Frontlines

Fortnightly Magazine - February 1 1999
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Some see utilities fixing prices under competition. Really? I'm shocked.

Did you hear the one about the 10,000 percent rate increase? Ask FERC chairman James Hoecker or his colleague, Curt Hébert. They'd be happy to tell you. They don't even need their own joke writers. This story, you see, is absolutely true.

It seems that Virginia Electric & Power Co. wanted to squeeze just a little more profit from its Kerr-Henderson transmission line. VEPCO uses that line to wheel power for the Southeastern Power Administration, one of those federal power marketing administrations that the conservative think tanks are always saying should be sold off as private businesses. SEPA generates electricity at its John H. Kerr Dam, in south central Virginia, a few miles from the Carolina border. It relies on VEPCO transmission to carry the Kerr capacity and energy to its hydro preference customers in North Carolina.

But what do you know? Last fall VEPCO informed SEPA of a slight adjustment in transmission rates: up from $13 per megawatt per month to $1,310 per MW/month. SEPA's typical yearly bill for this particular transmission service would rise 100 times over - from $14,400 to about $1.4 million.

So it came as no surprise that when the Federal Energy Regulatory Commission took up the case on Dec. 29, it suspended the proposed rate increase and begged the parties to try to settle. The FERC appeared sympathetic to SEPA's plight. It showed its colors by quoting a supporting protest filed by the North Carolina Eastern Municipal Power Agency, one of SEPA's preference customers: "[It's] difficult to imagine how a rate increase of this magnitude could be justified under any meaningful definition of 'just and reasonable.'" Docket No. ER99-417-000, 85 FERC ¶61,448.

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