ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Saturday, August 3, 1996 TAG: 9608050025
SECTION: BUSINESS PAGE: A6 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
COMPETITION AMONG ELECTRIC COMPANIES for retail customers may not be a good thing, some officials say. Virginians already pay among the lowest rates in the U.S.
Virginia should move slowly and carefully as it considers allowing electric utilities to compete for customers, the staff of the State Corporation Commission concluded in a just-completed, year-long study.
Because electric rates are low in Virginia compared with other states, Virginia may have "little to gain and much to lose" by being a leader towards competition on the consumer level, the commission's staff said in the report released this week.
Consumers, such as those in Virginia, who have benefited from low rates shouldn't have to pay more so others can get cheaper rates, the report said. Reliable and affordable electric service, the staff wrote, is critical to the well-being of Virginia's citizens and business.
"It is unnecessary and inadvisable to implement a massive restructuring of the [power] industry at this juncture, as several states are now undertaking," the staff said.
The commission and the General Assembly will use the report as they consider competitive issues involving the state's electric power industry. It contains many recommendations and raises issues such as whether competition will benefit small customers and whether it will damage the reliability of power service.
Del. Clifton "Chip" Woodrum, D-Roanoke, is vice-chairman of a special General Assembly subcommittee studying possible changes in the power industry.
He hasn't seen the report yet, but generally Woodrum said he wants to be sure that the state keeps a power generating and delivery system that continues providing the cheap power Virginia has long enjoyed.
"The bottom line is economic well-being," Woodrum said. "I need to be shown where it's broke before I try to fix it."
The move toward a competitive electric power industry was accelerated by passage of the 1992 federal Energy Policy Act. That's when Congress authorized the Federal Energy Regulatory Commission to order utilities to allow other utilities or independent power generators to use their transmission lines to move power to wholesale users - generally commercial and industrial customers. It was left up to the states, however, to decide if they want to allow competition among utilities for retail customers.
Generally, states where the cost of electricity is high, such as California, New York and Massachusetts, have advocated retail competition. They believe competition could bring down power costs, and they have support from businesses that use large amounts of electricity.
Some utilities and consumer groups, however, argue that only large customers will benefit from retail competition. Environmental groups have raised concerns that competition could lead to more pollution from power plants, which already are among the nation's major polluters.
A survey earlier this year of senior staff members in 20 state regulatory commissions, including Virginia's State Corporation Commission, found that many of them think the ability of consumers to choose their electric companies will develop more slowly than is generally believed.
Only four states surveyed by the Houston-based Terra Group had moved toward retail electric utility competition; and in the others, enthusiasm for competition was moderate to none. The regulators surveyed believe large utilities and large industrial customers would benefit from competition but residential and smaller business customers would end up paying higher rates.
Jean Ann Fox of the Virginia Citizens Consumer Council in Richmond said she hasn't seen the SCC's new report. However, Fox said Virginia needs to make sure competition doesn't leave some customers without service or unable to afford it.
If the state does allow competition, then it should mean lower rates for residential customers, she said.
In anticipation of the arrival of competition, many utilities have changed the way they operate. Some, including American Electric Power Co., have endorsed the idea of retail competition. Because AEP depends almost entirely on coal-fired steam plants for its power rather than more expensive nuclear energy, it is a low-cost producer, which would give it an advantage in a competitive marketplace.
It was the emergence of competition that led AEP in January to shift from an organization based on geography to one divided into its basic functions of power generation, transmission and distribution. The name Appalachian Power Co., under which AEP formerly operated in this area, fell victim to the parent company's desire, for competitive reasons, to operate under a single brand name.
LENGTH: Medium: 86 linesby CNB