Sunday, November 15, 2009
Power rates fuel debate
There have been record numbers of public comments about Appalachian's rate filings.
The latest from The Ticker blog
Appalachian Power Co.'s ongoing quests for rate increases worry many households and businesses already befuddled and concerned about electric bills.
This week, two regional public hearings scheduled by the Virginia State Corporation Commission will provide opportunities for residents to speak, as public witnesses, directly to SCC commissioners about Appalachian's request for an increase in its base rate.
Customers of the electric utility have watched their electric bills rise in recent years and that trend is likely to continue.
For example, in December 2007, the monthly bill of an average residential customer using 1,000 kilowatt hours a month was $71.71. As of December 2008, the bill had climbed about 31 percent to $94.24. The December 2009 bill, which will include rate increases already approved by the SCC as well as an interim base rate and a transmission surcharge that take effect Dec. 12, will be about 23 percent higher at $115.78.
A final ruling by the SCC on the base rate case and a decision about an Appalachian petition for an increase in an environmental and reliability surcharge could change that amount.
Utility filings for rate increases frequently generate high-voltage controversy.
This has been especially true this year, when many households and businesses are struggling to make ends meet. The SCC has received record numbers of public comments about Appalachian's rate filings.
Because Appalachian has no competition in its territory, the SCC regulates the company's Virginia operations and carefully reviews and often reduces increases sought through rate requests. The SCC is bound to comply with state law. And Virginia law holds that regulated electric utilities have an opportunity to recover through customer charges the utility's "reasonable and prudent" operating expenses plus a fair profit.
A utility can recover costs for fuel, transmission expenses, environmental and reliability costs, conservation programs, renewable energy programs and generation facilities. Appalachian and parent company American Electric Power emphasize that electric utilities are also beset by increasing costs -- especially to comply with environmental regulations.
Appalachian relies primarily on coal-fired power plants. Pending legislation designed to cap such plants' emission of greenhouse gas carbon dioxide are likely to increase the cost of electricity, a reality accepted even by many consumer advocates.
On Oct. 30, AEP formally commissioned a demonstration project that relies on new technology to capture and store a small amount of CO2 extracted from the coal-burning plant's flue gases. At the time, Mike Morris, AEP's chairman, president and CEO, said kilowatt hour production costs are likely to double when and if the capture and storage strategy is fully deployed.
For years, Appalachian Power's rates have been lower than many other electric utilities. But that is changing. In Virginia, Appalachian has about 500,000 customers. It also serves customers in portions of West Virginia and Tennessee.
PUBLIC HEARINGS
The Virginia State Corporation Commission will hold two public hearings this month to allow residents of the region a chance to testify about a base rate increase sought by Appalachian Power. The base rate recovers the utility's costs for generation and distribution of power.
Abingdon
When: 6 p.m. Wednesday
Where: Southwest Virginia Higher Education Center, Grand Hall
Rocky Mount
When: 6 p.m. Thursday
Where: Franklin County High School auditorium
Web site: www.scc.virginia.gov/case
The SCC case number is: PUE-2009-00030
GLOSSARY OF TERMS FOR ELECTRIC UTILITY RATES
Rates: Appalachian Power's electric bills include various rate and surcharge components. The two largest are base rates, which include most operating costs other than fuel, and the fuel rate.
Base rate: Includes recovery of Appalachian's costs of owning, operating and maintaining power generation plants, as well as costs associated with the distribution of electricity, related maintenance, depreciation and financing expenses and return on investment.
Fuel rate: Dollar for dollar recovery of all prudently incurred costs for fuel used to generate electricity for Virginia customers. It also includes costs for purchasing power from other utilities. Appalachian depends on coal as its fuel for about 98 percent of the power it generates.
Environmental and Reliability (E&R) surcharge: Virginia law allows Appalachian to recover money spent to comply with environmental regulations and costs associated with providing a reliable source and delivery of electricity. The company anticipates environmental compliance costs will continue to rise. After 2010, the E&R surcharge as currently defined will be discontinued. But Appalachian will still have opportunities to recover costs not associated with the base rate through filings for other surcharges.
Transmission surcharge: Recovers costs of transmission services provided to Appalachian by PJM Interconnection, an independent transmission organization that coordinates the movement of wholesale electricity in a multi-state region.
Source: State Corporation Commission, Appalachian Power
