Mr. Chairman, members of the Consumer, Environment and Education Task Force, I am Frank Bacon, Chairman of the Virginia, Maryland and Delaware Association of Electric Cooperatives, representing 12 of the 13 cooperatives located throughout Virginia. We represent over 900,000 Virginians - or almost one of every six of our citizens.

I am also a member-owner of Southside Electric Cooperative, headquartered in Crewe, Virginia, and serve as an officer on its board of directors. Southside serves over 42,000 meters, which equates to approximately 105,000 people, in 18 counties and 5 towns across Southside Virginia. Most of our service territory is rural, and our members are primarily farmers, small businesses and residential consumers. In fact we serve on average only six meters per mile of line - one of the lowest densities among our sister cooperatives in the Commonwealth, and most certainly a much lower density than the IOU's average of approximately 35 customers per mile, or the municipalities' average of 48 customers per mile.

Our average revenue per mile of line also pales in comparison. While the national average revenue for a co-op is a little over $7,000 per mile annually, investor-owned utilities earn nearly $60,000 and municipal systems make over $72,000 per mile of line annually. And an IOU, even when it serves a few low-density areas, has the city and suburban areas within its service territory to average or "smooth out" the rates to those customers.

I give you these figures to demonstrate that Southside Electric Cooperative and indeed all of Virginia's electric cooperatives are serving, and have been proudly serving for over 60 years, the very group of consumers that will need additional protections when competition is introduced in the Commonwealth - that is the small business and residential consumers, and consumers living in sparsely settled areas.

As a voice for the state's consumers, Virginia's electric cooperatives have several major points that we would like to make.

First, we are concerned about the costs that may be borne by residential and small business consumers. As we have mentioned on several occasions, we are concerned about the potential market power that can occur if one or more large, vertically integrated utilities own and operate the transmission system and the majority of generation sources within their control area. This will severely limit the ability to import capacity from competing suppliers, which in turn will restrict the availability of generation choices to the retail consumer. The fewer choices available, the greater the ability to charge higher rates, in particular to the smaller customer who will not have the economic clout to bargain for the best price.

We are also concerned about the costs of transitioning to competition. It will cost a substantial amount of money to create and operate an ISO. To achieve savings for the ultimate consumer, the ISO must provide access to lower cost generation that will in turn offset the cost of developing and operating the ISO. It doesn't make economic sense to reduce the regulation of electric utilities, restructure the electric industry and allow retail competition unless there is a significant degree of confidence that there will be savings for the ultimate consumer. Lowering the cost of power to the end-user should be the ultimate goal of this task force - not competition for the sake of competition.

We should also keep in mind that restructuring actually raises some costs. As the Consumers Union and the Consumers Federation of America pointed out in their recent joint study, "marketing to attract customers also imposes new costs that were unknown to monopoly providers." In particular, "serving residential customers requires extensive marketing, new billing and collection processes, the risk of uncollectable debt, and the need for new customer service personnel."

Second, we need to assure that consumer protections are in place to prevent the mistakes that occurred in telecommunications deregulation. And we need to do this before competition begins. We need strict licensure and bonding standards to prevent the Ponzi schemes that have taken place in California and Pennsylvania. We must have rules in place before competition begins to govern disconnects, deposits and slamming, to name a few. And we must have regulations governing that most dreaded aspect of competition - the dinnertime phone call asking us to switch our electric provider.

Third, we must begin educating consumers now about how competition may work in the Commonwealth. And that education should be more than propaganda about potential rate decreases that may never occur for the small business or residential consumer. The Association publishes ten times a year the Rural Living and Current Living magazine that reaches over 285,000 homes and businesses in Virginia. In fact it is the largest circulated magazine in the state. We would be happy to assist this subcommittee and the Commission to educate consumers by publishing information in our magazine.

Fourth, we firmly believe that consumers should not be forced to make a choice of electric suppliers, nor should they be forcibly switched if they do not make a choice. Electric co-op consumers like being served by a cooperative. Research proves it, and countless testimonials amplify this strong support. Recent research demonstrates that consumers perceive electric cooperatives to be efficient, responsive and an integral part of their communities. Members also like having a "voice" in their power service, and the fact that their energy service provider is close to home. Co-op members are loyal. We and our members would oppose any proposal that would assign a utility to electric users who don't make a choice of a provider. "No choice" should be a legitimate, viable option.

Fifth, we need to assure the availability and reliability of electric service. The recent debacle in the Midwest, where utilities were forced to pay as much as $7,500 per megawatt hour for peaking power, should serve as a warning about what can happen in a deregulated environment. If a utility must repeatedly pay prices it can't afford, this may ultimately be reflected in consumers' rates.

Another reliability concern is the possibility of increased instances of blackouts and brownouts. Open access to the electric power grid in order to import energy to a large industrial load or to transmit power from low cost generation areas to high cost generation areas, requires an adequate interconnected transmission system to be available. As we have pointed out, this is not the case in all areas of the interconnected system, particularly in Virginia. If attempts are made to force generation, system overloads may likely occur. And, unlike the telephone industry, where overloaded circuits prompt a busy or a " try again," message; in the electric utility business, if the demand exceeds capacity, a blackout occurs.

The telephone industry provides further examples of the potential hazards of deregulation for consumers. We have seen the once exemplary service of phone companies become tarnished as they cut costs to prepare for competition in the local exchange market. Low quality, unreliable service, long waits for repairs and installation - all of these have become common complaints. Electricity is a necessity. Consumers simply can not be allowed to experience the kind of service problems from the deregulation of their electric companies that they've experienced from telephone deregulation.

Finally, Virginia's electric cooperatives have concerns about the impact of retail competition on the environment. As we have related to you in previous testimony, ten of Virginia's electric cooperatives plus one each in Maryland and Delaware are the member-owners of Old Dominion Electric Cooperative. Through Old Dominion, we designed and constructed the Clover Power Station located in Halifax County. Clover, an 880 megawatt, twin-unit coal-fired generating station, utilizes the best known pollution control technology. When Unit 1 of Clover came into commercial operation in October 1995, it was the first baseload plant to come on-line since Congress adopted amendments to the Clean Air Act in 1990. Nearly one-third of Clover's $1.2 billion cost is devoted to advanced pollution-control technology, including the first scrubbers on a power station of this size in this region and baghouses removing 99 percent of the fly ash. In fact, Clover is the cleanest coal-fired power station ever built in Virginia and one of the cleanest in the country.

Old Dominion and the Clover Power Station are also committed to improving the environment. About 36 acres of fully functioning wetlands were created at Clover for a waterfowl habitat, which includes a nature trail and wildlife observation towers. Further, Old Dominion and Virginia Power, which bought a 50% interest in Clover, provide $40,000 a year to the National Park Service for studying air quality issues in the Shenandoah National Park.

We have spent a good deal of money to implement these environmental protections and enhancements at Clover. Yet we are concerned that in a deregulated environment, the market will demand the "lowest cost" power. Often this power is generated at the older, "dirtier" plants that do not have to meet the Clean Air Act requirements.

Further, long-term planning and emergency service may be jeopardized if utilities can no longer count on a secure, predictable customer base. Forecasting will become almost impossible for conventional utilities, and state-mandated integrated resource plans, demand-side management initiatives, and other traditional means of ensuring needed generation can become virtually meaningless.

The final point I'd like to make this morning is that cooperatives are the voice of consumers. We are consumer-owned. The cooperative is their business, literally. As members of the cooperative they have a voice in running the company that brings them electricity. They elect representatives to the board of directors. Board members are accountable to the membership as they shape cooperative policies. So the members have a real voice in how their utility is run.

And, electric cooperatives are not-for-profit. Unlike Investor-Owned Utilities (IOUs) who must make a profit for their shareholders, all of a cooperative's costs and expenses are recovered through its charges to its members, and any surplus revenues are returned to its members on a periodic basis. Our bottom line is providing the most reliable possible service at the lowest possible cost to our member-consumers.

Cooperatives also benefit from the pooling of resources with other electric cooperative systems to assure that all members get this quality service at the lowest possible price. And, we benefit from a locally-owned, locally-controlled business dedicated to serving our member-owners' needs.

We've been aggregators for customers in rural areas and emerging suburbs for over 60 years, and we will be around to aggregate those residential and small business consumers left in the dust of competition. In fact, in both California and New York City, new utilities have been formed in response to competition, to aggregate residential loads. In both states, these new utilities were organized as electric cooperatives. And a recent national study found that 80% of electricity customers served by an investor-owned utility would choose to be served by a consumer-owned utility. And 39% of that 80% would be willing to pay a little extra each month to get their electricity from a consumer-owned company, such as an electric cooperative.

Virginia's electric cooperatives. We're the voice of 900,000 consumers. We urge you to listen to that voice as you craft the rules for deregulation of the electric utility industry. Thank you.