Appalachian Power seek to increase rates to cover fuel costs

Appalachian Power Fuel Factor recovers fuel and purchased power costs, including coal and wind, driving a proposed rate increase: 7% residential to 11.26 cents/kWh, higher for some industrial customers, pending SCC review.

Appalachian Power, a subsidiary of American Electric Power, recently filed a request with the Virginia State Corporation Commission SCC seeking to increase the fuel factor component of rates to reflect higher fuel costs.

The fuel factor is aimed at dollar-for-dollar recovery for the cost Appalachian Power incurs for fuel, primarily coal, and purchased power, including some wind generation purchases under the renewable portfolio standard guidelines in Virginia. There is no profit in the fuel factor. The request addresses a growing imbalance between what Appalachian Power pays for fuel and what it is collecting from customers.

Appalachian’s proposal would increase overall rates about nine percent, similar to a recent rate increase approval reported for the company. Residential rates would increase about seven percent from 10.5 cents per kilowatthour (kWh) to 11.26 cents per kWh. Certain higher-usage industrial customers could see larger percentage increases depending on their usage. Appalachian anticipates no further rate changes in 2012.

Although the fuel factor is often adjusted annually, Appalachian’s last increase in the fuel factor was in 2009. In 2010, it was adjusted downward, and it was left unchanged in 2011, even as some communities reported higher power bills than the previous year. The decrease has been in effect for more than 20 months.

In this request, Appalachian Power asked to increase the fuel factor from 2.197 cents per kWh to 2.953 cents per kWh, a level comparable to the one in effect about three years ago, while Duke Energy Carolinas sought its first increase since 1991 during a comparable timeframe.

Appalachian proposes to collect a portion of the increase over an extended period to help reduce the impact on rates. The new factor is proposed to take effect in early June, subject to the review and approval of the SCC, while another utility seeks lower rates in Arkansas amid different regulatory considerations. Any over-recovery or under-recovery will be reflected in the next adjustment.

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