Appalachian Power Company and Wheeling Power recently filed a request with the Public Service Commission of West Virginia for a $114.6 million revenue increase. If approved, the request would raise rates in West Virginia by 7.85 percent.
“Today we submitted a request to the Commission in which we present our costs of providing safe and reliable electric service to our customers,” said Chris Beam, Appalachian Power president and COO. “It includes the cost of maintaining and improving utility infrastructure, higher state and local taxes, a reduction in federal income taxes and significantly lower customer usage.”
Approximately half of the requested increase is due to a significant decline in the amount of electricity used by customers. Traditionally, revenue from increasing customer usage has been used to offset some increases in the cost of doing business, thereby lessening the need for rate increases. However, customer usage has been declining for the last several years. For residential customers as a whole, electricity usage has dropped by 14 percent since 2013. The number of residential customers has also declined, dropping by 11,000 since 2013.
Also driving the need for increased rates, the company has made major infrastructure investments in the last several years. These include investments in generation facilities, the transmission system serving the region, and distribution facilities, including upgrades to the underground distribution networks in Huntington, Charleston and Wheeling.
“We continue to invest in our transmission and distribution network to ensure that service remains reliable,” Beam said. “Our goal is to balance our customers’ service expectations with the need to keep prices as low as possible.”
The company’s filing reflects the lower federal income tax rate and other benefits of the Tax Cuts and Jobs Act of 2017. These changes in federal income taxes reduced the company’s request by approximately $52 million. The company also recently filed a proposal to use additional federal tax reform savings to offset almost $132 million in unrecovered fuel and vegetation management costs, allowing rates for those charges to remain unchanged. Additional federal tax reform savings will be addressed in a separate ongoing Commission proceeding.
While the company requested a June 8, 2018, effective date for its proposed tariffs, rates will not be put into effect until approved by the Commission, which can take up to 300 days to make its decision. The average monthly bill for the various classes of customers will be changed as follows:
Increases by Class
Class $ Increase % Increase
Residential $14.81 11.1%
Commercial $42.43 11.5%
Industrial $1,960.00 1.1%
Other $1.18 11.9%
The company is proposing changes to its rate structure that would help to reduce high winter electric heating bills and seasonal bill volatility for residential customers.
The filing requests a 10.22 percent authorized return on equity. Earning a fair return on equity is critical to the company’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.
Appalachian Power has 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power). It is a unit of American Electric Power, one of the largest electric utilities in the United States, delivering electricity and custom energy solutions to nearly 5.4 million customers in 11 states. The company and its AEP affiliates employ approximately 1,200 people in West Virginia, making AEP one of the largest employers in the state. It is also one of the largest taxpayers in the state. AEP owns the nation’s largest electricity transmission system, a more than 40,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP also operates 224,000 miles of distribution lines. AEP ranks among the nation’s largest generators of electricity, owning approximately 26,000 megawatts of generating capacity in the U.S. AEP supplies 3,200 megawatts of renewable energy to customers.