DATE: Wednesday, April 9, 1997              TAG: 9704090497

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY AKWELI PARKER, STAFF WRITER 

                                            LENGTH:   77 lines

VIRGINIA POWER OVERCHARGED CUSTOMERS, ACCORDING TO SCC AUDITIF THE COMPANY DID OVERCHARGE, THE REFUND WOULD WORK OUT TO ONLY ABOUT $2.25 A MONTH FOR THE AVERAGE HOMEOWNER, AN SCC SPOKESMAN SAID.

For anyone who's ever complained about the electric bill being too high, some influential people in Richmond agree.

Virginia Power overcharged customers by nearly $100 million in 1995, according to a State Corporation Commission audit of the utility's 1995 Annual Information Filing.

The power company disagrees, pointing to calculations of its own for 1996 showing that it underearned by $35 million.

The bottom line, contends the SCC: The utility exceeded its allowable return on equity - a measure of profitability determined by dividing net income by common stockholder equity.

Generally, the higher the company's profit, the higher its return on equity.

The SCC allows Virginia Power a return on equity between 10.5 and 11.5 percent. But according to the commission staff's audit, the utility took a 13.26 percent return.

If the SCC staff audit is correct, it would mean the power company overcharged customers in 1995 by $95.6 million.

But those hoping for a refund shouldn't get too excited.

For the average homeowner, that works out to about $2.25 a month, according to Ken Schrad, a spokesman for the SCC.

And not even that if the full commission sides with the utility.

``We believe they're considerably off,'' said Bill Byrd, a Virginia Power spokesman. ``We have more recent data, generated off of 1996, that show that we are $35 million under (the return on equity cap).''

Byrd said that company accountants are still crunching the 1995 numbers, but ``they don't believe we are in an overcollecting position.''

A number of factors could have gone into the apparent overcharge, Schrad said.

The big one - Virginia Power hasn't had a rate change since 1992. Between then and 1995, the year for which the audit was conducted, the company saw lots of fluctuations in its operating costs - upon which billing rates are based.

Lower interest rates, for instance, have lowered the company's cost of borrowing money since 1992.

But the company is laying off thousands of workers as part of its Vision 2000 re-organization, which has cost the company $120 million over the past two years.

Renegotiations of contracts with non-utility generators - companies from which Virginia Power sometimes buys energy - also affect the equation.

These and other variables combine to paint a very different picture than when the SCC reviewed the company and authorized rates in 1992.

Byrd said the SCC review also discounted or disqualified the true costs of Vision 2000, depreciation of assets and auxiliary enterprises such as the company's Evantage energy services unit.

He stressed though, that the SCC report ``was not all bad news.

``We are heartened that they recognize stranded costs are an issue.''

Byrd said the company was particularly pleased that the commission considered letting Virginia Power apply the alleged overearning toward writing down nearly $500 million in so-called regulatory assets.

Those are infrastructure investments the company made to satisfy regulators and serve its customers.

The commission could order Virginia Power to refund the money to customers, freeze its rates or reduce them.

``When that might happen, I don't know,'' Schrad said.

The commission will have its hands full for some time as it looks at the utility's books for 1996 and reviews Virginia Power's alternate regulatory plan, which it submitted to the SCC last month.

Preparing for expected competition, the plan calls for the removal of the current profit cap in exchange for stable rates through 2002. Virginia Power officials point out that, adjusted for inflation, rates have decreased by 12 to 14 percent since 1992.

That claim does not include fuel costs, which are subject to the whims of the spot market and passed on directly to customers.

Schrad said the last time he remembered the commission ordering Virginia Power to give a refund was the late 1980s, because of a federal tax law change.

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