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A cogeneration project approved by the Virginia State Corporation Commission will allow Virginia Electric and Power Co., the utility sponsor, to lease equipment to Chesapeake Paper Products Co., the project host (which will operate the gas-fired plant), and yet retain contractual rights to control certain aspects of operations and maintenance.

At the same time, however, the commission has nixed VEPCO's idea of organizing an affiliate "as an electric utility" to own and operate a pipeline lateral to supply natural gas to the plant.

The cogeneration project, termed a "dispersed energy facility" by VEPCO, will enable the utility to meet all energy needs for Chesapeake Paper for up to 25 years, and in a "cost-effective and mutually beneficial way," according to the commission.

The 38-megawatt facility will include a gas-fired combustion turbine, a heat-recovery generator, an electric generator and related equipment. Although the utility would lease the generator and Chesapeake will operate the facility, Virginia Power would retain contractual rights to control certain aspects of operations and maintenance. The proposal also includes utility ownership of a gas supply and control of fuel procurement activities.

The commission directed the utility to alter its plans to acquire ownership of an associated gas supply pipeline lateral through an affiliate organized as an electric utility. Re Virginia Electric & Power Co., Case No. pue950131, Aug. 31, 197 (Va.S.C.C.).

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