Rates to increase less than 50¢ a day for residential customers
The Public Service Commission (PSC) of West Virginia on Tuesday approved a $123.5 million revenue increase for customers of Appalachian Power and Wheeling Power, both subsidiaries of American Electric Power (AEP). The increase will raise electric bills about 47 cents a day for residential customers.
The Commission ordered residential customer rates to be phased in over a two-year period. According to the PSC, average residential customers will see an immediate increase of $14.30 a month. A year from now, rates will increase an additional $5.20. The increase for other customer classes, like commercial or industrial customers, will vary. Even with the increase, rates for Appalachian’s customers are below the national average of 12.24 cents per kilowatt-hour.
“We want the same thing our customers want, and that’s safe, reliable electric service that is affordable,” said Charles Patton, Appalachian Power president and COO. “The Commission has the tremendous responsibility of trying to balance the economic realities of the state with the financial health of the companies it regulates. This decision moves us in the right direction; however, we are in an increasing-cost business. Ultimately, the financial health of the company affects the future reliability of service, the scope of services and even the future cost of electricity, because an unhealthy company pays significantly more to attract investors.”
The order includes $13.7 million in cost recovery for two major storms that struck the state in 2012, the Derecho and Superstorm Sandy. Those costs will be spread over five years.
Also included is $44.5 million in cost recovery for the company’s new cycle-trimming vegetation management program. While cycle trimming won’t eliminate outages from major events like the Derecho and Sandy, it is helping improve reliability and reduce power restoration times. The program calls for every circuit to be trimmed end to end every four years. Appalachian has doubled the number of tree crews in the state, and already is seeing a reduction in the frequency and length of outages on circuits that have been fully trimmed.
To better manage costs, over the past five years the company has implemented two major cost-cutting initiatives, reduced its operations and maintenance budget by $15 million, and reduced its workforce by more than 10 percent. The company also is implementing an efficiency program called Lean throughout its service territory. The internationally-known program, used by Toyota and other multinational corporations, is designed to engage front line employees to increase efficiency and add value to customers.
Appalachian Power has worked with the Commission on several programs to spread costs for coal and storms over an extended period so they have less impact on customers. Still, the company has seen its investment in physical infrastructure to meet customer needs grow over the past 10 years from $5.9 billion to $9.6 billion.
The Commission order authorized a 9.75 percent authorized return on equity. Earning a fair return on equity is critical to Appalachian’s ability to do business. It directly affects bond ratings and therefore the cost to finance infrastructure improvements, make long-term investments and provide reliable electricity.
AEP employs approximately 2,300 people in West Virginia, making it one of the largest employers in the state. It is also one of the largest taxpayers in the state, paying $82 million in state and local taxes in 2014.
Customers are urged to manage their energy use wisely and to visit www.AppalachianPower.com to learn more about the company’s many energy efficiency programs. The site also provides information on payment options available to customers.
Appalachian Power provides electricity to 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power) and Wheeling Power provides electricity to customers primarily in Marshall and Ohio counties in West Virginia. Both companies are units of American Electric Power, one of the largest electric utilities in the United States, with more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.