The fuel adjustment clause, which has become a political code word and cause celebre, was both attacked and defended yesterday in an inconclusive public hearing on proposals to abolish it.
The House members have put in identical bills to eliminate the clause which allows utilities to pass on to consumers fluctuating costs of fuel without a rate increase hearing.
Fuel charges change monthly. For the owner of an all-electric home, the fuel charge this would be $17.88. The total electric bill for such a customer, including fuel charges in the base rate, would be about $175.
The meeting was attended by consumer representatives, who long have railed against the clause, and by a vertiable Who's Who of the utility industry in Virginia. Although the arguments are familiar, the passions are high on the issue.
Sen. Virgil Goode (D-Rocky Mount), a vehemert opponent of the clause, spoke toward the end of a hearing noting in a low voice that Exxon is one of the larges producer of oil, coal and uranium. "If I were the president of Exxon," he said, gesturing toward the utility company executives seated nearby, "sitting on the 20th floor of that building in Houston or New York. I'd say 'We're with you. Brother Moore, Brother Beam and Brother Ragone. I am glad for your remarks.' It (the clause) is surely a profit-making device for the big oil boys, the big coal boys and the big uranium boys. We pay. Better for them to be arranging (about the cost of fuel) with the big boys than I, the lonely rate prayer."
T. Justin Moore is chief executive officer of the Virginia Electric and Power Co. (Vepco), Stanley Ragone is president, and Bruce A. Beam represents the Appalachian Power Co.
Ragone said later of Goode: "Virgil is not knowledgable about fuel costs."
Goode's and Ragone's remarks are but an example of the emotion surrounding the controversial clause, which occasionally obscures the complex technical information that utility companies like Vepco use to support their position. Consumer representatives, and, during last fall campaign, politicians, have helped make the fuel adjustment clause into an "us against them" issue.
Both Democrat Henry E. Howell and Republican Gov. John N. Dalton battled for changes in the clause during the campaign, and Dalton, in his first speech to the assembly two weeks ago, reiterated his position.
"I'm a pretty conservative sort of person," said Del. William Wilson (D-Covington), who introduced one of the three bills. "But I just came through an election as you all did, and I can tell you what my constituents said to me . . . They were very upset at the amount of their furl bills and very dissatisfied with the fuel adjustment clause . . . When the public is speaking as long and loud as they are on this, the General Assembly should stop and think, 'Is the system working as it should.'"
Del. Richard M. Bagley (D-Hampton), chairman of the House Appropriations Committee, said the introduced one of the bills because "the electric and gas customers have no confidence in the equity of the fuel adjustment clause billing. It is hated, mistrusted and misunderstood . . . If you give a dog a bad bame you might as well shoot it."
Del. Lewis P. Fickett (D-Fredericksburg), sponsor of the third bill, said "the fuel adjustment clause has been much abused," because charges other than an increase in fuel costs have been factored in, such as transportation of coal for power generation. Most importantly, he said, the clause promotes "poor and inefficient management," because utilities have no incentive to cut costs.
All three, and the consumer representatives who followed them, seemed to echo another major intention of the proposed legislation - that utilities should not be allowed to increase rates, whether because of increasing fuel costs or some other factor, without a public hearing before the utility-regulating State Corporation Commission.
None of them said they expect the abolition of the clause to result in an immediate lowering of mills for consumer. But they said they went to retain and increase the monitoring of utilities by the SCC, as well as the public. The utilities representatives disagreed.
Vepco's Ragone said that the fuel adjustment clause is not a profit-making device, and that it is actually a protection for the consumer. He said there is a need to "maintain some protection for the financial health of the company and adequate cash flow without numerous and costly rate applications and hearings."
Ragone disagreed with Fickett, who claimed that fuel prices have remained stable for two years. Rather, Ragone said, in remarks echoed by Moore, the world energy crisis presages even more flucuation. Elmination of the adjustment clause might discourage potential investors in the company. Ragone said, which would result in lower stock prices, higher interest rates, continuous rate hearings, higher rates for customers and low morale among Vepco employees.
Dalton also has promised to have a bill introduced that would place restrictions on the fuel adjustment clause, but not abolish it altogether. He said in his legislative message that the clause "can still work to benefit consumers if it covers only those factors which are truly beyond the control of the utility companies. . ."
Adminstration officials say the Dalton bill will reflect his campaign position on the issue by requiring utilities to project how much power should be produced by nuclear or large coal-fired generating units. If they fail to produce the relatively low-cost power from these plants, they would not be allowed to pass on to consumers the higher costs of resorting to oil-fired plants or smaller and older coal generators.
Vepco has told the State Corporation Commission that it would not object such a plan if a decision is made to abolish the present fuel cost pass through to consumers. However, it is expected that the Dalton bill will be more restrictive than the proposal that Vepco has said would be acceptable.
The House Committee on Corporations, Insurance and Banking is scheduled to act on the proposals on Tuesday.