- The Washington Times - Wednesday, December 20, 2006

RICHMOND (AP) — Dominion Virginia Power will ask state lawmakers to end Virginia’s five-year experiment with competition in the electricity business.

The state’s largest public utility called for a return to state regulation of electric rates Tuesday, five years after Virginia fixed rates and allowed retail customers to shop for their power supplies.

If approved by the General Assembly in the session that begins Jan. 10, the proposal would lift the cap on retail rates at the end of 2008, two years earlier than under current law. It also would establish a new way of setting rates that would not rely on market prices.

The proposal was prompted by fears about the danger of allowing competitive power markets to eventually set retail rates for millions of homes and businesses across the state.

“It’s an acknowledgment that it’s not going to work for Virginia,” said Irene Leech, president of the Virginia Citizens Consumer Council. She said Dominion’s proposal “is exactly where we need to be headed.”

However, Dominion’s retreat from the competitive market signaled the beginning of a new debate over how high a profit Virginia should guarantee utilities for building and operating power plants to serve homes and businesses in monopoly territories. The company wants a 6 percent margin above bond rates for its return on equity, and the possibility of a higher return based on performance.

Consumer advocates say that return would be too high, while State Corporation Commission member Theodore V. Morrison Jr. said the formula “would be most unusual” for Virginia.

Dominion Virginia Power officials said they need a new way of setting rates that would guarantee a high enough return to ensure that financial markets would supply the capital necessary to expand and operate the generation and distribution system.

Dominion officials proposed the change at a meeting of the Commission on Electric Utility Restructuring, which had heard hours of testimony about the low competition and high electric rates in other states because of deregulation.

Maryland lawmakers and residents were outraged last year when the Public Service Commission approved a 72 percent increase in electricity rates for Baltimore Gas and Electric Co. customers after the state’s caps came off. Pepco customers saw a 39 percent increase.

The General Assembly passed legislation in the summer to limit the BGE increase to 15 percent for the year, but regulators must come up with a plan to phase in the rest of the increase by January 2008.

“We’ve presented this proposal for two reasons,” Dominion spokesman Jim Norvelle said yesterday. “It recognizes that retail competition likely will never be an efficient retail price regulator, and that’s especially for our residential customers. We’ve seen what’s going on in other states and certainly we don’t want that to happen to our customers in Virginia.

“Second, this proposal would give us stability to provide better incentives than restructuring for building new power stations and other facilities to maintain our high level of service reliability.”

The proposal would allow competition to continue for wholesale electric supplies to large commercial and industrial customers.

“There is a persisting concern about the deregulation of electric generation, not only in the commonwealth but across the country,” said Sen. Thomas K. Norment Jr., James City Republican, chairman of the commission. “It’s time to remake the bottle.”

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