Kaine Strengthens Environmental, Rate Protections in Electricity Legislation

RICHMOND, March 27 -- Gov. Timothy M. Kaine (D) announced significant amendments Tuesday to legislation that would dramatically change the way electric utilities are regulated in Virginia, proposing tougher environmental requirements and greater price protections for customers than the General Assembly approved last month.

In a final flurry of action on hundreds of bills approved by lawmakers this year, Kaine also announced three more vetoes Tuesday, including one of a bill that would have exempted religious schools from paying building inspection fees. Kaine vetoed 10 bills this year, most notably five that would have expanded the list of crimes eligible for the death penalty.

Also Tuesday, Kaine announced that he signed a controversial bill allowing school systems to rent or lend buses to private schools. Opponents viewed the measure as a foot in the door for religious schools to use public resources, but Kaine noted that the measure is not mandatory.

"If local public schools and private schools are able to find solutions that benefit both, there's no reason for the state to stand in the way," he said.

The legislature will return to Richmond next Wednesday to consider Kaine's amendments and vetoes.

Kaine's proposed changes to the electricity bill would direct the State Corporation Commission to keep utility prices in line with other southeastern states. He wants utilities to reduce the average customer's electricity use by 10 percent, instead of 5 percent, by 2022. And he has added incentives for utilities to build "clean" plants that emit less carbon than conventional, coal-fired plants.

He didn't change a provision in the legislation to require utilities to share with consumers profits that exceed expected levels.

"My primary goals in amending this bill were to ensure that appropriate consumer protection measures were in place to keep Virginians' electric rates among the lowest in the country," Kaine said, "and to ensure that electric companies have incentives to conserve energy, produce cleaner energy and take other steps to protect the environment."

The General Assembly undertook a wholesale rewrite of electricity regulations this year in part because an eight-year-old attempt to deregulate the industry had been deemed a failure. In 1999, lawmakers agreed to phase out much of the authority that the State Corporation Commission had over setting utility rates. The idea was to foster competition, which would keep utility rates low for customers.

But the competition never materialized, and lawmakers feared that when rate caps came off in 2010, Virginia's largest utility, Dominion Virginia Power, would essentially become an unregulated monopoly. So they tried to "re-regulate" the industry by setting rates but also providing financial incentives for utilities to operate efficiently.

Dominion played a major role in crafting the legislation. The company sought re-regulation primarily to stabilize rates and earnings, which would make the company more attractive as it seeks low rates to finance new generating plants.

But critics charged that Dominion played too strong a role. They said the measure allowed too much profit for the company without adequate price safeguards for customers or sufficient conservation requirements.

It was those concerns that Kaine was trying to address while also helping Dominion meet its goals as demand for electricity in the state, particularly in Northern Virginia, grows rapidly. Dominion contributed $88,000 to Kaine's 2005 election campaign, according to the campaign finance database of the nonpartisan Virginia Public Access Project.

Dominion spokesman David Botkins praised Kaine for setting in motion a "good, long-term energy policy to keep Virginia's economy humming while at the same time laying out specific plans for energy conservation."

The bill's reception among conservationists was a bit cooler.

"The governor made some positive changes, but it is still fundamentally a Dominion Power monopoly bill that puts emphasis on new generation and not demand management and conservation," said Piedmont Environmental Council spokesman Robert W. Lazaro Jr.

Kaine did make changes to the bill to preserve some of the competition encouraged in the 1999 deregulation bill. For example, customers would continue to be able to purchase energy from such alternate, renewable sources as wind power.

Staff writer Bill Turque contributed to this report.