Thursday, February 04, 2010
SCC sets public hearing on electric rates
One advocate urged Appalachian Power customers to contact public officials now.
This year's wintry mix in much of Southwest Virginia has delivered snow, ice and eyebrow-arching electric bills.
Customers of Appalachian Power Co. now have a third chance to testify before the Virginia State Corporation Commission about the utility's increasingly controversial application for a base rate increase on top of three previous rate or surcharge increases granted since August.
Base rates can pack a wallop. They typically have the greatest potential to affect customers' bills.
During a public hearing set for March 16 in Richmond, the SCC's three commissioners undoubtedly will hear what they've heard repeatedly during two previous public hearings -- impassioned testimony from struggling homeowners and businesses about hardships tied to ongoing rate increases for Appalachian.
Commissioners have expressed empathy for customers' concerns.
But they have time and again emphasized too that their decisions must follow state law. And Virginia law gives electric utilities an opportunity to recover reasonable and prudent costs and what is determined to be a fair profit.
Consumer advocate Irene Leech suggested Wednesday that customers upset about rate increases should register their complaints well before March 16. For one thing, she said, the Virginia General Assembly is scheduled to adjourn March 13.
"The most important thing consumers can do at this moment is to let public officials know their concerns and they should contact legislators, the attorney general and Governor [Bob] McDonnell," said Leech, a professor of consumer studies at Virginia Tech, president of the Virginia Citizens Consumer Council and a longtime utility watchdog.
Leech and others say that re-regulation legislation passed in 2007 swung the pendulum of power too far in the direction of electric utilities and that the pendulum must swing back to re-empower the SCC.
Several state lawmakers have introduced legislation this session that could, if passed, yield some measure of swing.
An opportunity for a third public hearing on the base rate case emerged when an "evidentiary hearing" originally set for March 16 was postponed to March 30. In November, the SCC held public hearings in Abingdon and Rocky Mount.
Lawyers dominate evidentiary hearings, when evidence and testimony are submitted either in support of the increase or in opposition. For example, lawyers representing the Steel Dynamics Roanoke Bar Division, which uses electric arc furnaces to melt scrap metal, are likely to submit materials and testimony on March 30 opposing the increase.
Many Appalachian customers have recently received staggering electric bills for December and January -- a period that included a lengthy cold spell and the implementation of three separate rate increases.
As a result, the still-pending base rate case has become a political lightning rod.
A base rate filing allows utilities to recover the costs of owning, operating and maintaining power generation plants, distributing electricity and related maintenance, depreciation and financing expenses, as well as an opportunity to earn a profit.
In its base rate request, Appalachian seeks an increase of about 12.5 percent for the monthly bill of an average residential customer consuming about 1,000 kilowatt hours per month.
If the SCC ultimately approves a lesser amount, Appalachian will credit customers' bills for the difference plus interest.
Why the postponement of the evidentiary hearing?
Appalachian told the SCC it needed to adjust its base rate application by about $40 million to account for significant revenue losses Appalachian suffered because Century Aluminum, one of the utility's largest industrial customers, has ceased production in West Virginia.
The adjustment does not provide an opportunity for the utility to exceed the $154 million base rate increase request currently before the commission. However, this new information may be considered by the SCC when determining what amount the company will ultimately be authorized to collect from customers after considering all of the factual evidence and applying Virginia law.
If any or all of the revenue loss associated with the aluminum plant is not recovered as a result of the current case, Appalachian could seek recovery in a future rate case.
Appalachian serves about 500,000 customers in its Virginia service territory. It is a subsidiary of American Electric Power, which reported last week a 50 percent jump in profits during its fourth quarter compared with the same period last year.




