APCo Is Seeking Rate Hikes That Could Total Nearly 40 Percent

By Debra McCown
Reporter / Bristol Herald Courier
Published: July 19, 2008

For the residential rate-payer:
* Current bill for 1,000 kilowatt hours of electricity – $71.48.
* After Sept. 1, bill for 1,000 kilowatt hours if fuel factor increase takes effect – $79.84.
* After Jan. 1, bill for 1,000 kilowatt hours if all proposed rate increases take effect – $98.43.

ABINGDON, Va. – Appalachian Power is seeking a fuel factor increase that would mean an 11.7 percent increase for the average Virginia residential ratepayer if approved by the State Corporation Commission.

If it and two other requested rate increases are approved, the total electric rate hike would be close to 40 percent by the beginning of 2009.

“You hear it every day, and it doesn’t matter what business you’re in. We’re all in a global economy, and what happens on a worldwide basis affects what happens right here in Southwest Virginia,” said Dan Adams, Southwest Virginia manager of external affairs for the power company.

Adams said the requested fuel factor increase – which is aimed to help cover fuel costs for power generation – and the base rate increase requested earlier this year both reflect skyrocketing costs.

“In the regions of the market where we typically buy coal from in the Appalachian chain, prices have doubled if not more than doubled in the last six months,” he said of the fuel factor increase requested Friday.

“It’s the overall coal market economy here and the weakness of the U.S. dollar overseas. China and India are importing coal in significant quantities, South Africa and Australia have had to curtail their exports of coal for various reasons, and the international coal market has turned to the U.S. to fill the need.”

Normally, the power company reviews its fuel factor in the fall and rates are adjusted Jan. 1; this year they’ve done it earlier because of rising costs and the company wants the proposed fuel factor increase to take effect Sept. 1.

According to a company news release, the price it pays for a ton of coal has increased from $60 to $140 a ton in the last six months.

The fuel factor, which comprises about one-third of a Virginia customer’s bill, would increase from 1.418 cents per kilowatt hour to 2.255 cents per kilowatt hour. Adams stressed that the increase includes no profit but merely covers the increased cost of fuel.

“Other utilities are facing the same issues, not just us, and they’re all going to have to deal with it [rising fuel costs],” Adams said. “If the price of coal continues to climb, then we would be forced to pass that along to our customers.”

A fuel factor increase has already been approved for customers of Dominion Virginia Power, which increased its average residential bill this month by more than 18 percent to cover rising fuel costs.

In addition to a proposed fuel factor increase, Appalachian Power also has pending a 24 percent base rate increase to reflect the increased cost of payroll and equipment and a 2 percent environment and reliability cost increase to cover the cost of emissions reduction equipment being installed at the company’s power plants.

If all three are approved and implemented as the company hopes, it would result in a combined 37.7 percent increase for customers by Jan. 1.

“There’s nothing that’s indicating a downward trend,” said power company spokesman John Shepelwich of fuel prices. But, he added, “Despite these huge increases, coal is still the most affordable [fuel] for us and for our customers.”

The company requested a 25 percent base rate increase in 2006 based on projected cost increases; it was cut back to 3.1 percent. Adams said now the same need for dollars is back, but this time in the form of actual costs.

“I know they’re feeling the pinch, and we would encourage people to conserve – use their energy wisely,” Adams said of customers. “If they are not participating in our equal payment plan, they need to look at that, which is a program that allows them to average their bill out over the year and pay the same amount each month.”

Local service organizations say they too are promoting energy conservation in the face of what they refer to as a crisis.

“This is devastating news today,” said Tom Casteel, director of the Washington County Department of Social Services. “I think definitely we’ve been at a looming crisis. ... People with low incomes, people on fixed incomes, they’re getting squeezed in every direction.”

Casteel said last winter the rising cost of fuel presented a crisis for the community, and it took $50,000 additional dollars raised from local government and charitable organizations to meet the need for assistance related to the increased price of home heating oil.

He said substantially higher electric rates, which would increase more families’ heating costs, would add to the problem this winter as assistance to families who heat with oil no long