SCC Approves $85.1 Million Revenue Increase for Appalachian Power

Published by the Scott County Virginia Star on Thursday, December 8, 2011.

The State Corporation Commission (SCC) has approved a total of $85.1 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 SCC¹s final orders in each case results in a combined total increase of $85.1 million.

Company officials estimate 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 Power¹s customers and put the burden on future ratepayers.

In setting the company¹s authorized return on equity for base rates for the review period of 2011 and 2012, the Commission determined that 10.9 percent is ³fair and reasonable Š within the meaning of the statute.² 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 company¹s annual revenue by approximately $7.75 million. The company was seeking a combined rate of return on equity of 11.65 percent.

Additional information on the rate increases can be found on the SCC's website, http://www.scc.virginia.gov/case/index.aspx. Case numbers are PUE-2011-00035 for environmental rate adjustment clause and PUE-2011-00037 for the biennial review of base rates.