Testimony filed this week by the staff of the State Corporation Commission recommends that commissioners consider limiting to 3 percent a controversial base rate increase sought by Appalachian Power Co.

The operative word is "recommends."

Appalachian still seeks a 12.8 percent increase that would yield increased annual revenues for the electric utility of $154 million. In testimony filed Monday, SCC staff proposed lowering the revenue gain to about $41 million.

The potential rate impact of the staff's proposal would increase by 3 percent the monthly bill of a residential customer consuming 1,000 kilowatt-hours a month. Thus, a customer now paying $105 a month would pay $108.15 instead.

At Appalachian's proposed 12.8 percent, the customer's bill would go from $105 to $118.44.

Ken Schrad, a spokesman for the SCC, emphasized that staff recommendations will be weighed by commissioners along with substantial evidence and testimony from numerous other parties in the case -- including input from Appalachian's witnesses, from individual customers, the office of the attorney general, major industrial customers and a host of others.

Todd Burns, a spokesman for Appalachian, offered a similar observation.

"It's premature to draw any conclusions just because the parties have filed differing testimony," Burns said. "That's not uncommon. Ultimately, the SCC commissioners will hear the evidence and render a decision that considers all views."

He said Appalachian will file rebuttal testimony with the SCC on Wednesday.

A third public hearing related to the base rate case is scheduled for 10 a.m. Tuesday in Richmond. An "evidentiary hearing" is set for March 30.

On Dec. 12, Appalachian began collecting an interim base rate increase of 12.8 percent. But angry reactions from many customers to steep electric bills this winter stirred response by the Virginia General Assembly. The utility ultimately agreed to comply with emergency legislation and suspended collection of the interim charge.

The legislation holds that SCC commissioners must announce a ruling on the base rate case by July 15.

Staff testimony referenced a point emphasized by Appalachian -- that its return on common equity has been less than the amount approved by the SCC. The return on equity sets an opportunity for the utility to earn that return but does not guarantee it.

Specifically, the staff reported, Appalachian earned in 2009 a 7.6 percent return on equity on a fully adjusted basis, below the range of 10.2 percent to 10.6 percent authorized by the SCC. In turn, Appalachian's testimony indicated that the company earned only a 2.2 percent return during the period. Return on equity is a measure of how much the company earns on the investment of its shareholders and the SCC uses the calculation to regulate Appalachian's profits.

Because the measure describes the potential return an investor might expect to earn and helps inform shareholders how effectively their money is being spent, return on equity can affect investment in capital-intensive businesses such as American Electric Power, parent company of Appalachian.

Burns said both the SCC staff and the attorney general's office "have filed testimony that demonstrates that the company is not fully recovering its costs of serving its Virginia customers."

In 2009, Appalachian's profit from its full service territory, which includes parts of Virginia, West Virginia and Tennessee, totaled $155.81 million.