Mr. Chairman and members of the Task Force: I am Howard W. Dobbins and appear as a representative of the Virginia Municipal League.

At the outset, I think we can all agree that de-regulation of electric industry must benefit all classes of electric customers and not just industrials and commercial companies.

That means that residential customers, businesses and governments, small and large, must have an equal opportunity to participate in any savings which are available.

The opportunity to participate must be more than a legal opportunity - it must be practical as well.

I believe we could all agree that this practical opportunity is not really available to small customers if they are required to act independently. In order for the residential and small customers to participate on equal, or more nearly equal, terms with the large customers, they must cooperate with other customers to negotiate for the purchase of the power which they jointly require, so that the aggregate demand constitutes a sizable piece of the power pie.

Aggregation, or joint purchasing, can be accomplished by either profit or non-profit organizations, by cooperative action, or by units of local government negotiating on behalf of themselves and their citizens.

I think we could agree that the individual customer must be granted the right of choice among these organizations. Whether a particular customer wants to be served by one of these new organizations or by the utility which has traditionally served the customer must be by a voluntary choice on the customer's part.

VML appears before you to urge that any legislation presented to the General Assembly provide authorization for local governments, either individually or in combination with other local governments, to negotiate the purchase of electricity for governmental uses, such as schools, water, sewer, street lights and government buildings and also on behalf of their citizens for their own individual use. We believe, and submit, that there will be many organizations that will seek to enlist customers either as marketers, brokers or aggregators. The larger customers, of course, will be more attractive to such organizations and we submit that when the dust settles, many residential and small business customers will either not be solicited, or if solicited, will simply default by not joining a purchasing group.

For that reason, we submit that if local governments are to serve as public aggregators one issue to resolve is whether residential consumers must affirmatively choose to be included in, or opt in, a local government aggregated group - or whether residents will be included unless they opt-out.

The opt-in model envisions building an energy buying group through intense community outreach and a grass-roots campaign on behalf of the community. No customer can be included in the opt-in aggregate unless he or she affirmatively signs up.

The opt-out model of local government aggregation would allow the local government to form an energy buying group on behalf of its residents. The difference is that instead of going to each individual to ask them to sign up, the community could do it through public meetings and a public education campaign. Residents would be notified about the process, informed of the steps, and given the option to opt-out of the aggregate if they so choose.

We urge the opt-out model as it directly addresses the key problem of uncertain pool size. By obtaining the consent of residents to aggregate them automatically, the local government achieves the critical advantage of assembling a large and relatively certain aggregate of customers. Negotiations with potential suppliers become easier for both parties, since the supplier is assured a reasonably predictable pool of customers and can, therefore, offer more attractive terms for price and service, while the local government is spared the extraordinary burden of getting each and every resident to sign on the dotted line before the contract can be negotiated. Any customer that does not want to be part of the aggregate can easily withdraw.

Around the country, in debates over the restructuring of the electric industry some private utilities and others have opposed aggregation of consumers by local governments. The common charge is that it will create market barriers and re-regulate or stifle competition. To the contrary, we believe that government aggregation provides a way for more consumers to participate and realize the benefits of competition.

Virginia's local governments, counties, cities and towns, are particularly well qualified for the privilege and responsibility of negotiating for their residential and small business citizens as well as for themselves. Electricity is a basic commodity, much like water supply and sewer services which are local government responsibilities. Unlike other potential aggregators and marketers, universal and reliable electric service, safety and fair and equitable costs are the vital concerns of local governments without regard to bottom line profit or loss. They are natural goals of local government officials and administrators who are accountable to their electorates and are subject to fair bidding, purchasing and conflict of interest laws.

For over twenty years, Virginia's local governments, under the sponsorship of VML and VACo have jointly negotiated with both Virginia Power in the eastern part of the state and American Electric Power in the western part of the state for their governmental electricity demands. These cooperative efforts have resulted in improved service, in economical and fair rates and enhanced cooperation between governments and the public utilities, without resort to either the courts or the SCC.

Current Virginia law permits local governments to take joint action on any enterprise for which a single jurisdiction is authorized. There are also existing provisions by which local governments may form purchasing groups. Local governments have exercised these powers responsibly and successfully. As you may know, Virginia law also permits local governments to jointly form worker's compensation self insurance pools for their employees and liability insurance pools for the governments, their officials and employees. I mention these undertakings simply to assure you that Virginia's local governments have more than a little experience in dealing with issues which are important to themselves and to their citizens and which are some ways akin to the aggregation authority which we seek at your hands in connection with the electricity needs of our governments and citizens.

In summary, we urge legislation which will permit local governments to aggregate the electricity needs of the governments and of their citizen customers who will have a reasonable opportunity to voluntarily opt-out of the aggregation by the governments.