Virginia Breaking News

New Pilot Program Aimed at Boosting Competition 11/18

State Should Heed Warning On Power Rates 10/24

Governor and Attorney General Promote Electricity Rate Freeze 10/16

Virgina Power Gets Ok for Customer Choice Pilot Plans 9/17

Deregulation Brings Profit But No Competition to Dominion Power 9/11

Dominion Virginia Power Won't Take Fight to Sell Power Outside State to High Court 8/7

New Pilot Program Aimed at Boosting Competition

(November 18) Dominion Virginia Power customers will receive letters in the mail this week encouraging them to sign up for a new competitive bid pilot program approved by the State Corporation Commission with an opportunity to save money on electric bills.

Letters will be mailed to customers in Eastern Virginia during the week of Nov. 17, followed by Central Virginia the week of Dec. 1, Western Virginia the week of Dec. 8, and Northern Virginia the week of Dec. 15.

"This is an innovative opportunity for our customers to become more involved in the competitive electricity market in Virginia and have a choice in who provides their electricity," said Jay L. Johnson, president and chief executive officer. "I encourage customers to sign-up for this pilot program. For those who chose another provider, Dominion will still be there to deliver the service to you."

Volunteering for the competitive bid pilot, which is for residential and certain small businesses, began formally Nov. 17. Customers will be selected by late January 2004 and placed in a "buying group" with about 14,000 other customers in their geographic area. The State Corporation Commission will oversee a competitive bid process to select the lowest cost supplier to provide electricity to each group. The pilot will continue until the July 1, 2007, expiration of capped rates.

Regardless of which company supplies a participant's electricity, Dominion will still deliver it to the customer and maintain wires, poles and equipment. Any time during the pilot customers can return to Dominion for electricity supply service at their current rate, which is capped until July 1, 2007.

Source: PRNewswire

State Should Heed Warning On Power Rates

(October 24) Competition for electric utility customers in Virginia is developing far slower than expected, two state officials told a General Assembly commission on deregulating electric utilities. As a result, they said, Virginia consumers will be "victims" of deregulation, not beneficiaries, if rate caps are removed in 2007, as current state law requires. Secretary of Commerce and Trade Michael J. Schewel and Deputy Attorney General Judith Williams Jagdmann told commissioners that the rate caps need to be extended until 2010.

The legislators had better listen. The fantasy of every monopoly is no regulation and no competition. And that's where Virginia's headed. Obviously, the free market can effectively suppress and even reduce rates only if it is a true market with different companies vying for customers. Without competition, uncapped electricity rates would go through the roof. In a letter to the commission last week, the two officials gave several reasons why competition has been slow to form: "The California energy crisis, the collapse of Enron, the doubling of natural gas prices, delays in Virginia utilities joining regional transmission entities, increased uncertainty with federal regulation, and weaker capital markets in general and particularly for generations plant developers."

Fortunately, there is no good reason to rush to deregulation in Virginia, since rates are already relatively low, as they are throughout the South. Besides, regulations still in place protect against the kind of blackout that recently cast a large chunk of this country and Canada into darkness. Why rush to trade low rates and certainty of delivery for high rates and risk?

Tellingly, Virginia is the only one of 16 Southern states that is moving toward deregulation. The two power utilities serving most Virginians are seeking permission from the state to join a regional transmission organization (RTO) called PJM Interconnections. It encompasses relatively high-rate states in the Mid-Atlantic region and the Midwest.

Virginia Beach Del. Bob Tata, a member of the commission and chair of a key energy subcommittee, has a better idea. He suggests that Virginia wait until an RTO is formed in the low-rate South. Because competition within an RTO determines rates, competition within a low-rate RTO would be greatly to Virginia customers' advantage.

For now, legislators should heed the advice of Schewel and Jagdmann and delay the uncapping of rates, so Virginians don't get shocked.

Source: Virginian Pilot

Governor and Attorney General Promote Electricity Rate Freeze

(October 16)  Top Virginia officials have acknowledged that electric deregulation and power-industry restructuring have not gone as well as expected. For that reason, the offices of the governor and the attorney general are urging the General Assembly to consider extending the capped base rates of Virginia electric utilities by three years until mid-2010.

Extending the capped rates is intended to protect consumers from the possibility of extreme rate increases should competition among electricity suppliers not develop.

In a letter to the special legislative panel, Secretary of Commerce and Trade Michael J. Schewel and Deputy Attorney General Judith W. Jagdmann, the state's consumer counsel, wrote that "it is most important that we assure that Virginia consumers are not the victims of a deregulated market lacking effective competition post-2007."

Under terms of Virginia's 1999 electric-deregulation law, base electric rates of state utilities are frozen or "capped," although overall rates can be adjusted up or down to account for changes in power-plant fuel costs.

Base rates are to remain capped through July 1, 2007, when a transition to electric competition is scheduled to end and market prices come into play.

The problem is that competition among electric suppliers has not developed as the legislature had hoped; in fact, there has been practically no competition for Virginia's incumbent electric utilities.

To stimulate competition, the two suggest that lawmakers eliminate or phase out a special charge customers of utilities, including Dominion Virginia Power, must pay if they switch electricity suppliers.

A State Corporation Commission study for the legislature has indicated that Virginia Power may have earned $900 million more under capped rates between 1999 and 2002 than the company would have earned under traditional rate regulation. Most of the $900 million was earned in 2002.

Lawmakers provided that utilities could collect more than usual under capped rates to offset potential losses associated with deregulation. But the General Assembly has not determined whether such losses ever materialized.

Source: Richmond Times-Dispatch

(September 17) The State Corporation Commission has granted Dominion Virginia Power permission to begin three new pilot programs of customer choice. Virginia Power proposed the programs in March in the hopes that they will help jump-start retail electric competition. Retail competition has been practically nonexistent despite having been legal since Jan. 1, 2002. The pilot programs could involve more than 65,000 Virginia Power customers from various customer classes. One pilot for 150 of Virginia Power's largest industrial customers is designed to provide information on developing market-based pricing for those customers.

Another program will allow two or more Virginia localities to pool Virginia Power residential and small-business customers and request bids from competitive power companies to serve the entire group. Residents will have the option of declining participation in the pool.

The third program will allow competitive suppliers to bid to serve blocks of residential and small-business customers. As many as 43,000 volunteers will be sought. If not enough customers volunteer, Virginia Power will be allowed to randomly select customers for participation, again giving them the option of declining to participate. If competitive market prices paid by the volunteers exceed Virginia Power's rates, customers would be refunded the difference.

To encourage participation by competitive suppliers, Virginia Power is reducing by half the "competitive-transition" or "wires" charge that customers participating in the test programs will have to pay. The state's electric deregulation and restructuring law allows utilities to assess the charge to cover any losses they may have from investments they made before deregulation to serve all customers. The lowered charge may make it easier for competitors to beat Virginia Power's capped electric rates.

The SCC said that Virginia Power could start the programs as early as Jan. 1. They will run through July 1, 2007, when the General Assembly has said the state's transition to competitive electric markets should be over and capped electric rates will be lifted.

Source: Richmond Times - Dispatch

Deregulation Brings Profit But No Competition to Dominion Power

(September 11)  Virginia's drift toward deregulating its electricity markets by 2007 is proving very profitable for Dominion Virginia Power.

Deregulation was touted as a way to generate more competition for Dominion, the state's biggest power provider. But that hasn't happened anywhere in Virginia, and Dominion has earned $886 million more over the past four years than state officials said it would have kept as a fully regulated utility.

But Dominion still seeks a rate increase in 2004, hoping to recoup $441 million. The company said the price increase was needed to cover the rapidly rising prices that it paid for the fuel it used to generate electricity. Although Virginia's electric rates are largely capped until 2007 -- when deregulation is expected to fully take effect -- Dominion and other utilities can seek rate changes based on fluctuations in fuel prices.

Dominion disagrees with the formula that regulators used to calculate the $886 million in profits that regulators are terming as excess. The money that the company earns under capped electric rates, Dominion officials have argued, is a reward for becoming more efficient and a way for the company to recoup what the utility will lose under deregulation.

Many of the current deregulation battles center on whether Dominion's assets, such as electric plants and transmission lines, will gain or lose value as competition enters Virginia. As long as there's no agreed-upon method for calculating how Dominion's economic position will change, the arguments will continue.

Also, without an agreed-upon method, Dominion will continue to add a charge to the bills of any customers who want toswitch to a new electric company. That "wires charge" has made it impossible for other energy suppliers to compete.

That's why the State Corporation Commission, which regulates utilities, urged the General Assembly -- in the SCC's annual report released in August -- to halt parts of the march toward deregulation. The utility-regulatory agency issued the same recommendation a year ago. If Dominion and other large utilities join a regional power grid by July, the federal government will assume some of the state's authority to guide the deregulation process. That's the commission's biggest fear, the report indicates.

Source: Newport News

Dominion Virginia Power Won't Take Fight to Sell Power Outside State to High Court

(August 7) Dominion Virginia Power's proposal to sell electricity usually reserved for Virginians set off a power struggle over the past year between Virginia and federal regulators. It also angered Dominion's largest industrial customers and power companies that want to compete for Virginia consumers.

The Virginia State Corporation Commission rejected the deal in June, and Dominion has decided not to appeal the case to the Virginia Supreme Court. Instead, the main provider of electricity in Hampton Roads left itself in regulatory limbo by not forcing a court to decide whether the state or federal government could approve certain power deals.

This is the second time that the state has fended off a federal power grab, and a third might be on the horizon. Virginia previously denied a Dominion request to take its power generation away from Virginia Power and put it into a subsidiary regulated by the federal government.

By the end of 2003, the SCC is expected to allow Dominion to join PJM Interconnection, a group that directs a regional power market stretching from Illinois to the Atlantic Coast. PJM will dispatch Dominion electricity under the guidance of federal regulators. If the SCC tries to make Dominion's entry into PJM contingent on retaining state authority, federal regulators might object.

A Virginia Supreme Court case would have had serious implications for whether competition develops before Virginia ratepayers lose the protection of electricity price caps in 2007. Virginia legislators and regulators could have lost some of their clout to create rules aimed at opening energy markets and pressuring Dominion to keep its customers' bills low.

Even though the SCC saw the potential for consumers and competition to suffer because of the Dominion proposal, the commission approved it on the condition that the SCC could cancel the deal at any point. Federal regulators told Dominion to remove the condition because only the federal government had power to order cancellation of wholesale interstate power sales.

The agreement that the SCC rejected last month would have allowed Virginia Power to sell electricity to other firms and Dominion Retail, a sister company. The SCC saw the potential for Virginia Power to abuse Virginia's deregulation laws while boosting profits for parent company Dominion Resources and costs to customers.

Source: Daily Press, Newport News

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