One of the better ideas in the Regulation Lite that Dominion proposes for electric utilities in Virginia is a provision that incentivizes power companies to generate cost-saving ideas. Under the old regulatory regime, power companies had little incentive to save. If they had devised an ingenious idea to cut costs, regulators would have passed on the savings to rate payers. By contrast, under the re-regulation bill now being debated, Dominion would pass on 60 percent of savings to rate payers but keep 40 percent as a reward.
One of the benefits of 10 years of partial deregulation at Dominion was the rise of a new corporate culture. Because the power company’s rates were capped, the only way it could improve earnings was to cut costs. David Shuford,vice president-state regulation, Shuford offers a couple of examples.
In the old days, Dominion maintained a team of meter readers who went door-to-door reading customers’ meters. Under deregulation, the company spent the money to install 2.2 million solid-state readers that could be read remotely. “Now you send a car down the street, and you can read them from the car,” Shuford says. “Now one person can read hundreds of meters in a day that would have taken a team to do.”
Another example: Soon after regulators imposed a fuel-price freeze on Dominion in 1994, energy prices shot higher — gas prices quadrupled, coal prices doubled, uranium prices doubled. With fuel prices threatening to pulverize the bottom line, Dominion created a team specializing in fuel procurement. Says Shuford: “They are scouring the market, negotiating deals, making hedges. We have a very sophisticated fuel-procurement process.” When re-regulation allows fuel costs to be passed along to the rate payer, that team will remain in place — benefiting rate payers as much as Dominion.
“There is a corporate culture now that didn’t exist 10 years ago,” says Shuford. “We don’t want to lapse back into the old habits.”