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Electric rate hike asked
Average rates would rise $200 a year if approved

Thursday, July 16, 2009

By GINNY WRAY - Bulletin Staff Writer

Appalachian Power filed requests for increased rates with the Virginia State Corporation Commission (SCC) on Wednesday that could raise average daily electric rates by 55 cents a day or about $200 a year.

Compared with current rates and assuming an average of 1,000 kilowatt hours (KWH) used a month, the requests, if approved, would mean residential customers would pay about $3.61 a day for electricity. The average daily increase would be about 55 cents over current rates, Appalachian stated in a release. That would total $200.75 a year.

Those figures could be even higher if the SCC approves two pending Appalachian rate hike requests that total 13 percent.

The company made three separate filings Wednesday; two will directly affect customer rates.

The first is Appalachian's initial filing under the commonwealth's regulatory statutes. It is referred to as a pre-biennial review, and its purpose is to determine a utility's costs of providing service and correspondingly fix base rates for a period of two years - essentially through 2011. Electric utilities are required by law to file similar cases every two years.

The second rate-related filing is for a new bill component to recover transmission costs. This component recognizes federal regulatory authority over transmission services and allows the company to recover charges approved by those regulators for the transmission of power flowing through the independently operated transmission grid. The filing will remove transmission costs from base rates and apply it to customer bills much like the state's fuel factor.

The base rate filing seeks adjustments that will increase current base rates by $169 million, and the transmission adjustment will increase rates about $24 million. That is a total increase of $193 million or about 16 percent over current rates.

The percentage impact will vary across customer classes. Residential customers will see an increase of about 19 percent. The residential increase, which is higher than the overall average percentage, reflects the proposed removal, in part, of rate subsidies historically provided for residential customers by larger commercial and industrial customers under Appalachian's rate structure.

The third filing will not increase rates. It seeks approval of two demand response tariffs that allow commercial and industrial customers to be rewarded for agreeing to reduce power consumption during periods of high prices and emergencies and actually doing so when notified by the company. This helps create opportunities for customers to control their use and to have rates that reflect that option.

"These applications come when our customers and the company are attempting to balance rising costs with a recessionary economy," said Dana Waldo, Appalachian Power president and chief operating officer. "In order to reliably serve our Virginia customers, the company must spend substantial amounts of money for mandated environmental and other necessary energy-related programs at a time when capital is more difficult and expensive to obtain.

"The company continues to tighten its belt with serious cost-containing measures resulting in essentially a flat level of discretionary expenditures as we go forward. Consequently, our filings today reflect the total level of costs Appalachian requires to serve its customers and ensure that the electric infrastructure is ready as we begin to help turn around the area's economy," he added.

Waldo also acknowledged recent comments and concerns from customers and elected officials throughout Southwest Virginia regarding rising energy costs.

"We recognize the impact of increased costs of electricity being added to the growing costs of housing, food, transportation and other necessities," he said. "That is one reason I'm pleased to also announce today a number of steps we are taking to help."�

Among those are:

"¢ The company will immediately increase from $210,000 to $1,025,000 its contribution to low-income energy assistance programs in its service territory. Virginia's Neighbor-to-Neighbor program will receive $500,000.

"¢ Initiate improved deposit and collections efforts for customers with a history of delinquency.

"¢ Make it easier for customers to make "settle-up payments" under the company's budget billing plan.

Waldo said part of the pre-biennial rate application also asks approval of an economic development rider that will provide incentives for larger commercial and industrial customers to grow their businesses in Virginia.

"We are doing our best, within the terms and conditions of our service in Virginia, to soften the economic impact on our customers. We continue to search for innovative ways to keep our costs as low as possible, help customers through these troubled times and prepare for better days ahead," he said.

Appalachian spokesman Todd Burns noted that if all the company's requests were approved by the SCC, its rates would equal what they were in 1983 when adjusted for inflation. That reflects the fact that Appalachian "went more than a dozen years with no increase at all," he added.

Also, despite the recession, the utility's customers set a peak demand record in January of 8,300 megawatts, up 1,000 over peak demand in 2005, Burns said. Appalachian has added infrastructure - output from power plants - to accommodate that demand, and "those plants now have a payer of environmental compliance built in on top," he said.

The SCC has yet to rule on Appalachian's two pending rate increase requests. One is related to the fuel adjustment clause. Appalachian has said it makes no profit on the fuel factor, and it is trying to recover its fuel costs.

Hearings were held on that recently, and in addition to those who spoke, the SCC received about 9,000 letters and e-mails on the matter, according to SCC spokesman Andy Farmer.

The other proposed rate hike is an attempt to recoup $41 million in equipment purchases the company made in 2008. A hearing on that will be held Oct. 1.

The commission will publish a schedule of hearings on Appalachian's latest requests in the coming weeks, and it will include information on how people can comment on them, Farmer added.

Appalachian Power provides electricity to customers in Henry and Patrick counties. Overall, it serves 1 million customers in Virginia, West Virginia and Tennessee. It is a unit of American Electric Power, which has more than 5 million customers in 11 states.


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