THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, June 30, 1996 TAG: 9606290366
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
LENGTH: 107 lines
Summertime in Hampton Roads usually means nonstop air conditioning and sizable Virginia Power bills. For an update on the state's largest utility, staff writer James Schultz went to Richmond to talk with Virginia Power president and CEO James T. Rhodes. Rhodes' remarks have been edited for clarity.
Q What's the trend in the cost of electrical power?
A The trend will be stable, or generally declining electric rates over the next several years. Since 1990, and compared with inflation, rates have been much, much less than inflation - about half (the inflation rate) for residential customers and less than half for commercial and industrial customers. I don't see that trend changing.
Q Are customers due for a price break or a price increase?
A Our last base rate increase was 1992. It's due to the good performance of our plants, where fuel is a cost factor. We're really been focusing on reducing our costs in all areas, and improving our performance. That's one of the reasons you're seeing no base rate increases. And we've got to continue that.
Q You've cut quite a few jobs over the past year. Do you plan deeper cuts?
A We have had major staffing reductions for the last six years or so, including in the last year. There probably will be more cuts. I think, though, that the numbers will be smaller than they've been in the past. We'll have some over the next year, and then adjustments for years to come.
Q Where will those cuts be?
A In the fossil and hydro area, we've finished the re-engineering, roughly 30 percent. We're going through that process now in nuclear. We had roughly a 40-person reduction last fall. We announced another reduction in May, and then tuned it up a little bit in June. Up to about 200 folks in nuclear will be affected now and through the rest of the year. We have about 2,300 people in nuclear. In what we call commercial operations, which is the transmission and distribution part of our business, it really contains as a group the largest number of people - roughly 5,000 employees. We're just going through the re-engineering there.
Q Are these cuts affecting your ability to maintain and repair the electric power grid?
A No. They aren't. All of our statistics - and we monitor this very carefully, like average hours out (on repair) - shows we're not diminishing our ability to serve customers. Take our phone center operations. Customers call in for routine or outage-related problems. We used to have phone centers in each one of 35 districts throughout Virginia and a few in North Carolina. A little more than a year ago, we concentrated these centers in three locations: one in Norfolk, one in Richmond, one in Fairfax County. We greatly increased the number of lines that people could call in on. Most importantly, we interconnected the phone centers. Because of the concentration, we can answer the phones more efficiently.
Q How have the cuts affected employee morale?
A Clearly folks express misgivings about the downsizing. That is a natural reaction when people feel insecure about their jobs - particularly in an industry like ours, which has traditionally been you come to work for a utility and you have a 30-year or 40-year lifetime job unless you do something really, really bad. Unfortunately, our industry is changing with deregulation and that kind of employment contract, an implied contract, is no longer true for us just like it's no longer true for a lot of industries.
Q Do you have enough energy-generating capacity?
A We have a very ample amount of generating capacity. We set a new, all-time peak record on Feb. 5 of this year, almost 15,000 megawatts. At the same time we were able to sell to other utilities 1,500 megawatts, about 10 percent more than we were using at peak demand. Our generating units have been performing exceptionally well. We usually have a 20 percent reserve margin. That day, it turned out that most of that margin was available. I don't see adding new generating plants in the foreseeable future.
Q Could new energy technologies under development - electric cars, for example, with rechargeable batteries - increase electrical demand?
A We think many of those lifestyle-improving technologies can be served without major increases in power plants. Electric vehicles would be charged primarily at night, when we have lower demand. What we would be able to do is sell power at a time when we have plenty of it to sell. That would improve the overall utilization of our system. We're selling more energy, but not having to add more capacity. If anything, that would have a favorable effect on rates. You're able to spread a fixed cost over a larger sales base.
Q What is Virginia Power doing to promote energy conservation?
A We formed an energy efficiency department in 1992. It was one of the first formed in the nation. Included in that department is energy conservation. We've worked with all classes of customers to advise them on improving their energy usage. We work on new technologies; for example, infrared paint drying. QWhat sort of strategic alliances are you entering into, and why?
A Our industry is starting down the path of deregulation and more competition. What that will probably mean is that utilities, like other industries, will tend to form more efficient structures. Alliances could play a important role in that. There have been about a dozen mergers of utilities proposed in the last two years. Not many have been finalized yet. Most of these mergers involve utilities smaller than we are. Virginia Power is about the 10th largest investor-owned electric utility of roughly 200 in the nation. We're already quite large and it's unclear whether a merger would improve our efficiency.
Q What's in the future for Virginia Power?
A We're positioning ourselves to be very cost-effective through re-engineering and by dividing up our company into business units. Nuclear is a business unit. Fossil-hydro is a business unit; commercial services is a business unit. We want to not only survive a major deregulation, but to thrive in that environment. Whether 10 years from now Virginia Power will look like it does today, I really can't say. I don't think anybody can. ILLUSTRATION: Color photo
James T. Rhodes
KEYWORDS: INTERVIEW VIRGINIA POWER by CNB