American Electric Power subsidiaries have proposed a rate increase that would raise the monthly bill for a residential customer using 1,000 kilowatt-hours by $18.41 starting Sept. 1.
Appalachian Power and Wheeling Power asked the West Virginia Public Service Commission in a Tuesday filing to approve a $297 million increase in the rate that the companies charge for buying power or fuel to generate electricity, known as an Expanded Net Energy Cost rate.
If the commission approves the proposal, the monthly bill for a residential customer using 1,000 kilowatt-hours would rise nearly 12% from the current monthly bill of $155.66.
Appalachian Power cited rising energy and fuel costs as reasons for the proposed increase, which comes six weeks after the Public Service Commission ordered a $31.4 million Expanded Net Energy Cost rate increase to reflect a recalculation by the commission of reduced purchased power costs and additional fuel-handling costs incurred by Wheeling Power.
The companies’ under-recovery balance for fuel costs was $174 million at the end of 2021, according to a recent commission order.
The companies raised concerns about a recent Public Service Commission order that both they and clean energy advocates say encourages uneconomic operation of AEP’s coal-fired power plants and that leave ratepayers vulnerable to higher bills.
In September, the commission required AEP’s John Amos plant in Putnam County, Mountaineer plant in Mason County and Mitchell plant in Marshall County to operate with a capacity factor of 69%, citing concern that Appalachian Power may not be maximizing use of the plants.
Capacity factor is the ratio of electrical energy produced by a generating unit for a given time period to the electrical energy that could have been produced at full power during the same span.
Projected Expanded Net Energy Cost expenses included plant use at capacity factors of 49.6%, 57.3% and 34.7% for Amos, Mountaineer and Mitchell, respectively, the commission noted at the time.
The commission acknowledged in an order last month that capacity use factors remained “incredibly low” even after its September order.
Appalachian Power’s capacity use at Amos dropped from 57% in September to 3% in November, according to the commission. Mountaineer capacity use fell from 29% to zero in October and November. The capacity factor at Mitchell dropped from 49% in September to 6% in November.
In the Tuesday filing requesting the latest rate hike, American Electric Power Service Corp. director of coal, transportation and reagent procurement Jeffrey Dial testified that supply shortages and elevated prices constraining the coal market have greatly limited the companies’ ability to secure enough coal to achieve high capacity factors on a consistent basis.
“The Commission’s directive that the Companies should be targeting a 69% capacity factor at their coal-fired plants would appear at odds with the flexible, least-cost approach of economic dispatch,” John Scalzo, vice president of regulatory services and finance for Appalachian Power and Wheeling Power, testified in Tuesday’s filing.
When asked if the proposed $297 million increase would abide by the 69% capacity factor requirement, Appalachian Power spokesman Phil Moye said in an email that the company seeks the lowest cost reliable source of power because that is in the best interest of our customers.”
Jason Stegall, manager of regulatory pricing and analysis for American Electric Power Service Corp., said in the filing it was possible to designate an available unit as “Must-Run” to consume more coal and achieve a higher capacity factor, even when the unit would not be selected to run under economic dispatch.
But the companies wouldn’t do that unless the commission clarified that it wanted them to, Stegall said.
Company executives asked the commission for clarification in Tuesday’s filing whether the companies should run their coal-fired plants “out of merit” to achieve a 69% capacity factor — and whether the increased costs of doing so can be recovered solely from West Virginia jurisdictional customers.
Clean energy advocates like Karan May, senior campaign representative for the Sierra Club in West Virginia, are wary of the commission’s capacity factor order.
“I just think it’s interesting that the company notes that the mission telling the companies to target a 69% capacity factor is completely contradictory ... with the economic dispatch model,” May said.
The West Virginia Public Service Commission shares jurisdiction with Kentucky utility regulators over the Mitchell plant and Virginia utility regulators over the Amos and Mountaineer plants. May fears that the 69% capacity factor requirement could contradict those states’ regulations of the plants — and free market principles.
“[It] would go against the competitive free market values that so many of our elected leaders purport to have,” May said.
Chris Beam, Appalachian Power president and chief operating officer, characterized the proposed rate climb as unavoidable in a news release Wednesday.
“It is difficult to make this filing, especially when inflationary pressures are burdening families on so many fronts,” Beam said. “However, if the unrecovered ENEC amount continues to grow it will become even more difficult to deal with in the future.”
The average monthly residential bill for AEP’s West Virginia customers escalated from $55.28 in 2006 to $138.57 in 2021 — an increase of 150% over 15 years.