State Passes Dominion-Backed Overhaul

By Amy Gardner and Michael D. Shear
Washington Post Staff Writers
Friday, February 23, 2007

RICHMOND, Feb. 22 -- The Virginia General Assembly enacted sweeping changes Thursday to the way the state's power companies are regulated, creating greater flexibility that the electric industry says is essential but that critics say will lead to less conservation and higher rates for customers.

The measure, which had been approved by the House of Delegates, passed the Senate, 35 to 3. It now goes to Gov. Timothy M. Kaine (D), who has said he will review it to make sure it includes appropriate consumer and environmental protections.

Intense lobbying by Dominion Virginia Power and several smaller electric utilities succeeded in producing a wholesale rewriting of regulations on one of the state's largest and most powerful industries.

Company officials said the new rules will give them the financial stability to build a generation of coal and nuclear power plants to meet the growing demand for power, especially in Northern Virginia. Critics said the legislation will undermine the authority of the State Corporation Commission to hold rates down and require environmental improvements. Supporters said the reverse is true.

"You defeat this bill, and the SCC is going to have minimal control," said Sen. Thomas K. Norment Jr. (R-James City).

Lawmakers sprinted through dozens of other bills as the final week of the 2007 legislative session drew to a close. The state Senate voted to require restaurants to display prominent signs if smoking is permitted, moving a state where the tobacco industry once dominated a step closer to an all-out smoking ban.

And an effort to tighten restrictions on the payday lending industry stalled after Kaine said he is considering adding a rate cap to the bill. The sponsor of the measure, Sen. Richard L. Saslaw (D-Fairfax), threatened to pull the bill rather than let Kaine amend it in a way that Saslaw said would destroy the industry in Virginia.

"If we can't get everything worked out and resolved to enough people's satisfaction, it will be my intention to just leave the bill in committee and try again next year," Saslaw said. "I'm trying to reform this industry and, for better or worse, not put them out of business."

For decades, Virginia's power companies operated under State Corporation Commission regulations that controlled prices because companies held monopolies in the market for power.

Almost a decade ago, the legislature voted to phase out those regulations in favor of a deregulated industry in which competition from multiple power companies would give consumers a choice and keep prices low. That idea was pursued across the nation.

But that competition never materialized, leading to huge rate hikes in some states, including Maryland. So this year, lawmakers in Virginia moved to abandon the shift to deregulation even before it is scheduled to begin in 2010.

Critics of the legislation that passed Thursday said the state should simply go back to the old system of regulation. But company officials argued that such action would hinder their ability to compete with other power companies in world financial markets.

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