THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, January 22, 1996 TAG: 9601200185
SECTION: BUSINESS WEEKLY PAGE: 18 EDITION: FINAL
SERIES: Forecast 1996
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Medium: 76 lines
It's not quite the 800-pound gorilla of Virginia energy utilities, but Virginia Power is the largest and most influential. So its massive and ongoing reorganization, launched last year, is preoccupying many of the folks in and around the state's utility industry as 1996 unfolds.
``I think it's heightened the competition for us,'' says William A. Fox, president and CEO of Virginia Natural Gas, a unit of Pittsburgh-based Consolidated Natural Gas Co.
Since Virginia Power started putting its Vision 2000 makeover into effect last March, it has cut or targeted for cuts nearly 1,000 of its 10,500 jobs. And unlike most of the 3,000 other jobs it eliminated in the previous five years, the bulk of the latest severances are involuntary.
The savings so far from the reductions are nearing $100 million a year, utility officials have indicated. More cuts are in the offing in 1996: in Virginia Power's field and business-office operations and at its nuclear power plants.
And that's just Round 1, warns Robert E. Rigsby, Virginia Power's executive vice president. ``We can't expect this to be done once and then it's . . . business as usual,'' he said. ``I don't think it's ever going to be business as usual again.''
The reductions have taken a toll on employee morale. Many workers say top executives haven't sacrificed and point out that many managers continue to draw large bonuses - in some cases in direct payment for helping engineer plans that reduce work forces. Virginia Power defends the payouts, saying they're vital to retaining valued managers and part of a plan to tie an increasing percentage of pay to meeting performance goals.
The one indisputable fact is that the overall cost savings that Virginia Power expects to result from its streamlining should help the utility keep a lid on customer rate increases. Virginia Power's last general rate hike was in 1992. The utility said it doesn't expect to file for one this year.
Virginia Power said the average residential customer's monthly bill dipped from $84.77 to $82.88 between 1992 and 1995.
With the prices of its services falling, Virginia Power is posing more of a challenge to gas utilities and to independent power producers. But this competition is nothing like what's in the offing if some lawmakers and regulators in various states and at the federal level have their way. They want to make it possible for customers to eventually buy energy from a multitude of suppliers, even bypassing their local utilities.
Slowly but surely, the rulemakers have been easing utilities into a more freewheeling environment. Virginia's State Corporation Commission, for example, last year approved a plan that lets Virginia Power's 25 largest industrial customers shift up to 20 percent of their power purchases into a more flexible pricing scheme. The so-called ``Real Time Pricing'' plan allow users to schedule their plants to operate in the hours when electricity is cheapest.
At the same time, the utilities want to be free to go into new services. That's part of the thinking behind some legislative proposals they've made to Virginia's General Assembly this year - bills that would give the corporation commission the go-ahead to loosen a number of restrictions on utilities.
Folks in some related industries don't take kindly to the idea. Heating/air-conditioning and electrical contractors, for example, worry that Virginia Power has a bead on their businesses.
Here's a brief rundown of Virginia Power's and VNG's outlooks for 1996:
Virginia Power. Rigsby forecasts about 47,000 new customer connects this year, compared to about 45,000 in '95. Northern Virginia and Hampton Roads will experience the fastest growth rates, he says.
Virginia Natural Gas. New customer additions of about 9,000 in '96, Fox says, the same as last year. VNG will push harder to sell natural-gas heating/air-conditioning units for new homes. With major pipeline additions completed last year, VNG will settle into more normal capital spending of about $30 million a year for the next several years. Last year's spending: $50 million. by CNB