THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, March 31, 1995 TAG: 9503310517
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Medium: 57 lines
Virginia Power's proposal to vary the rate it charges its largest industrial customers on an hour-by-hour basis should be approved by the State Corporation Commission, the agency's staff recommended Thursday.
The SCC staff said the electric utility needs to try such programs ``to be prepared for an increasingly competitive market.''
The Real Time Pricing plan, which Virginia Power has proposed offering - on an experimental basis - to its 25 largest industrial customers is likely initially to cut the utility's revenues.
But Virginia Power has said it hopes that the factories participating in the pricing scheme will expand production so much to take advantage of lower rates that they'll end up buying more electricity over the long term.
``We view this recommendation as very, very favorable,'' Virginia Power spokesman Bill Byrd said. ``It's a clear indication that this is a program whose time has come.''
Competition in the electric-utility industry has been steadily increasing. Cooperatives, municipalities and other wholesale buyers of power have been the main beneficiaries. The Federal Energy Regulatory Commission proposed rules this week that would give such customers even more leeway to shop for power.
But ``retail'' customers - factories, shopping centers, even households - could also choose from competing providers in the decades ahead, if regulators follow through with plans.
To prepare for more intense competition, Virginia Power last week announced a major cost-cutting restructuring that could lead to the elimination of hundreds of its 10,700 jobs in the next year.
The utility has said that it also needed more flexibility in pricing electricity - especially to its largest customers. Utilities in neighboring states already are offering such programs. Virginia Power said that without its own program, some industrial customers may transfer production to factories in those states.
The Real Time Pricing plan would allow participating customers to shift up to 20 percent of their power purchases into the more flexible pricing scheme. Virginia Power proposes to tell the customers the day before what it will charge them for electricity each hour of the next day. That will allow users to schedule their plants to operate in the hours when electricity is the cheapest.
The SCC staff indicated in a report that its main concern about the plan is that other customers of the utility may suffer. One way that could happen is if Virginia Power's revenues drop and it tries to make up for the loss by jacking up everybody else's rates.
But it said the specter of greater competition requires regulators to loosen controls on the utility.
The three-member commission hasn't indicated when it will make a final decision in the case. by CNB