Electric utility bills in Virginia will continue to rise significantly faster than the cost-of-living index despite announcement of a new regulatory plan designed to keep the increases in check, State Corporation Commissioner Junie L. Bradshaw has acknowledged.
Confusion and anger over the announcement have continued to mount here with consumer groups saying the plan may mean automatic annual increases in utility rates in excess of past increases. State Attorney General J. Marshall Coleman has expressed concern that the plan may be "just cosmetic."
The plan announced last week by Bradshaw and House Majority Leader A.L. Philpott (D-Henry) was presented as a plan to keep utility rate increases to less than increases in the cost-of-living index, thus saving consumers money.
But, Bradshaw admitted in an interview, rates will go up more than the index because fuel costs -- the biggest operating expense that utilities have -- will continue to be passed directly through to customers and not be subject to the plan's guidelines.
It is the utilities' operating and construction costs, Bradshaw said, that will be subject to the new guidelines and held below the cost of living. Virginia Electric and Power Co. vice president William W. Berry said that druing the last five years operating costs, exclusive of fuel costs, have been less than the increases in the cost of living.
Construction costs in recent years have risen at a rapid rate, reflecting the general rate of inflation in Virginia, Bradshaw said. He said, however, that increased emphasis on conservation has slowed the need for new generating facilities in the state.
Consumer advocates have said they feared that the costs of huge, controversial power plants planned by Vepco and others would be excluded from the new plan and thus passed directly to consumers with fuel costs.
"Just when consumers were learning to play by the rule, the commission changes the rules," complained Taylor Cousins, an official of the Virginia Consumer Congress.Del. Martin H. Perper (R-Fairfax), who has introduced legislation to force the commission to stick to its present procedures in rate cases, calls the new plan a "bunch of baloney."
The Virginia plan can be put into effect by the commission, which regulates utility rates, without any legislation, according to Bradshaw. He said the plan likely will begin in May after the commission announces its decision in a Vepco rate case that could boost electric rates by 25 percent.
Virginia is one of the first states in the nation to consider such a rate plan. When Michigan adopted a similar plan, both that state's attorney general and consumer groups fought unsuccessfully against it.
Consumer groups, however, apparently were not the only ones to be confused. Philpott himself said in an interview today that plant generating expenses would not be considered under the new plan but would be considered in separate "emergency hearings" -- something that Bradshaw said would not be the case.
There was speculation here today -- by Perper, among others -- that announcement of the new plan by the commission was a political effort to soften public wrath about rising utility costs -- particularly about Vepco's pending request to the commission for a 25 percent, $246 million rate increase for its 1.2 million Virginia customers.
By making the commission appear in a better light, Perper and others think that Bradshaw, who becomes chairman of the autonomous and enormously powerful commission in February, is seeking to blunt legisaltive efforts to take away some of the commission's powers and place them in the executive branch.
Bradshaw said one aim of the new plan is to "create credibility" with the "man in the street," who has had difficulty understanding enormous in creases in utility rates. "And we're the first state in the union to further the president's policy of containment of inflation" with new rate-making procedures, he said.
Philpott and Bradshaw, longtime friends, said they worked the new plan out together over a period of months. Philpott said Bradshaw convinced the other two commissioners that the plan was a good one, although they were at first opposed to it.
"I just feel certain (the new plan) will work," said Bradshaw. "... We're going to make it work. My staff is committed to make it work."
But what exactly is the new plan? In his announcement last week, Bradshaw said that henceforth utility rate increases will be limited to no more than the increase in the cost-of-living index. No more will there be "these abrupt, sudden increases" like Vepco's requested one for 25 percent. No more will there be raucous hearings dragging on forever.
Instead, Bradshaw said in the interview, there will be annual "mini-hearings, short and brief." The public won't be as interested or infuriated, he said, because there will be a small annual increase in utility rates instead of a huge one every few years.
And the public can be assured, he said, that the annual increase will not be more than the cost-of-living rise. In other words, people can plan their budgets with more assurance, he said. Rate increases will be steadier, "flattened."
But when pressed, Bradshaw acknowledged that when the fuel costs are included -- as they in fact are on monthly electric bills -- then rates will continue to to up -- overall -- more than cost of living.
Bradshaw also said that more frequent increases will create a better "regulatory climate" for utilities and increase utility compnay "cash flow" -- both of which will make Vepco stocks and bonds more attractive and thus lower the company's cost of raising capital.
He said that Berry and other Vepco executives now spend enormous amounts of time on rate cases, and that the simplified rules for hearings will take less executive time and "permit company officers to spend more time on company matters" -- anothrr saving.
But at the same time Bradshaw said the hearing process in the new system will allow for full public participation just as before.