THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Wednesday, August 17, 1994 TAG: 9408170405
SECTION: BUSINESS PAGE: D01 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 95 lines
After weeks of legal maneuvers and rancorous accusations, Dominion Resources Inc. and its Virginia Power subsidiary have settled their dispute over the management of electric utility Virginia Power.
As part of an agreement announced Tuesday, the two companies will expand their boards and put more Virginia Power directors on Dominion's board.
With a settlement in place, Dominion and Virginia Power apparently avoided a solution imposed by state regulators.
The State Corporation Commission had expressed concern in mid-June that their dispute could hamper the reliability of Virginia Power's service to customers and launched an investigation into relations between the two companies.
Virginia Power, the state's largest electric utility, provides service to almost 1.9 million customers in Virginia and northeastern North Carolina. The utility accounts for 90 percent of the assets of Dominion, which also has operations in natural-gas drilling, electric-power production, and financial services.
By increasing the number of their directors serving on both boards from four to nine, the Virginia Power and Dominion boards will have more in common, spokesmen for the two companies said.
``These nine people will be familiar with Virginia Power's needs, commitments and public-service obligations,'' said William Byrd, a Virginia Power spokesman.
Mark G. Lazenby, a Dominion spokesman, described the overlapping membership of the two boards as an integral part of the settlement.
``It provides a solid basis for cooperation,'' he said. ``The divisions of the recent past are behind us.''
Securities analysts, too, described settlement as a favorable development. Wilbur W. Simao, an electric utility analyst at the Atlanta securities firm Sterne, Agee & Leach, estimated that the dispute had depressed the price of Dominion's stock by at least $2 a share.
``If it weren't for this battle, the stock would be trading at $40 to $42,'' he said. ``It is a very solid utility.''
Dominion's shares closed at $38, up 50 cents for the day.
As part of the settlement, Dominion retains Thomas E. Capps as its chairman and chief executive officer but will remove him from the Virginia Power board.
James T. Rhodes, an adversary of Capps, remains president and CEO, and a director of Virginia Power, but he will lose his seat on the Dominion board.
Meanwhile, the Richmond-based utility holding company named a new president and chief operating officer, Tyndall L. Baucom. A Dominion senior vice president who had worked for 23 years at Virginia Power, Baucom also joins the Dominion and Virginia Power boards. ORIGINS OF THE BATTLE
The battle between Dominion and Virginia Power sprang last spring from a strained working relationship between Rhodes, Virginia Power's CEO, and Capps, Dominion's CEO.
Rhodes had threatened to take advantage of an early-retirement program unless there were changes in the way he reported to the Dominion board.
Rhodes and others on the Virginia Power board had accused Capps of violating a 1986 order from the SCC that provided the utility with a measure of independence from its parent.
However, attempts to work out a new management structure and a plan for board succession fell apart in mid-June.
Under Tuesday's settlement, Rhodes will report to Baucom. The settlement also calls for a four-member committee to monitor the working relationship between Capps and Rhodes.
The agreement restores three directors - William W. Berry, James F. Betts and William G. Thomas - to Virginia Power's board. All three had sided with Rhodes in his struggle against Capps.
Dominion had accused the three of trying to seize control of the Dominion board and ousted them as Virginia Power directors on July 26. However, Berry and Betts will no longer serve on Dominion's board.
With the dispute resolved, ``the management can get on with the business of positioning (Dominion) to compete in the evolving electric utility marketplace,'' Edward J. Tirello Jr., an analyst with NatWest Securities Corp., said in a report on the agreement.
Dominion's stock price, like the prices of many electric utility stocks, has been depressed by concerns about rising interest rates and the specter of greater competition in the electric-power industry.
While announcing their settlement, Dominion and Virginia Power said they had asked the SCC to halt its investigation into the way Virginia Power is governed by its board and by Dominion.
The SCC also is investigating other relationships between Virginia Power and its parent, including allegations that Dominion interfered in the utility's negotiations for coal-shipment contracts with CSX Corp.'s railroad.
KEYWORDS: VIRGINIA STATE CORPORATION COMMISSION
VIRGINIA POWER DOMINION RESOURCES INC.
by CNB