Rate hike requests provoke protest
- July 29, 2009
Businesses in Southwest and Southern Virginia are protesting rate increases requested by Appalachian Power.
The company, a subsidiary of American Electric Power, is asking the State Corporation Commission to approve a fuel factor rate increase of 9.6 to 13 percent; another 3.5 percent increase to cover its environmental costs; and an increase in base rates that will average 19 percent for residential customers.
“It’s outrageous,” said Del. Charles W. Carrico (R-Galax), noting that in its base-rate request, the utility is asking for a 13.2 percent return on equity. “It’s more than businesses can overcome.”
He predicts the rate increases could be a tipping point for economic development. “One of our biggest draws to Southwest Virginia has been our low power rates, but we’re losing that advantage,” he says.
Many business leaders, state legislators and local economic development directors already have testified before a series of SCC hearings in Richmond and Wytheville in late June and early July with regard to the fuel factor and environmental rates. They said the proposed rate increases — which come eight months after Appalachian Power was granted a 17 percent base-rate increase — will be devastating to the region’s ongoing economic development and job retention efforts.
“The timing of this is just awful,” said Del. Don Merricks (R-Henry County). He called on utility officials to rescind their request temporarily. “I understand that this is a business decision, but it would be nice if the company would see this from an economic standpoint and consider the region and say, ‘We’re going to show some restraint; we’re going to have to absorb this.’ ”
The fuel factor request involves the cost of coal for power plants. Even though spot coal prices recently have decreased, Appalachian Power spokesman John Shelpelwich says that the company hedges against wide price swings by locking into long-term contracts. “We’re sitting on $100 million in under-collection with the cost of coal,” he said.
By law, the utility can pass through its fuel factor costs, dollar for dollar, to customers. Merricks says that given the relative financial strength of Appalachian Power and its parent company, the utility should consider the region’s economic situation, “have a little heart and postpone a rate increase.”