Last year, following a dramatic increase in the cost of coal and purchased power, the companies sought the PSC’s 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 phrase 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 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 to provide electric energy to customers. The Expanded Net Energy Cost, as it is called, includes no profit for the company.
“This gradual phase-in of costs helps keep rates as low as possible for our customers,” Dana Walda, Appalachian Power president and chief operating officer, said. “It’s an innovative solution that allows us to recover our legitimate costs of doing business while lessening the immediate burden on customers.”
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.
With Monday’s filing, 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 a month, or $60 per year.
“We know that seniors, especially, are having a difficult time making ends meet in this economy,” Waldo said. “We hope this discount will help.”
For many seniors, the discount means that they will see little or no increase in their bills, despite the overall rate increase. Some seniors will even see a decrease in their bills. 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.
Waldo said that 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.
Monday’s filing was for Appalachian Power’s regular annual Expanded Net Energy Cost (ENEC) filing to adjust for the costs of fuel and purchased power. ENEC is a pass-through mechanism for the recovery of actual costs that 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. If approved, rates will be effective July 1, 2010.
Appalachian Power, a unit of American Electric power, provides electricity to 1 million customers in West Virginia, Virginia and Tennessee (as AEP Appalachian Power). AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S.