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.
Under the new rules, the State Corporation Commission will retain the right to regulate Dominion but will be required to make sure the company earns a return on its investments equal to that of similar power companies across the South. If company profits exceed the levels expected, the company will keep 40 percent of that excess.
But the SCC will also put limits on the amount that can be added to bills this summer, when adjustments are made to compensate the company for the cost of fuel, which is used to generate electricity at its plants.
The Senate's vote requiring restaurants to display smoking signs doesn't rule out the possibility of a total ban this year. The sign requirement is on its way to Kaine, and health-care advocates are urging him to amend the measure to ban smoking entirely in restaurants across Virginia. A Kaine spokesman said the governor will look closely at the bill.
The battle to restrict smoking in public places has been protracted this year. Advocates for outright bans viewed the sign bill as the least meaningful of the various proposals being considered, and they urged lawmakers to oppose it in favor of more sweeping regulations that would have prohibited smoking in most workplaces and public spaces.
But Philip Morris USA and other powerful tobacco companies opposed the bans. Even the sign requirement was a difficult sell in the conservative House of Delegates, where lawmakers tend to oppose regulations on businesses. But once it emerged from the House, advocates for a ban saw an opportunity to quietly support the bill with the hope that Kaine would strengthen it when it got to him.
"It is my strong expectation that the governor will review this bill carefully and possibly amend it," said Sen. Mary Margaret Whipple (D-Arlington).
It is unclear whether such amendments would survive in the House. House Majority Leader H. Morgan Griffith (R-Salem), who sponsored the sign bill, said he might support a ban in restaurants, but he promised his colleagues in the House that he would oppose any attempts to change his bill. It was the condition he offered in exchange for getting the bill out of the conservative House General Laws Committee.
"Would I support it? I'd have to think about that," Griffith said. "Would I support it as an amendment to my bill that I pledged I wouldn't allow it on? I can't, because I gave my word of honor."