Dominion Retail, the electric and gas marketing arm of Dominion, has informed 19,000 of its electric customers in Virginia that they will be switched back to Dominion Virginia Power in the near future, after Dominion Retail determined that current prices in Virginia’s wholesale power market are not at a level where the retailer can effectively compete for those customers.

But a Dominion Retail spokesperson also made it clear that the company continues to believe in the long-term viability of Virginia’s nascent competitive electricity market, and that it’s a matter of when, not if, Dominion Retail will re-enter those markets and contend for customers.

The customers in question were procured by Dominion Retail during a pilot program in Virginia leading up to the state’s opening up a portion of its electricity market to competition at the start of the year. The pilot program ended on Dec. 31, 2001 “and we sent [customers] a letter in November saying we don’t know what the price to compare is going to be,” Daniel Donovan, a spokesperson for Dominion Retail, told NGI. At its height, Dominion Retail had 23,000 customers during the pilot.

The Virginia Corporation Commission in January unveiled the average “price to compare” for each customer class of the four incumbent utility companies in Virginia that have opened their service territories to choice: Dominion Virginia Power, American Electric Power-Virginia, Allegheny Power and Conectiv.

In the November letter, Dominion Retail told its pilot customers that they could stay with the retailer through the end of April. “About 19,000 decided to stay and 3,000 left to go back to the utility,” Donovan said.

“With current conditions, we don’t have a price we think would appeal to them because of the new price to compare,” he said. The 19,000 customers will be switched back to Dominion Virginia Power at their next meter reading next month. “We hope in the future to come up with a price that would appeal to them,” Donovan said. All of the 19,000 customers will go back to Dominion Virginia Power “unless they find another marketer that’s interested” and signs them up.

A competitive energy supply market is phasing in throughout Virginia, with northern Virginia, parts of the Eastern Shore and 31 counties in southwestern Virginia opened up at the start of the year. The phase-in continues through 2004, with consumers in some parts of Virginia receiving energy choice in January 2003 and the remainder in January 2004.

“We think that the Virginia market is very promising,” Donovan told NGI. “We think, in the long run, it will be a very competitive market and it’s one we intend to participate in.”

He said that Dominion Retail is very careful when it enters a market in terms of making sure that it goes in with an appealing offer for customers. “Generally, they’re…10 or 15% below the utility’s price and currently the wholesale market prices aren’t at that level that we could do that,” Donovan noted. “But we’ll be carefully watching the market and monitoring the market and when we feel we have an offer that will cause people to sign up with us, we’ll be back.”

Donovan said he sees similarities between what’s happening now in Virginia’s electricity markets and what Dominion experienced in a natural gas pilot program in Ohio. Cleveland-based Dominion East Ohio is the largest gas distribution subsidiary of Dominion. The company serves more than 1.2 million residential, commercial, and industrial customers in 400 eastern and western Ohio communities.

“In that pilot program, we had a similar number, almost exactly the same number, of pilot program customers,” Donovan noted. “And the pilot ended and, at that time, we didn’t have an offer we felt would appeal to those customers,” he said. “And then, the year before last, the market opened up and we aggressively went back into the same market and today we have over 200,000 customers on Dominion East Ohio’s lines.”

Electric utilities in Virginia can collect so-called “wires charges” from customers that switch to competitors. Debate has emerged as to whether these charges will prove to be an impediment to electric competition in Virginia gaining a full head of steam.

But Donovan questioned the notion that the wires charges could hinder competition in the state. “I don’t know if that’s an issue, there [are] wires fees everywhere we compete or other transition fees,” he said. “We don’t think that’s a stumbling block.”

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