One of the curious events of the Democratic gubernatorial primary campaign in Virginia was the gas bill rebate episode.
Five days before the June 14 election, the accounting staff of the State Corporation Commission (SCC) alleged that three gas companies had made excessive profits of $2 million during the cold winter and recommended that they be asked to refund the money to customers voluntarily.
The report was seen as a pre-election break for former Lt. Gov. Henry E. Howell, who defeated former attorney general Andrew P. Miller for the nomination for governor. Howell has made crusading against utility management and rates a centerpiece of his political career and had called throughout the primary campaign for refunds of winter profits.
Apparently forewarned of a favorable report, Howell scheduled a press conference for the day of its release and took credit for what he implied would be a quick rebate of $5 to $25 to about 180,000 business and residential gas customers.
In fact, anyone with a minimal knowledge of utility operations and regulatory law, including Howell, knew the day the report was released that rebates were unlikely. Howell himself acknowledged when questioned at his news conference that it would not be lawful to require utilities to refund revenues collected under SCC approved rates.
SCC staff counsel Richard Rodgers on the day of the report shrugged off the whole profits inquiry in an interview as "an exercise in futility." He pointed out that retroactive rate making - refunds or surcharges to lower or raise a utility's earnings to some specified level in the past - would destroy the only incentive for good management remaining in the limited risk public utility area.
In recognition of this, all utility rate regulation is prospective. That is, regulatory agencies like the SCC try to set rates that will give a utility the opportunity, with prudent management, to earn a reasonable profit in the future.
It is not a guarantee. To guarantee a floor on profits to a company or a ceiling to customers would amount to a cost plus contract for utility services.
Management does not control weather, but it is clearly part of the risk in the gas business. The utility companies in question have told the SCC since the report was filed that their profits may have looked good through March, the end of the period covered by the report, but an unusually mild April reduced their earnings below the level allowed by the SCC.
The companies clearly are not going to volunteer a refund they do not believe they owe, especially when they know the law cannot compel them to make it even if their profits were "excessive."
Given the heavy odds against a refund - even the small ones envisioned by the SCC report - it seems fair to ask whether Henry Howell, as a candidate for governor, didn't have the duty to throw out a few caveats with his claims of a victory for consumers.
Most consumers approach utility regulation with a good measure of outrage over rising prices for all things and only a dim understanding of the regulatory processes involved. In this last campaign and in three previous runs for statewide office, Howell has shown himself ready to take advantage of both consumer outrage and consumer innocence.
It would be downright prissy to expect a candidate to Howell's free-wheeling style to go through a campaign without taking a few shots at "big boys," but the gas rebate show demonstrated the need for some trugh in campaigning on the utility issue. Raising consumer expectations unrealistically should not be among the campaign practices of a consumer advocate.
The rebates press conference was not an isolated event in the Howell campaign.
Early in the race, he distributed a brochure that pictured him as a successful defender of consumers against utilities. "Henry Howell is the most experienced consumer lawyer in Virginia," it said, "and his record is nothing less than astonishing."
Among the astonishing assertions in the brochure was the following:
"Since (Howell) left public office in 1973, Virginia Electric and Power Co. has received $309 million in rate increases. While he was lieutenant governor, Vepco received $41 million in rate increases."
Among the points ommitted by this statement are (1) the fact that Howell's two years as lieutenant governor, an office with no power over utility rates, came at the end of a long period of rate stability, and (2) he left office just as the Arab oil embargo touched off a fossil fuel inflation that doubled electricity prices throughout the nation in 1974 and 1975.
The brochure also cited Howell's success in winning a $5 million refund for Chesapeake and Potomac Telephone Co. customers in 1972.However, the brochure referred to the $5 million as "overcharges." That word suggests the Virginia Supreme Court ruled that C&P was earning more than it should. In fact, the court ruled only that the SCC failed to grant Howell and others due process when they tried to intervene in the case.
These little instances of misleading advertising of Howell the candidate are not so important as the implication of all his statements on public utilities - the implication that the state government can have a significant effect on rising utility prices.
Many thoughtful people believe that is not so. If he is going to convince them. Henry Howell is going to have to get out a new brochure.