Utility company eyes 2015 rate hike
CHARLESTON, W.Va. -- Appalachian Power officials say the company's proposed 4.4 percent rate increase is actually designed to avert a sharper rate hike in 2015.
Appalachian Power and Wheeling Power on Tuesday filed a case asking the Public Service Commission to approve a $68 million rate increase to help offset the companies' projected fuel and purchased power costs in the coming year.
Consumers pay for those costs through a charge called the Expanded Net Energy Cost, or ENEC. That charge is included in the overall rate on a customer's power bill.
State regulators review those costs each year and set rates accordingly. Consumers got a bit of a reprieve last year when the PSC granted a 3-percent reduction in ENEC rates.
Consumers could have been in line for another decrease this year. However, power company officials say there are looming costs on the horizon.
In testimony filed with the PSC, APCo's regulatory vice president Steve Ferguson said that using a traditional ENEC approach - where you take the current estimated costs and subtract any leftover funds from the prior year - consumers would get a $61 million rate decrease.
For math nerds: APCo had a $129 million "over-recovery" (means they got more than they needed) from the last ENEC period. If you take that leftover $129 million and subtract it from the company's current estimated costs of $620 million, you get $491 million.
Current ENEC rates would bring in about $552 million in revenue for the company over the coming year. Subtract the $491 million in costs from the $552 million projected revenue and you get $61 million - that's the amount of money by which rates could be reduced under a traditional ENEC case.
However, Appalachian Power is asking the PSC to not use a traditional ENEC calculation this year because the company says it could lead to a sharp rate increase in 2015.
In 2015, APCo will retire 1,270 megawatts of generating capacity from some of its older coal-fired power plants - the Kanawha River plant at London and the Clinch River and Glen Lyn plants in Virginia - in order to comply with environmental regulations.
Less generating capacity means the company will have to go out and purchase more power.
Ferguson also noted the current ENEC rates were not enough to cover the company's power costs during the recent record-low temperatures.
"Early estimates show a January 2014 under-recovery of approximately $43 million for that month alone," he said. "The month of February is also expected to result in a large under-recovery."
Ferguson said the effect of the 2014 under-recoveries and loss of generating capacity would lead to a sharp increase in 2015.
"There would need to be a significant increase in ENEC revenues in the 2015 ENEC proceeding, perhaps an increase of some $200 million if the current ENEC rates are reduced by the $61 million discussed above," he said.
Ferguson said raising rates this year could help blunt the effect of a larger increase in 2015.
"The way the Commission has been able to maintain relatively stable rates over the past couple years has been successful for all," he said. "Continuing the approach of promoting rate stability is the proper course of action in this proceeding."