Saturday, May 23, 2009
Appalachian Power seeks rate increases
The company wants to recover higher fuel costs and "environmental and reliability" expenses.
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When Appalachian Power Co. pays more for coal to fire its power plants the utility's customers typically pay more for electricity.
By law, electric utilities are entitled to pass along to customers the costs of electricity-generating fuel and to annually file to adjust the associated "fuel factor."
On June 30, the Virginia State Corporation Commission will hold a public hearing in Richmond to solicit comment about Appalachian's recent filing for a fuel rate adjustment.
According to the SCC, the utility's latest fuel factor request, filed May 15, has the potential to increase by 13 percent the monthly bill of a typical residential customer.
But Appalachian has proposed a billing strategy that would extend the recovery of fuel costs through August 2010 and thus limit the monthly increase in residential electricity bills to about 9.6 percent.
Meanwhile, on May 15, the utility also filed to recover about $41 million for "environmental and reliability" costs incurred during 2008. It wants to revise a surcharge that would take effect Jan. 1, 2010.
Among other things, the surcharge recovers money spent to reduce emissions and to maintain reliability of electric service. That revision could raise the average residential bill by about 3.5 percent.
Thus, the two filings combined -- if the SCC approves and adopts Appalachian's extended plan to recover fuel costs -- could increase average monthly residential bills by about 13 percent.
As a result, recovery of the costs for coal and of the environmental expenses could push the average monthly electric bill in Western Virginia to more than $100 this year for the first time. The average Appalachian customer who uses 1,000 kilowatt hours of electricity per month and currently pays $92.97, would pay $105.18 by January 2010 if both increases are approved.
Appalachian says the state-regulated utility had anticipated paying about $62 a ton for coal and has actually been paying more than $70 a ton.
"We are paying more for coal than we are collecting from customers," said Todd Burns, a spokesman for Appalachian Power.
The fuel factor calculation includes actual fuel costs during the preceding year and predictions for costs in the coming year.
In addition, Appalachian's sales of electricity to other utilities have declined, which affects credits that are applied against the fuel factor.
The utility's May 15 filings came five months after the SCC approved a controversial 17 percent base rate increase for Appalachian's residential customers. The base rate increase also hit commercial and industrial customers, many trying to cope with a slumping economy.
Irene Leech, a professor of consumer affairs at Virginia Tech and president of the Virginia Citizens Consumer Council, said last week that the increases will hurt many people in the region already struggling to pay their electric bills.
But she acknowledged that Appalachian does not control some of its costs, including fuel expenses and the costs of complying with environmental regulations.
Ken Schrad, a spokesman for the SCC, said the commission will announce a separate schedule for soliciting comment on the proposed environmental and reliability surcharge.
Staff writer Jenny Kincaid Boone contributed to this report.
