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Appalachian Power seeking 16 percent rate hike

Wes Bunch • May 15, 2009 at 12:00 AM

After implementing a 31 percent rate increase totaling $168 million at the beginning of the year, Appalachian Power filed two additional increase requests Friday with the Virginia State Corporation Commission.

The subsidiary of American Electric Power (AEP) says the increase is needed to recover the cost of fuel and investments in meeting environmental compliance requirements and improving service reliability.

Both requests, which would be implemented in two stages by the beginning of next year, would be equal to an almost 16 percent increase in overall rates. If certain mitigation measures recommended by Appalachian Power are put in place, the average increase for residential rates would be closer to 13 percent.

If approved, a residential customer using 1,000 kilowatt hours a month would pay $101.87 beginning July 1 and $105.18 starting Jan. 1, 2010, up from the current bill of $92.97. All figures exclude local taxes, which vary.

“At Appalachian we recognize that increases in electric rates can be difficult for our customers, especially with a downturn in the economy.” said Dana Waldo, Appalachian Power president. “That’s why in the face of increasing costs, we’ve come up with a recommendation to the commission that would lessen the impact to customers.”

The request asks the VSCC to increase the current fuel factor by July 1 from 2.16 cents per kilowatt hour (kWh) to 3.05 cents per kWh, a move that would increase annual revenue by $141 million.

The company says the fuel factor increase is motivated by several factors, including the higher cost of coal and a sharp decline in electricity sales.

Appalachian Power is also seeking $41 million to offset environmental and reliability costs — including equipment purchases — incurred during 2008. The move would increase the overall average electric rates by 0.27 cent per kWh.

Although revenue has fallen during current economic conditions, AEP has remained profitable.On April 24, AEP reported 2009 first-quarter net earnings of $360 million, or 89 cents per share, compared with $410 million, or $1.43 per share, for first quarter 2008.

The company’s revenue, which totaled $3.5 billion for the first quarter of 2009, remained unchanged from last year.

Because of the economic downturn, Appalachian Power said it is also asking the VSCC to reduce the immediate average rate increase for all customer classes from 17 percent to about 12 percent. Residential customers would see a lower increase of 9 percent to 10 percent depending on usage.

Despite that move, Scott County Administrator Rufus Hood said the additional rate increase would have negative effects, especially on small businesses and low-income families, across the region.

“How can they even expect a rate increase at this time?” he asked. “It’s just ludicrous to think they could get that through the State Corporation Commission. It bothers me. They’re not even operating in the red.”

Hood said the county government would continue to voice its displeasure with the increases to the state board and Appalachian Power.

“We’ve been very vocal about this issue,” Hood said. “And we’ll continue to be with this latest request, I guarantee it.”

The higher rates often impact rural areas — like Scott County, which has a median per capita income of $15,073 — worse than other areas of the state, said Angela Sproles, executive director of RADA Inc., a nonprofit that assists low-income families in Scott County, Lee County, Wise County and Norton.

“In our region, an increase like this is more difficult to overcome than it is other areas with a higher per capita income,” she said. “It has an unfair effect on rural areas.”

Sproles said RADA, which provides a variety of assistance programs including help with paying utility bills and home weatherization, has already seen use of its services rise due to the combination of job losses and rising costs.

“We’re already stressed and overloaded because of all the people coming in, and we have the responsibility to assist them,” Sproles said. “This is just going to further impact the help that we can give.”

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