
DATE: Sunday, June 15, 1997                 TAG: 9706140558

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 
SOURCE: STORIES BY AKWELI PARKER

        STAFF WRITER

                                            LENGTH:  226 lines

DEREGULATION TURNS TABLES IN FAVOR OF THE CUSTOMER

The folks at Virginia Power see storm clouds on the horizon, more menacing than this summer's inevitable crop of thunderstorms.

The gathering storm is called deregulation.

One day soon, Virginia Power's customers will be able to choose their power supplier. And when they do, electric utilities like Virginia Power could take a pelting as customers bolt - and take profits with them.

Virginia Power's storm protection plan: Lock in customers' loyalty tomorrow by spoiling them with service today.

Expect the overtures to become quite visible this summer. In July the company will unveil a systemwide, toll-free ``1-888'' number that will replace hard-to-remember local numbers for billing, installation and repairs.

Other upgrades will be more transparent to customers, such as the automation the company will roll out over the next couple years.

The benefit to customers: speedier, more efficient service.

The hoped-for payoff for the company: survival.

``In the face of increasing competition, the company must do a better job of serving the customer,'' says Thomas E. Hamlin, an analyst with securities firm Wheat First Butcher Singer in Richmond.

In the power game, where competitors' products are indistinguishable, the buying public responds to two basic criteria - price and service.

``It's widely expected that to compete, you're going to have to offer more than just current,'' says Tom Hyman, vice president of distribution/operations for Virginia Power.

Big-time power users such as municipalities and regional co-ops already have the right to choose their electricity supplier as a result of Congressional legislation in 1992. Those power marketers, or ``wholesale wheelers,'' can be several states away.

Most experts agree that it's just a matter of time before Virginia follows the lead of states like California and Massachussetts in allowing ``retail wheeling,'' or sales to residential and other small customers as well.

CHANGING HISTORY

The changes at Virginia Power won't come cheaply or easily. The service improvements will cost $100 million. In addition, close to 500 workers in the company's commercial operations division - which includes meter readers, linemen and customer service representatives - have been told their services will no longer be needed.

Commercial ops, Virginia Power's biggest business unit with more than half the company's workers, is in the throes of a top-down re-organization.

Companywide, more than 1,500 have lost their jobs or been given notice as the utility slashes payroll, part of its 3-year-old Vision 2000 re-engineering. Another 1,500 left the company through buyouts, early retirements or other voluntary measures.

The company employs about 9,400, compared to an all-time high of about 14,000 in the mid-1980s.

Among the hardest hit will be the company's nearly 400-strong meter-reading force, which has yet to feel the downsizing blast.

The company is gradually introducing a computerized meter-reading network that could make today's pavement pounders as quaint - and as rare - as the milkman.

``The fact is that we have brought in new technology and it replaces people,'' says Larry Girvin, senior vice president commercial operations.

The bloodletting hasn't been confined to the rank-and-file, Girvin adds. ``We are affecting the overhead portion,'' he says, ``fewer officers, fewer managers.''

Although the company is attempting to find other spots for the displaced - the new jobs usually mean lower-skilled work for less pay.

When the smoke clears, the pared-down, centralized leadership of commercial ops will ultimately mean more responsive service for customers, says Girvin. And it's likely to cost consumers zilch - the company has all but advertised in neon its intention to freeze rates until 2002.

The changes have been a long time coming, says Jean Ann Fox, vice president of the Virginia Citizens Consumers Council.

``Obviously the utility should provide excellent service for their customer because they're a monopoly,'' says Fox, who also serves on a model workgroup for the State Corporation Commission's inquiry on deregulation. Since for the time being they're captive, consumers deserve outstanding service, she argues.

Not impressed by the coming improvements, she says it's ``regrettable'' that it's taking the threat of competition to prod these service upgrades.

``It's hard to get breathless about,'' says Fox. ``It sounds like good business practices any business that size should have.''

Out in the field, the shake-up in commercial ops has meant a paradigm shift for workers used to performing a certain job a certain way for decades.

``We have changed 25 years' worth of history,'' says Hyman, the distribution/operations v.p.

For example, in the past, all line workers did construction. If a new business needed a transformer box, a construction crew came out and put it in. But if the lights went out somewhere across town, there was a good chance that crew would have to stop what it was doing to chase the emergency.

``We would call whoever was closest,'' explains operations supervisor Larry Black, pausing while he directs a crew replacing a wrecked utility pole in Norfolk.

``That would pull me off my work.''

The disruptions made for lots of missed deadlines, wasted time and money, and, of course, peeved customers.

That's changing. The company's Eastern Region, which includes Hampton Roads, is the first to split its workers into two divisions, construction and operations.

Construction crews now have just one job - putting in new facilities. Operations crews are responsible solely for troubleshooting.

Now, says Black, ``we've got people whose job it is to do nothing in the world but fix and repair.''

The exception would be during storms, when all crews are expected to work until the lights are back on.

Regarded with a cautious ``let's-try-it'' attitude by workers when it debuted in March, the strategy is gaining acceptance in the ranks.

``At first I didn't think it was going to work,'' says Matthew Couch, a groundman who's been with the company for 15 years.

But, he says, ``it's better, and I think it's going to get better.''

MORE SERVICE, SAME PRICE

There are other changes afoot, such as letting employees take home company trucks (to cut travel and response times) and getting work orders via wireless modem through computers on the truck.

None of the changes occurred in a vacuum. In fact, they're the result of Virginia Power's biggest research effort to date. It included customer surveys, focus groups and countless strategy sessions.

Although the company has made huge strides since its days as Vepco - a period marked by runaway rate hikes and impassive service - customers told Virginia Power's market researchers they expect even more.

They said reliable service should be the company's No. 1 priority, according to Hyman. When the lights do go out, they want to be able to call the company and not get a busy signal. After that, they want an accurate restoration time.

And as might be expected, price is a concern, Hyman says.

Currently, Virginia's electricity costs rank slightly below the national average. Virginia Power and incumbent utilities nationwide must pull off a precarious balancing act - raising the bar on customer service without raising rates.

``Some have concluded you can't do both,'' says Mark McGettrick, the company's vice president for customer service.

But the coming high-tech gadgetry, despite its high initial cost, is designed to achieve just that, he says.

For instance, Virginia Power's phone system, with circuits that max out at 10,000 calls per hour, will have an emergency capacity of 100,000 calls per hour. The goal: Eliminate busy signals for storm-besieged customers.

There's more. On the billing end, the company plans to:

Make bank drafting available in the fall

Offer consolidated commercial billing - allowing centrally owned chains to get one monthly power bill instead of several

Ramp up its Internet offerings, which already allow on-line service hook-up and change of address without tying up one of its human phone operators.

With Fran still etched into memory and forecasters predicting 11 named tropical storms forming in the Caribbean, Atlantic or Gulf of Mexico through November, Virginia Power officials have their fingers crossed that the Commonwealth will be spared this year.

But if not, they say, the company will be ready to deliver a ``world class response'' to get power restored. Excluding such catastrophic events, the company's goal for the year is to have an average of 135 minutes or less of outage time per customer. Last year's total was 142 minutes, which translates into a system reliability rate of 99.97 percent, according to the company.

THE BRITISH TACTIC

More improvements are needed. Virginia Power President-elect Norman Askew, who replaces the retiring James T. Rhodes in August, brought the intensity of a quality control inspector to his last post.

As outgoing president of the United Kingdom's East Midlands Electricity, Askew knows about competing in the power business. The United Kingdom will probably have a fully competitive power market by next year.

``If you want us to visit your house we give you a timed appointment,'' he told Dominion Resources shareholders at the company's annual meeting in Richmond this April.

``We get it right 10,000 times a day and once a day, we screw up.''

Virginia Power parent Dominion Resources Inc. gobbled up East Midlands early this year for $2.2 billion - an in-vogue tactic for U.S. utilities wanting the skinny on surviving competition.

``I think we can learn from each other,'' Askew said at the meeting.

According to Virginia Power's officers, the company's efforts are already on the right track to weather competition.

Girvin, the commercial ops senior vice president, said the company's re-engineering task forces came up with the same solutions as East Midlands - independently.

``I spent some time over there with the organization,'' said Girvin, and Virginia Power's strategy is ``almost identical to what they have.

``It was really comforting to me,'' Girvin said.

Analyst Hamlin said that given what's known so far about the futuristic competitive landscape - that is, not much - the company has positioned itself well.

``They're trying to prepare for something for which the rules have not yet been established,'' Hamlin said. ``We're driving along the highway without any headlights.''

NO ONE'S SAFE''

Ultimately, even the suits in Richmond concede they can only do so much for the company's survival.

The litmus test will be getting the thousands of linemen, phone bank operators and support staff who survive re-engineering to buy into Vision 2000 - no small task given that they will have seen nearly one out of five co-workers leave the company in the past three years.

``That's a real challenge,'' admits distribution manager Hyman, ``to keep your employees motivated when it involves layoffs.''

Most employees agree it's a great company to work for, with generous salaries and benefits. But there's also a sense of unease and vulnerability, even in the ranks of the highly skilled linemen, whom the company has said are too vital to eliminate.

The general outlook, says one underground lineman: ``No one's safe.''

After giving a tour of the company's phone and operations centers in Norfolk, Hyman steps outside onto the dock where the company's red and gray trucks await their next sortie.

A few linemen are gathered outside and wryly joke that they'd better stop griping with such a luminary - Hyman - in their midst.

He brushes it aside, telling them that management wants to hear everything on the employees' minds, even if it's unflattering to company leadership.

``The truth of the matter is,'' he confides later, ``those are the guys who make or break this company.'' MEMO: [Related story also on page D1.] ILLUSTRATION: MORE POWER TO YOU

Virginia Power is taking a more consumer-friendly tack as the threat

of competition looms.

JOHN EARLE

The Virginian-Pilot

WHAT'S IN IT FOR CONSUMERS

GRAPHIC

[For a copy of the graphic, see microfilm for this date.]

FACTS

A subsidiary of Richmond-based Dominion Resources, Virginia Power

is among nation's 15-largest electric utilities.

It serves about 1.9 million customers - 409,419 in South Hampton

Roads - in 30,000 square miles of Virginia and North Carolina.