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Regulations established under the law require electric utilities to buy power from independent cogenerators instead of building new power plants wherever cogenerators can produce electricity as cheaply as the new plants could. As a result, cogenerators can make more money if \Y*ey c«n Veep utilities {ram producing electricity more efficiently. That’s good for cogenerators, but hardly good for utility customers.
In Virginia Power’s view, Chesterfield 7 offered an unusual opportunity to keep electric rates down because a shut-down Virginia Power plant already occupied the site. Consumers would get double savings, for the utility could generate electricity more cheaply at Chesterfield, and force cogenerators to become more efficient as well.
Virginia Power was so confident about the savings that it even offered to keep the cost of the new plant out of its rate base so that its stockholders, hot ratepayers, would take the risk if the plant turned out to be more expensive than anticipated.
In an industry not known for cost containment, the utility has apparently exercised good judgment on these matters in the past few years. Its rates have fallen from 30 percent above the national average in 1980 to more than 6 percent below the average today. The average household in its service area pays $69 a month for electricity, compared to a national average of $74.
The new plant will hardly bar purchases from independents. Virginia Power President Jack Ferguson told a congressional subcommittee in May that the company counts on cogenerators to supply two-thirds of its increases in power needs by 1992.
The prices independent power sources receive are usually set by administrative estimates based on what it would have cost utilities to build their own plants. Virginia lets utilities and cogenerators negotiate prices but requires the two parties to take into account the utility’s costs of producing electricity in new plants.
That requirement made Virginia Power’s proposal for a new, efficient natural gas-fueled plant a threat to cogenerators because cogenerators’ prices would be based on the new
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