THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, December 22, 1994 TAG: 9412220529
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Medium: 72 lines
Recommendations that the State Corporation Commission widen its regulation of electric utilities are ``unwarranted and unwise,'' Virginia Power and its parent company said Wednesday.
A bitter dispute earlier this year between the utility and its Richmond-based parent, Dominion Resources Inc., prompted the recommendations, made by private consultants. Those suggestions were made even though the companies settled their differences in August.
In a joint filing with the SCC, the companies said Wednesday that they are building a framework for the long-term cooperation they pledged at the time of the settlement. They insisted that their plan will benefit both customersand shareholders and that there's little need now for extra oversight by regulators.
Virginia Power and Dominion Resources did, however, say they already are implementing or considering putting into effect some of the other ideas suggested by the consultants in a preliminary report earlier this month. The consultants were hired by the SCC.
One of the most far-reaching recommendations was that the SCC consider ordering the divestiture of Virginia Power from Dominion Resources if the parent company's growing non-utility investments made it more difficult or expensive for Virginia Power to raise capital.
J. Robert Malko, a financial consultant and economics professor at Utah State University, also suggested in his consultant's report that Dominion Resources' other investments be limited to no more than 25 percent of Virginia Power's total assets.
``The limit on non-utility investment should be set by (Dominion Resources) and by the market, not the commission,'' the two companies said in response.
The parent company's investments in other activities, such as natural-gas drilling and financial services, have improved its access to capital and given it an advantage over other utility stocks, they contended.
The companies also object to consultant recommendations regarding the composition of their boards and how they appoint officers.
Liberty Consulting Group of Baltimore suggested to the SCC that Virginia Power's board choose its own replacement members without influence from Dominion Resources and that Virginia Power's chief executive should not have to report to any officer of the parent company.
But both recommendations are in conflict with terms of the August settlement between the companies. A committee of four who serve on both companies' boards was established to nominate future members for both Virginia Power and Dominion Resources. Meanwhile, James T. Rhodes, Virginia Power's CEO, reports to a newly appointed Dominion Resources chief operating officer, Tyndall L. Baucom.
Previously, Rhodes had reported to Dominion Resources' chairman and CEO, Thomas E. Capps. The two men's clashing over the way Virginia Power was run prompted their companies' dispute and caused concern at the SCC that a threatened exit by Rhodes and other Virginia Power senior managers would seriously harm the utility.
The acrimony was so great that the SCC decided that in spite of the companies' settlement, it would examine their relationship with an eye toward possible regulatory changes. That's what led to the consultants' reports.
But in arguing against big changes, the two companies insisted their relations now are relatively harmonious.
``Like any good compromise,'' they noted, ``not all elements are supported by all parties, but all parties support the total package as the best overall solution.''
In their filing, they said they've already adopted some of the consultants' suggestions, including returning to Virginia Power control over its own cash management, long-term financing and legal services.
They said they plan to better coordinate their planning efforts - something the consultants said is needed. by CNB