved by the State Corporation Commission following lengthy rate cases that take into account the companies' costs of doing business and what the commission considers to be fair returns on stockholders' investments.
Woodrum's legislation allows companies to apply to the commission for an alternative "performance-based" form of regulation that would enable changes in rates to be approved more quickly.
Although there is no precise definition of performance-based regulation, the legislation directs the SCC to approve gas utilities' applications as long as it finds - among other things - that no gas customers will be harmed, new rates aren't excessive and change in regulation is in the public's interest.
The bill calls for the SCC to review performance-based rates annually and make adjustments to bring revenues and prices in line with whatever rate index is used.
Basically, it calls for the utility company to propose an alternative form of rate-making tied to variables such as pricing or gas costs and then requires the company to perform to a certain level if it is to benefit from the new form of regulation.
Roanoke Gas has one particular form of performance-based regulation in mind if the legislation becomes law.
John Williamson III, the company's vice president for rates and finance, said Monday his company is interested in regulation that would allow Roanoke Gas to recover the money it is spending to upgrade its main distribution pipes more easily from its customers.
Roanoke Gas began a multiyear, $20 million pipeline replacement program in 1991 and has spent about $3 million replacing cast-iron lines with plastic pipes, at the rate of eight to 10 miles of pipe a year.
Under current law, when the company wants to recover the cost of that work, it must file a full rate case with the SCC.
A rate case, according to Williamson, can take months to complete and involves preparing reams of documents and a trip to Richmond with the company's attorneys for hearings before the SCC. The company's last rate case lasted about 18 months.
Usually, the commission allows utilities to impose proposed new rates on a temporary basis and then, if something less than the entire proposed rate increase is approved, the company is ordered to refund the excess to customers.
Roanoke Gas, Williamson said, would like to tie the company's rates, in part, to the cost of replacing its pipelines as long as it could prove to the SCC that it was actually completing the work. That kind of regulation would save the time and money of a full rate case. It also would save the company's customers money, because the SCC normally allows companies to recover from customers the money they spend on rate cases.
Other potential uses of performance-based regulation might prove more controversial, however, Williamson said. For instance, gas companies could ask the SCC to let them keep part of the money they receive from selling capacity they contracted to use on interstate gas pipelines and later find they do not need.
Letting companies keep some of the revenue from selling excess line capacity rather than passing all the savings back to customers has been proposed as an incentive to companies to seek buyers more actively for the excess capacity, Williamson said.
Jean Ann Fox of the Virginia Citizens Consumer Council said she has misgivings about relaxing regulation on natural gas providers before true competition exists within the industry. "As long as a utility has a monopoly position, the regulation of their profit should not be relaxed," she said.
The final bill contains some amendments suggested by consumers, including big industrial gas customers, Fox said. "We'll have to see in the implementation how it works."
The bill was amended and passed the Senate 40-0 on Feb. 21 and passed the House 96-1 on Feb. 23. Allen has until April 8 to sign, veto or amend the bill.
LENGTH: Medium: 82 lines KEYWORDS: GENERAL ASSEMBLY 1996by CNB