THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, December 3, 1994 TAG: 9412030270
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Medium: 60 lines
Virginia's utility regulators should have broader powers over electric utilities and utility holding companies to better protect ratepayers, private consultants hired by the state have concluded.
In a preliminary report to the State Corporation Commission, consultants said the SCC should be able to order the divestiture of Virginia Power from its parent company, Dominion Resources Inc., if the utility's financial health is seriously threatened.
The SCC, which already has broad powers over utility rates and levels of service, ordered a sweeping examination into the organizational ties between Virginia Power and Dominion in late August after a bitter struggle between the two companies' boards.
Virginia Power and Dominion had no immediate comment on the consultants' report. The SCC has given Dominion and Virginia Power three weeks to respond to the preliminary version of the report.
Liberty Consulting Group of Baltimore, Md., said in the 100-page report that a divestiture of Virginia Power also would be warranted if Dominion's non-utility investments adversely affected Virginia Power's cost of capital or access to capital, Divestiture also would be justified if Dominion's non-utility plans jeopardized opportunities or strategies that Virginia Power needed to remain competitive among higher quality electric utilities, Liberty Consulting said.
The report also recommended that the commission have the power to examine any records, plans and reports of the holding company, the utility, and any non-utility affiliates that the SCC considers necessary.
A second consultant who contributed to the report recommended that the SCC have the authority to restrict certain holding-company actions in an effort to insulate Virginia Power and its ratepayers from adverse risks of diversification.
Dr. J. Robert Malko, a financial consultant and economics professor at Utah State University, said the SCC also should be able to assess a special fee on the stockholders of a utility holding company like Dominion to cover the cost of additional monitoring and analysis of electric utilities by the SCC.
Differences over the pace of cost-cutting at Virginia Power and Dominion's diversification efforts provoked a split between the boards of the two companies last spring.
When several senior managers threatened to depart Virginia Power, the SCC expressed concern that the turmoil might threaten the delivery of reliable electric service to Virginia Power's customers.
After a highly visible struggle in July and early August, the boards of Dominion and Virginia Power negotiated a settlement, which included a new structure for the Virginia Power board and a new reporting arrangement for the utility's CEO, James T. Rhodes.
Despite the settlement, the SCC announced Aug. 24 that it wanted a broader investigation into ties between the two companies. A final version of the report is due by March 31, 1995
KEYWORDS: REPORT UTILITIES SCC by CNB