The State Corporation Commission (SCC) announced on Monday, Nov. 17, that it has approved a reduced base rate increase for Appalachian Power Company (APCo) that will allow the company to increase its annual operating revenue by $168 million. The amount is $40 million less than what the company requested and has been charging customers on an interim basis since late October.

APCo filed an application for a $207.9 million base rate increase in May 2008. By law, the increase was allowed to take effect October 28, 2008 on an interim basis, subject to refund with interest.
The company's original request represented a 23.9 percent increase in annual operating revenue. After a thorough review of the request, APCo, the SCC staff, and several parties in the case reached an agreement to lower the request to an increase of 19.3 percent. The Commission accepted the agreement.

For an APCo residential customer using 1,200 kilowatt-hours of electricity a month, the SCC's order means the monthly bill will be approximately $3.82 less than the current interim rate. Refunds will appear as a credit on customer bills.

In its final order, the Commission said, "[W]hile we are cutting Appalachian's rate increase substantially from its request, we understand that the rate increase approved will still represent a hardship on many of Appalachian's residential and business customers. We find, however, that this rate increase is consist ent with the facts and laws that govern this case."

The SCC noted that a significant portion of the increase related to capital expenditures made to generation and distribution facilities needed to provide service to customers. The Commission wrote, "A large portion of this increase is attributable to environmental improvements made to the generation facilities to comply with federal laws and regulations. Additionally, Appalachian has made improvements to maintain the reliability of its distribution network in Virginia. These expenditures, plus associated operating costs and depreciation, have contributed to an upward pressure on rates."

The SCC noted that in APCo's prior base rate case, the company sought to recover in rates much of this investment by projecting capital expenditures, but the Commission denied recovery because the funds had not actually been expended. Since the company has now actually spent these amounts, state law provides for their recovery in rates.

APCo serves approximately 500,000 customers in all or parts of 31 counties in southwest Virginia.

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