Hoping for lower prices, better service, and more options, VA lawmakers launched consumer choice on January 1 in The Old Dominion. Residential customers of Dominion VA Power in Northern counties and one third of its commercial users will go first, then others will be phased in through 2003. The State Corporation Commission has licensed 11 companies to compete, but so far only Pepco Energy Services has mounted a serious marketing effort, offering “green power” at premium prices. VA is spending millions to educate consumers about their options. Customers who choose a new supplier will incur an unregulated price for generation and transmission. The charge for local distribution will remain regulated by the state. Even if they switch, customers will pay for past investments in power plants and transmission lines for the next five years, so-called stranded costs, through a “competitive transition charge.” This charge will apply through 2007, along with capped rates for those who don’t switch to prevent runaway price spikes as occurred in California. The bottom line is that Dominion and other utilities can charge customers for the difference if they switch to a lower cost supplier. In addition, the VA plan includes a “cost to compare” price that will be set by the SCC based on Dominion’s cost. With estimates of 4-5 cents per kilowatt-hour, there is little room for competitors to beat this cost profitably and also little incentive for consumers to switch. Other states that have legislated similar safeguards have seen few customers switching suppliers and few suppliers offering lower rates.
Consumer advocates are not convinced. Irene Leech, president of the VA Citizens Consumer Council noted, “We’ve done such a good job in Virginia that our prices are lower than the national average.” She fears that without price regulation, the laws of supply and demand might fail. Leech said, “Competition is not an end in itself. Consumers need competition if it provides a better product. And I just don’t it happening.” But State Sen. Thomas K. Norment, Jr., who chairs the legislative transition task force says they want to encourage more suppliers. “Another word for that is capitalism,” he said.
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