A NATIONAL SURVEY published earlier this year found that customer electricity charges in different parts of the country vary by 800 percent, "more than for any other widely used commodity." The biggest contributor to this enormous disparity -- equivalent, say, to paying $1 a gallon for gasoline in one place and $8 a gallon somewhere else--is the type of fuel a utility uses. But a considerable part of the difference also depends on how well a utility is managed--how accurately it predicts future trends, how carefully it builds and maintains plants, how cleverly it designs its rates to encourage conservation, and so forth.
Vepco's most recent $210 million rate increase request--of which about 60 percent was granted this week by the State Corporation Commission-- is of interest therefore not only because of the larger bills it will mean for Northern Virginia residents and businesses (and, through Metrorail, for the District as well). The commission's decision is important also as a measure of what progress Vepco is making in correcting its managerial defects of years past.
In granting the $132 million increase, the commission noted that the utility was still having trouble with plant efficiency, calling last year's performance of some of its generating units "less than satisfactory." The situation is improving, however: all four of Vepco's completed nuclear plants are, for the first time, actually producing power.
Vepco asked for $22 million to cover costs related to the cancellation of North Anna 4, the sixth planned nuclear plant. The commission granted half of this amount, enough to cover what had been spent, but not to allow the utility to earn on an investment that had not benefited its customers. Since the commission had found--rightly or wrongly--both the original decision to build the plant and the decision to cancel it to be "prudent," this seems a fair compromise.
The largest single chunk of the requested increase and the most hotly contested issue between the company and the commission was money that would have raised the rate of return to Vepco's investors' from the 13 percent set six years ago to 16.5 percent. The commission met the company halfway, setting a new rate of 15 percent. That is another good compromise. The new ceiling is in line with what utility commissions elsewhere are granting, and, despite the company's protests, should be adequate to allow Vepco to raise the capital it needs. The challenge for Vepco is to invest its new capital wisely in ways that will allow more stable electricity rates for its customers in the years ahead.