Proposed settlement in Appalachian Power rate case would reduce bill impacts
If approved, increases could shrink from $20 to $12.50 extra per month
Appalachian Power Company Director of Regulatory Services William Castle testifies during a hearing at the State Corporation Commission. (Charlie Paullin/The Mercury)
If regulators sign off on a settlement agreement proposed this week by Appalachian Power Company and consumer protection, environmental, municipal and other groups, utility customers will see their rates rise, but not by as much as initially thought.
On Aug. 22, eight parties involved in Appalachian Power’s latest rate case asked the State Corporation Commission to accept a settlement agreement known as a stipulation that would reduce the company’s request for an annual revenue increase from about $212 million to $127 million. The reduction would mean that the monthly bill for the average residential customer using 1,000 kilowatt-hours of electricity could increase by $12.50 beginning in January.
A previous utility proposal would have raised monthly residential bills by about $20.
The settlement is a “black box” deal, meaning specific accounting numbers the company used to arrive at the agreed-upon revenue increase aren’t included, but general provisions such as the company’s allowed rate of return are.
Parties involved in the case said such settlements aren’t uncommon in utility ratemaking because of the flexibility they provide companies to meet certain aims without setting specific precedents that could be an obstacle in future reviews.
The agreement was supported by Appalachian Voices, the Virginia Poverty Law Center, the Virginia Municipal League/Virginia Association of Counties Steering Committee, Walmart, Kroger, SCC staff and the Old Dominion Committee for Fair Utility Rates. While the Office of the Attorney General did not sign onto the settlement, attorneys noted the office did not oppose it.
Overall, the settlement would set the company’s allowed profit level at 9.5%, an increase from the current level of 9.2% but less than the 10.6% Appalachian Power had initially sought. It would also require the company to use a 2040 retirement date for its coal-fired Amos units for accounting purposes, adopt SCC staff’s recommendation for a vegetation management program, include disconnection protections and accept the company’s offer to waive a roughly $8 basic service charge for low-income customers.
The Amos retirement date has been a key point of debate during the case. The choice of the 2040 date does not commit the utility to run the units that long but instead determines the period of time over which costs for the plant can be recovered from customers. Several groups including the attorney general’s office had pushed for a later retirement date because it would allow costs to be spread out over a longer period of time. The later date in this case reduced the revenue increase by about $35 million.
“The company believes that on the whole, this stipulation represents a fair and reasonable resolution in this case, we think it’s in the public interest and we ask the commission to approve it,” said Appalachian Power Company attorney James G. Ritter during a hearing on the settlement at the SCC Thursday.
Senior Assistant Attorney General Meade Browder said the attorney general’s office “recognizes in base rate cases such as this, it’s often difficult to prevail on each and every issue.”
The disconnection provisions would require Appalachian Power to prevent disconnections due to non-payment of bills when the temperature is above 95 degrees Fahrenheit, below 32 degrees Fahrenheit and on Fridays, weekends and legal holidays.
“I don’t know that any utility has entertained any discussion around disconnection, but really the rate case is the only opportunity to have one,” said Dana Wiggins of the Virginia Poverty Law Center, who has pushed for disconnection protections for years. “I’m glad that it made it into the stipulation.”
SCC Chief Hearing Examiner Alexander F. Skirpan, Jr., on Thursday said he will recommend the commission approve the settlement. Skirpan had expressed some cost concerns about the vegetation management program, which removes and prunes trees to prevent disruptions to the grid, but said his worries were allayed by information that 24 environmental justice communities would benefit from the work.
“Given the number that’s in the environmental justice area, I’m a lot better with it at this point,” Skirpan said.
Skirpan said he would issue his report before Oct. 16. The commission must make a final decision by Nov. 30.
The rates that are expected to go into effect will last until new ones are set at the end of another review scheduled to begin in March as a result of legislation this past session.
This story was corrected to remove a misunderstanding of the Old Dominion Committee for Fair Utility Rates’ stance on the agreement. The committee did not express concern with the black box portion of the deal.
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