Mr. Chairman and members of the Task Force on Consumer Issues, thank you for the opportunity to present the issues of the farmer members of Virginia Farm Bureau today. My name is Mandi Smith and I am the Legislative Specialist for Virginia Farm Bureau Federation.

With many farmer members who rely on a steady and affordable source of power to produce agricultural commodities and large membership throughout the rural regions of the Commonwealth, the Virginia Farm Bureau has been closely following the restructuring of the electric utilities. As you will notice, our current policy statement reflects many of the concerns of other groups who have spoken before you previously, as well as the issues outlined in HB 1172.

Current Virginia Farm Bureau Policy

• We oppose deregulation of electrical utilities and establishment of retail competition in Virginia unless and until the following are met:
  1. changes in the structure of the electric industry must not be undertaken without full and informed public debate;
  2. every effort should be made to avoid negative impact on farms and rural areas; where negative impacts are unavoidable then all possible measures should be undertaken to minimize such impacts;
  3. the results of restructuring should ensure that all consumers have access to reliable electrical service;
  4. rates for farms, small business, and rural residential customers should not be increased in order to subsidize rate decreases for large customers and urban areas;
  5. restructuring should be consistent with the goals of protecting the environment, and encourage cost effective sustainable energy technologies; and
  6. restructuring should maintain adequate staff levels and training to ensure safety, reliability, customer service, and planning standards.
• We support rural electric cooperatives organized and operated in accordance with accepted cooperative principles and practices. We oppose any plan to convert rural electric cooperatives into an investor owned or private power systems.

While many of these concerns have been presented by other concerned parties and addressed by the task forces of the Study Committee, there are several additional issues from an agriculture and small business perspective. Some of these issues are being addressed in other task forces, but they are nonetheless consumer issues.

First, end-of-the-line and rural customers are not concentrated and therefore will not be as attractive as customers. These customers should be given the same choices for the same savings as suburbs and office complexes. The cost for reliable power should not increase simply because a home is at the "end-of-the-line" nor should those customers be given fewer choices.

Second, a "phased-in" approach to restructuring will not benefit residential customers if that class is last to gain access to the competitive market. Economic principles show that the "early adopters" are the first to benefit from any new opportunities; all classes of customers should have market access at once or not at all.

Third, since generation is the only portion of the bill which will provide savings, it is possible that one's overall bill for electric service may increase, especially with the proposed wires charges and surcharges added for various programs. The theoretical cost-savings of competition will be further hindered if billing and metering are opened to competitive markets. Not only would overhead expenses and profit goals of additional businesses tack additional dollars onto one's bill, competitive metering and billing would certainly increase confusion and hinder continual service in cases of bill mix-ups or partial payments.

Finally, affordable and reliable service is imperative to most small businesses and especially agricultural operations. Greenhouses with timed watering or air circulation need a steady source of power. Similarly, cooling tanks for milk require unfaltering electricity or the milk will sour and cannot be sold. Gas-powered generators can help in emergencies if the farmer is on site but will not always be sufficient. The Supplier of Last Resort is charged with holding sufficient reserves and ensuring that lapses in service do not occur for long periods of time. However, in a free market, those reserves are likely viewed as foregone opportunities. Consequently, that company may compensate for "lost profits" by charging additional fees for "emergency power." The cost of emergency power should not exceed the customer's contracted price, especially if a customer has paid bills in a timely manner and the outage is not the customer's fault. This problem could be abated either by placing a cap on the rates for emergency power, or by making the failing utility responsible for any difference in price of emergency power supplies.

Restructuring the electric utilities market brings to light many unexpected issues for farmers in Virginia. We appreciate your work and thank you for considering the concerns of Virginia's rural citizens and farmers. I would be happy to answer any questions task force members may have.