Armstrong to seek electric rate regulation

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The delegate says Virginia should return to the regulatory system in place before 1999.

By Landmark News Service

RICHMOND — After several months of study by an informal working group that he created, Del. Ward Armstrong remains convinced that Virginia should scrap its 3-year-old law that partially regulates the state’s electric utilities.

Armstrong, whose House district includes a portion of Carroll County, believes the law needs to be strengthened.

He said Thursday that he again will introduce legislation that would return Virginia to a regulatory system that existed until 1999, when the state began a failed experiment with deregulation of investor-owned electric utilities.

The bill likely will be one of two options Armstrong’s group will propose in an effort to give state regulators more control in setting electric rates.

Armstrong, D-Henry County, began to focus on the issue early this year in response to constituent complaints about Appalachian Power Co. rate increases.

He made repeated attempts to advance legislation that would impose tougher state regulations on the power company, but the bills died in a House of Delegates committee.

Lawmakers passed emergency legislation requiring the company to suspend an interim rate charge on customers, but Armstrong has argued that more needs to be done.

Armstrong, the House minority leader, said Thursday that he expects “an uphill struggle” on the issue in the 2011 General Assembly session, but hopes a report produced by his working group will strengthen his argument. The report should be ready by the end of November, he said.

“If the raw question that’s asked is, ‘What is the best thing we can do to lower rates in this state?’ I think we all agree that returning to the way we regulated utilities prior to ‘99 is the best way to do it,” Armstrong said at a meeting of his work group, which includes legislators, business people, a former utility executive and two former members of the State Corporation Commission.

An alternative proposal would require utilities to bundle various rate increase requests into a single case and eliminate stand-alone adjustments for factors such as transmission costs, environmental compliance and energy efficiency programs. Armstrong described it as a “half-a-loaf” solution.

Virginia began moving away from a traditional cost-of-service regulatory scheme in 1999 and toward deregulation of investor-owned electric utilities.

When competition failed to materialize, lawmakers in 2007 approved a “hybrid” regulatory scheme. It retained SCC oversight of rates and allowed utilities to achieve earnings that will keep them competitive and enable them to expand generating capacity.

The SCC has authorized a succession of rate increases for Appalachian since the 2007 law was passed. But the company’s most recent rate case, which resulted in an August rate increase, was the first to be decided under terms of the 3-year-old legislation.

Appalachian spokesman Todd Burns said state regulations have had little to do with most of the company’s recent rate increases.

“Virginia regulation didn’t cause rates to go up,” Burns said. “Compliance with federal environmental regulations is the biggest reason rates have increased.”

Burns said Appalachian customers should experience lower electric bills this coming winter than they did in the previous year because of a reduced fuel charge and the expiration of a separate environmental compliance charge.

Hulihen Moore, one of the former SCC commissioners on Armstrong’s working group, said scrapping the 2007 law may not lower rates, but would give state regulators more discretion to set rates fairly.

“We’re trying to have it so that rates are set fairly and adequately, but not excessively,” Moore said. “That may result in lowered rates, but what we’re looking for are fair rates, and the current system doesn’t do that.

“I don’t want to have the idea here that the only thing we’re trying to do is reduce rates. We want the rates to be set the way they ought to be set, without tying the commission’s hands.”