Jay Paul| Special to The Roanoke Times

Mary Martin of Martinsville attends a public hearing Wednesday over Appalachian Power's request for a rate increase.

Diane Ingram of Bassett addresses the members of the State Corporation Commission on Wednesday, asking them not to hurt people like herself who have served their country and cannot afford a rate increase.

Attendees listen at a public hearing about an Appalachian Power rate increase.

RICHMOND -- Appalachian Power Co. officials said Wednesday they will embrace a tentative, negotiated settlement that could mean customers' electric bills would increase by about 17 percent instead of by about 24 percent.

That figure would include a recent increase in the utility's fuel factor.

John Shepelwich, a spokesman for Appalachian, emphasized that the 17 percent "is a ballpark estimate."

On Tuesday, Appalachian customers began paying an interim rate that will increase electric bills by about 22 percent until the Virginia State Corporation Commission rules on the base rate case, first filed by the utility in May.

Before the proposed settlement was announced during an SCC public hearing in Richmond, 14 people who implored commissioners to reduce the base rate focused on the utility's original request for a 24 percent hike.

Many speakers, including several legislators, traveled from Martinsville, Henry County and surrounding counties. They repeatedly cited the economic struggles of the region, once a manufacturing hub.

Households are already battling to pay bills, buy food and clothes, medicine and gasoline, said Debra Buchanan, a member of the Henry County Board of Supervisors.

"You know how people are suffering," Buchanan told the commissioners.

Utility officials have acknowledged a rate increase will be an added burden for customers coping with difficult economic times.

But Appalachian notes that SCC regulations allow the utility to recover costs for mandated environmental improvements and other measures. The utility has said it is in a precarious financial condition in Virginia and needs to increase revenues.

A rate increase will affect most of Southwest Virginia.

Diane Ingram of Bassett, who said she is a veteran of the U.S. Army, spoke directly to Appalachian officials, telling them residents are stretched thin.

"There's nothing else we can do [but] appeal to you as a human, as an American citizen," Ingram said.

Mary Martin of Martinsville said she works two jobs. She warned that customers "are going to get double whacked with this" because they'll face tax increases to help cover the increased utility bills for public schools and other public facilities.

Referring to recent political rhetoric, she said, "The next thing I expect to hear is that paying a higher power bill is our patriotic duty."

Later, after learning that the settlement could limit the average increase to about 17 percent, Martin said "that's still huge."

At the negotiated base rate, a customer who uses 1,000 kilowatt hours of electricity pays about $77.42 per month now and would pay about $90.58 a month with a 17 percent increase.

Martin said many customers consume more than 1,000 kilowatt hours.

She said people are struggling now to pay their electric bills. Appalachian's number of customer shut-offs already has increased, Martin said.

Todd Burns, a utility spokesman, acknowledged that trend.

Using 2006 as a reference year because customer refunds affected 2007 numbers, Burns said shut-offs through August 2006 totaled about 18,800, including customers who had the power shut off more than once in that period. Through August of this year, that number has been more than 22,000, he said -- an increase Burns said he suspects reflects a slowing economy.

Disconnecting a customer's power is a last resort, he said. The utility directs people who might be eligible for energy assistance to relevant agencies or programs.

Terms of the settlement were described during the hearing before Commissioners Mark Christie, Judith Jagdmann and James Dimitri, who could accept or reject the agreement.

Appalachian's request for an increase of about 24 percent would have equaled an annual increase in revenues of about $208 million. The negotiated rate would increase revenues by about $168 million.

Why was Appalachian willing to compromise?

After the hearing, Barry Thomas, the utility's director of regulatory services, said a key factor was the agreement to boost a "return on equity" figure. The new number will help the utility borrow and attract money to help fund capital projects and ensure that shareholders of American Electric Power, Appalachian's parent company, receive an acceptable return on investment, he said.

In 2007, the utility earned "only a 3.5 percent return on common equity," Thomas said, "which is not a lot more than a typical savings account."

"Stockholders are not investing in a savings account," he said.

Under the settlement terms, Appalachian's return on equity would increase to 10.2 percent.

In fiscal 2007, AEP's profits totaled more than $1 billion.

Thomas said Appalachian is one of AEP's larger subsidiaries and must improve its financial performance. Appalachian provides electricity to about 1 million customers in Virginia, West Virginia and Tennessee.

Irene Leech, a professor of consumer affairs at Virginia Tech and president of the Virginia Citizens Consumer Council, said the council has known customers were facing a significant rate increase.

"The company has large mandatory expenses that are due to be paid for by customers," she said.

Leech noted, however, that both the base rate request for a 24 percent hike and the interim increase of 22 percent are too high, especially on the cusp of winter weather.

Reacting to the proposed settlement, she said, "That's better than what it was, but it is still going to hurt folks."

Consumers can anticipate "continually rising rates" in the years ahead, she said, based on current regulations.

"The only people who can make this change are delegates and senators, the governor, lieutenant governor and attorney general," she said.

"Widespread and strong consumer complaints are going to be required to get their attention and turn the tide."

Christie said commissioners will rule as soon as they can.