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| Legislators confront power company |
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Del. Ward Armstrong |
Thursday, January 28, 2010
By PAUL COLLINS - Bulletin Staff Writer
Some state legislators told the president of Appalachian Power Co. on Wednesday that if the company doesn’t voluntarily reduce the economic hardships caused by its rate increases, “we have no choice but to act,” according to Del. Ward Armstrong, the House minority leader.
About a dozen members of the House and Senate, from both political parties, met for about an hour with Dana Waldo, according to Armstrong, D-Collinsville. Waldo is the president and chief operating officer of Appalachian Power Co.
“We delivered the message pretty strongly” that both the magnitude and frequency of Appalachian’s rate increases are “creating great economic hardship, and something has to be done,” Armstrong said.
He said, at the request of Appalachian Power, House legislators at the meeting Wednesday agreed to give the company until next week to see if it is in a position to make a proposal to address the legislators’ concerns. If those concerns are not resolved, Armstrong and Del. Terry Kilgore, R-Gate City, intend to introduce a House measure that mirrors a Senate resolution already introduced to decertify Appalachian Power.
“That is the electric utility version of the death penalty, meaning that if Appalachian does not provide a service at a reasonable cost to consumers, we’ll find someone who will, including electric cooperatives,” Armstrong said. “I hope it won’t come to that.”
Appalachian is a regulated monopoly, he said. “We allow them to do business in Virginia. We can decertify their ability to do business in Virginia. The General Assembly can do that.”
He added that is “clearly the option of last resort, but it is a message that needs to be sent” to Appalachian.
Sen. William C. Wampler Jr., R-Bristol, and others introduced the Senate resolution. A summary of it on the General Assembly Web site says the resolution “Directs the commission on Electric Utility Regulation to study alternatives to the monopoly service provided by Appalachian Power, which is the existing investor-owned electric utility serving portions of Southwest and Southside Virginia.”
It directs the commission to determine if customers in Appalachian’s service territory should have the option to purchase electric generation and other services from other providers, including electric distribution cooperatives, investor-owned electric utilities, or licensed competitive service providers.
The resolution also states that the commission is “to determine if it would be in the best interests of the commonwealth if Appalachian Power were to be replaced by another entity, which may be a new or existing investor-owned electric utility or electric cooperative, as the certificated provider of electric utility services within Appalachian Power’s service territory,” the summary states.
The resolution states, “Between 2004 and 2009, the monthly cost to a residential customer of (Appalachian Power) using 1,000 kWh (kilowatt-hour) has increased from $56.82 to $98.65, which figure does not include the increase of approximately $8 that went into effect on an interim basis on Dec. 12, 2009.” (The increase from $56.82 to $98.65 is 73.6 percent.)
The electric rate increases also have “placed commercial and industrial customers at a competitive disadvantage,” the resolution states. “The inability of (Appalachian Power’s) customers to purchase electricity service from other providers of electric service, except in the limited circumstances set forth in § 56-577 of the Code of Virginia, may be contributing to the rapid escalation in electric rates in (Appalachian Power’s) certificated service territory. ... ,” it adds.
Waldo told the legislators that the company was trying to recover its costs and get a reasonable rate of return; that the company is taking measures to assist people with payment of bills, including payment plans and a charitable fund called Neighbor to Neighbor; and is doing everything it can to avoid termination of service, Armstrong said.
“We concluded by telling Appalachian that if they were not willing to take steps voluntarily, we have no choice but to act,” Armstrong said.
Decertification would force Appalachian Power to divest itself of its assets, he said. A plan would have to be devised for someone else to come in and take over its assets, he said, adding that it has not happened in modern times.
Armstrong said he hopes the company will quickly find a way to roll back the significant rate increase that went into effect in December.
The 15.5 percent rate increase effective last month was made up of a 12.5 percent interim rate increase pending approval by the State Corporation Commission and a 3 percent increase (for transmission costs) already approved by the SCC, said Todd Burns, Appalachian Power’s corporate communications manager. Transmission cost is a “pass-through cost” to be part of a regional grid, said Burns, who was not at Wednesday’s meeting.
He said it’s important for customers to realize that the primary reason for large increases in their recent electric bills is not the rate increase last month, but rather “heating costs associated with sustained cold temperatures.”
“We have responded,” he said.
He explained that last week the company announced a new option for customers to pay their bills, making a down payment and spreading the balance over the next several months if needed or waiting until winter subsides to make payments. For information, call 1-866-276-5831 or 1-800-956-4237, he said.
The company also has an average monthly payment plan that allows customers to have their bills based on a 12-month rolling average, which prevents spikes in bills, Burns said. Also the company has contributed more than $5 million (including more than $1 million this year) to its Neighbor-to-Neighbor program to help people needing emergency assistance to pay their bills, he said.
As for the several bills that have been introduced in the General Assembly concerning Appalachian Power, Burns said, “We’re in a difficult position. Our costs are increasing tremendously. We are investing billions of dollars to help us comply with federal and state regulations for environmental compliance.”
The company has to pass those costs on to consumers, he said.
“In general, we are concerned about legislation that would delay, and in some cases prevent us from, recovering expenses we have to incur on behalf of our customers. Some of the legislation does that,” he said.
As for Wampler’s resolution, Burns said, “We consider the resolution unfortunate for what it implies. Our company has served this area well for more than 75 years. It (the resolution) is apparently in reaction to the rates, and if you exclude the current 12.5 percent we’re collecting on an interim basis, all the other increases in our rates have been found prudent after being thoroughly reviewed by the Virginia State Corporation Commission. We believe that we’ve done a good job in meeting our obligation and serving our customers, and the costs that we’ve incurred have proven to be prudent and are the true cost of providing service to our customers.”
“Although they (rates) have increased, they are still competitive with any other nearby utility and any other utility in the state,” Burns said. |
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