THE VIRGINIAN-PILOT
Copyright (c) 1997, Landmark Communications, Inc.
DATE: Monday, January 20, 1997 TAG: 9701180246
SECTION: BUSINESS WEEKLY PAGE: 24 EDITION: FINAL
SERIES: 1997 FORECAST
SOURCE: BY AKWELI PARKER, STAFF WRITER
LENGTH: 84 lines
Electric utilities in Virginia are taking a wait-and-see position as politicians, state regulatory commissions and utility companies elsewhere get their hands dirty as the test subjects for the industry's biggest issue: competition.
Massachusetts and California may allow customers to shop around for power providers as early as 1998.
New Hampshire is already testing competition with a 17,000-customer sample.
The State Corporate Commission has required Virginia electric utilities to submit mountains of data by March 31 in its study of restructuring to a competitive environment.
Expect a quiet session in Richmond this year as utilities and legislators wait for the SCC's findings and take notes on the experiences of states further along in the de-regulation process.
Virginia Power spokesman Bill Byrd said the company believes that the traditional regulatory approach of tightly controlling profit margins must give way as competition unfolds in the electric-utility industry.
Virginia Power helped push a bill through the General Assembly last year that allows the commission to consider alternate regulatory approaches for the state's electric utilities.
Among the alternate schemes Virginia Power said it was considering was a freeze on its rates for the next few years in exchange for a lifting of the cap on its profits.
Right now, the company's profits are limited to a predetermined return on equity. If the company is more profitable than allowed, it must refund money to ratepayers.
Virginia Power will continue its Vision 2000 restructuring, an effort to streamline the company that has drawn criticism for cutting loose some 1,200 workers in the past two years.
``There's no secret that downsizing will continue,'' said Byrd of Virginia Power, adding that the initiative has helped keep rates stable for customers.
Adjusted for inflation, customers' rates have actually decreased, according to Byrd.
``We have not raised rates in five years,'' he said, and the company doesn't plan an increase for 1997.
Last year Virginia Power began implementing a $100 million service improvement plan the company said will pay for itself ``over time'' and will not result in a rate increase.
Among the improvements: automated meters that transmit usage information to the company via radio signals and a revamped telephone customer service center able to handle 100,000 calls an hour during storms.
Virginia Power will also introduce modem-equipped computers in company trucks to give workers more complete information and cut response time to outages and other problems. The company expects the improvements, most of which should be complete by the end of 1998, to cut customers' waiting time for power restoration by 20 to 30 percent.
Virginia Power, which has just under 2 million customers, expects to connect about 44,000 more this year.
The competition bug hasn't been confined to the electric power industry. Virginia Natural Gas is also keeping a watchful eye on other states grappling with deregulation.
But it's too early to tell just what form it might assume in Virginia, says VNG spokeswoman Margie Ives.
``It's still unfolding,'' Ives said.
Consumers trying to predict natural gas heating prices for the coming year might have better luck predicting the weather.
Last year's brutal price increase resulted from, among other things, a cold winter, low fuel reserves and fears that this winter would also be unusually cold.
In both industries, open competition would allow business or residential users to choose who sells them power or natural gas, much the way they pick long distance phone service.
``There are some dangers to it,'' Byrd said. For instance, the possibility that more choices will benefit bulk users such as big companies at the expense of residential customers.
``The other key issue is what the 105th Congress will do,'' he said.
A ``very strong movement'' is pushing for blanket legislation that would have a similar effect on utilities as the Telecommunications Act of 1996 had on the phone industry. MEMO: Dave Mayfield contributed to this report ILLUSTRATION: [Color Photo]
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KEYWORDS: 1997 FORECAST UTILITIES