Appalachian Power Rate Increase

Appalachian Power, Wheeling Power Seek Second Year Phase-In of Coal Costs;
Increase to be About 20¢ a Day for Residential Customers
Appalachian Power and Wheeling Power, both subsidiaries of American Electric Power (AEP), are seeking an adjustment to their West Virginia rates for recovery of the ongoing costs of fuel and purchased power and environmental compliance project expenses.

Last year, following a dramatic increase in the cost of coal and purchased power, the companies sought Public Service Commission (PSC) of West Virginia approval to adjust rates upward in a series of annual steps rather than in one single large increase. In response to that request, the PSC granted permission to phase-in the required rate increases over a period of four years.
The first year’s approved increase was approximately $124 million, or about 12 percent. Additional increases over the remaining years of the phase-in were expected to be about the same each year. However, because coal and purchased power costs have moderated somewhat, this year’s increase – made March 1, 2010 – is lower than expected.

The total revenue increase in the request is approximately $96 million or 8.2 percent. This increase reflects a dollar-for-dollar recovery of the expenses incurred for the costs of fuel and purchased power. The request made to the PSC is Appalachian’s regular annual Expanded Net Energy Cost (ENEC) filing. It includes no profit for the company. The filing also adjusts rates to recover the cost of environmental compliance construction projects, specifically the flue gas desulfurization units or scrubbers at the John Amos Plant.

Residential Customer Usage and Costs
If approved by the Commission, typical residential customers will see an increase in their electric bills of about 20 cents a day. Residential customers who use 1,000 kilowatt-hours a month will see their monthly bill rise from $80.47 to $86.44, an increase of 7.4 percent. The increase for other customer classes, like commercial or industrial customers, will vary.
Usage in KWH Current Rate Proposed Rate Increase
1,000 $80.47 $86.44 $5.97
2,000 $150.83 $162.77 $11.94

Senior Discount
The company also proposed the introduction of a temporary senior citizen discount. If approved by the Commission, the discount will provide a one cent per kilowatt-hour reduction on the first 500 kilowatt hours a month for residential customers who qualify. For a customer who uses 500 kilowatt-hours or more a month, it will provide a maximum savings of $5.00 a month, or $60 dollars per year.

Energy Efficiency Programs

Additionally, the company submitted an Energy Efficiency/Demand Response Program Portfolio to the Commission. Appalachian is proposing to implement a comprehensive portfolio of energy efficiency or demand response programs targeting residential, commercial and industrial customers. Programs range from low-income weatherization to incentives to purchase smart lighting. For commercial and industrial customers, the focus is on increasing the efficiency of lighting, HVAC and motors. The programs help customers save money on their energy costs and help reduce the overall energy demand for the company.

Energy efficiency measures can be used to offset rising prices for electricity. For example, replacing some of the incandescent bulbs in a home with just one six-pack of compact fluorescent bulbs would save enough to offset the proposed increase for a typical residential customer.

Manage Your Energy Use

Rates for Appalachian’s customers are among the lowest in the country. The national average price for electricity is 11.76 cents per kilowatt-hour, compared to Appalachian’s proposed 8.6 cents. Customers can manage their energy use by exploring the company’s Internet site (www.WattWhyAndHow.com) for energy-saving tips and a free home energy calculator that can help explain how to conserve electricity. The site also provides information on payment options available to customers.

Source: www.AppalachianPower.com

So what do you think? Is this a valid reason for a rate increase? Is Appalachian Power (AEP) deserving of this? If not, why?

I would argue that the company is entitled to recoup its costs, and I look forwarded the the energy efficiency programs. What are your thoughts?

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