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APCO Gets Approval For $85.1 Million Increase

The State Corporation Commission (SCC) has approved a total of .1 million in revenue increases for Appalachian Power Company in two rate case orders.  One case is a review of base rates that, under Virginia law, takes place every two years.  The other case was filed under a provision of Virginia law allowing electric utilities to recover environmental expenses.

The original additional revenue increase requested by Appalachian Power in both cases totaled $203.4 million.  In the biennial review case, the company also originally asked that $51 million be deferred, with carrying costs, to be collected later from customers.  The SCC’s final orders in each case results in a combined total increase of $85.1 million.

For a typical residential customer using 1,000 kilowatt-hours of electricity per month, the monthly bill will increase by approximately $7, from $94.66 to $101.66.

The major components leading to the rate adjustment include:

• Allowing recovery of $56.8 million in additional expenses for compliance with state and federal environmental regulations.

• Rejecting recovery through a rate adjustment clause of $33.8 million in environmental components of capacity payments the company is already recovering from base rates.

• Denying recovery of $23.9 million in workforce transition costs, as these were deemed already recovered.

• Implementing depreciation schedules now, a $39 million impact, instead of deferring a greater cost to ratepayers in the future.

Appalachian Power had requested that the new depreciation schedule be deferred for recovery in the future with the company receiving a carrying cost on the amount deferred.  The SCC, however, noted that doing so would only increase the cost on Appalachian Power’s customers and put the burden on future ratepayers.

In setting the company’s authorized return on equity for base rates for the review period of 2011 and 2012, the Commission determined that 10.9 percent is “fair and reasonable … within the meaning of the statute.”  The 10.9 percent includes a half-percent (50 basis points) incentive that Virginia law awards to the company for meeting certain renewable energy targets.  The renewable energy incentive increases the company’s annual revenue by approximately $7.75 million. The company was seeking a combined rate of return on equity of 11.65 percent.

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