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Businesses in more rural areas pay more for electricity than those in more developed areas.

Date published: 4/26/2008

BY CATHY JETT

Dan W. Wallace was shocked when he opened utility bills for two of the six Arby's restaurants he and his father own in the Fredericksburg area.

Rappahannock Electric Cooperative had charged twice as much per kilowatt hour for the new fast-food franchise in Cosner's Corner in Massaponax, Wallace said, as Dominion Virginia Power had for a similar-size Arby's about a mile away on Salem Church Road.

"I found this out strictly by accident," said Wallace. "One bill was right behind the other. That's when it popped up."

The rate difference means it will cost about $20,000 more per year to use the same amount of electricity at the Cosner's Corner Arby's as the one on Salem Church Road, his father, F. Dan Wallace said.

"It's like one side of town charged $3.25 for gas and the other was charging $6.50," said the elder Wallace, whose other Arby's franchises use Dominion.

Outraged, father and son contacted REC, only to discover that the charge was correct and that they were in the cheapest billing category for a business their size.

"That is wrong," said F. Dan Wallace. "If REC is designed to cover rural areas, it should not be in a commercial area."

RATES VARY WIDELY

Locally, commercial development is expanding into rural locations served by electric cooperatives, including some in Spotsylvania and Culpeper counties. Southpoint II, for example, straddles the boundary in Massaponax between Dominion and REC.

And Terremark Worldwide Inc., a global player in integrated Internet exchanges and information management, plans to build and operate a $270 million data-center campus just outside the town of Culpeper in part because the site is next door to Germanna Community College's new Joseph R. Daniel Technology Center. There, too, REC will be the provider.

But that doesn't mean Dominion, one of the nation's largest producers of energy, wants to expand into areas long served by co-ops.

"It is to their benefit not to shake that tree, because they wouldn't want what would come with it," said Irene Leech, a Virginia Tech associate professor who has been a consumer representative in Virginia's electric restructuring process. "They'd have to take the expensive areas to serve as well as the cheap areas."

While Dominion is owned by investors and covers the most populous areas of the state, electric cooperatives, which were created to bring power to rural farms in the 1930s, are not-for-profit ventures. They still serve relatively rural areas and have slim profit margins that are returned to customers.

"Dominion--nor any of its predecessor names such as the Virginia Electric & Power Co.--has ever purchased an electric cooperative," said spokesman Jim Norvelle. "It's not been a part of our business model."

Buying even a part of an electric cooperative would be difficult if Dominion executives changed their minds. Under Virginia law, one utility can't move into another's territory unless the State Corporation Commission finds that the service in that area doesn't meet public demand.

Electric cooperatives trace their roots back to the mid-1930s, when nine out of 10 rural homes were without electric service. Agriculture continued as a way of life in these areas as factories and businesses bypassed them for cities, where electric power was more prevalent. To help bring electricity to farmers, President Franklin D. Roosevelt signed into law the Rural Electrification Act on May 11, 1935. It went into effect the following year, and more than 90 percent of U.S. farms had electricity by 1953. Today, rural electric cooperatives serve 12 percent of all consumers of electricity in the United States and its territories, account for approximately 10 percent of total sales of electricity and own about 5 percent of electric-generation capacity, according to the National Rural Utilities Cooperative Finance Corporation, a private, nongovern-mental organization. --Cathy Jett

Date published: 4/26/2008