VA. Power to Waive Charge in 2005

VA. Power to Waive Charge in 2005 ; the Decision Could Be a Benefit to Rivals Seeking to Compete With Utility

Dec 11 - Richmond Times - Dispatch

A special charge that many say has hampered competition in Dominion Virginia Power's service territory will disappear, at least for 2005.

In a filing with the State Corporation Commission this week, Virginia Power said it does not plan to collect a wires charge - also known as a competitive-transition charge - from any of its customers next year.

The wires charge is added to the bills of customers who switch electricity purchases from Virginia Power to a competitor. The charge on each kilowatt-hour of electricity consumed is intended to compensate the utility for investments it has made to serve the departed customers.

The SCC filing has generated some optimism among representatives of competitive electricity suppliers, who say removing the wires charge could provide them more opportunity to enter the Virginia market and make a profit. However, the possibility of the wires charge returning in 2006 causes them concern.

The state's electric deregulation law allows Virginia Power to collect a wires charge through mid-2007.

To stimulate competition, which so far has been nonexistent, the General Assembly this year amended the deregulation law to allow customers to avoid paying wires charges if they would agree to certain conditions. For 2005, at least, that stimulation will not be needed.

Virginia Power will forgo the charge next year because rates for electricity on the open market during a test period in September and October exceeded the company's generation rates. So even if some customers defect, Virginia Power could sell their electricity on the open market without suffering a loss.

Next year, the "price-to-compare" is expected to be higher than this year's. The price to compare is the figure competitors must undercut to offer Virginia Power customers a savings on their electric bills. A higher price-to-compare might lure competitors into Virginia by giving them more of a chance to make a profit.

With market prices for electricity trending downward recently along with other energy prices such as those for oil and natural gas, competitive suppliers may find Virginia even more attractive.

A steady run-up in electricity prices in the past year had hurt prospects for competition, said David Holt, who oversees competitive markets for Virginia Power. "I'm hopeful what we might see this year is the flip side of that," he said.

"The lack of a wires charge helps, but because we could still have one in 2006 and 2007, it still creates a lot of uncertainty for suppliers," said Mike Swider of Strategic Energy, a competitive supplier active nationally. Swider said he hopes Virginia Power will consider eliminating the charge for good.

Strategic Energy, Swider said, would not want to begin serving Virginia customers and then see the wires charges return in 2006 to wipe out any saving Strategic Energy had provided those customers.

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