Monday, August 03, 2009

SCC REDUCES APPALACHIAN POWER FUEL RATE INCREASE REQUEST

RICHMOND — The State Corporation Commission (SCC) has reduced by $97.3 million the revenue increase for fuel expenses contained in an application by Appalachian Power Company (APCo). Filed May 15, 2009, the company set forth revisions to the fuel rate representing an estimated revenue increase of $226.8 million. The SCC has approved an increase of $129.5 million to recover fuel costs during the period of July 2009 through August 2010.

The typical residential customer using 1,000 kilowatt-hours would have paid $12.21 more a month, or 13.1 percent, under APCo’s original unmitigated request. Instead, this customer will pay an increase of $7.16 per month, or 7.7 percent, per the SCC’s order.

The SCC stated, “[We are] concerned about the significant increase in APCo’s [requested recovery of fuel costs] and its ultimate impact on customer bills, especially at this time of economic hardship for many people in APCo’s service territory. APCo, however, by law, is entitled to recover its prudently incurred fuel costs.”

The SCC made several legal and factual findings that reduced the amount of rate increase that APCo will be allowed to charge customers at this time. APCo may seek to recover some portion of the reduced revenues at a later date.

The SCC rejected APCo’s proposed treatment of revenues and costs resulting from its use of the regional transmission grid. APCo had proposed including “financial transmission rights” (FTR) revenues in off-system sales, which, under Virginia law, would allow APCo to keep 25 percent of such revenues. The SCC ruled that only a small fraction of such FTR revenues could be considered as off-system sales; and all other FTR revenues, associated with serving Virginia customers, must be credited 100 percent to Virginia customers.

The SCC also denied recovery at this time of the costs to purchase power from two wind projects that were not included in APCo's renewable energy program, which the SCC approved last year, because of the high cost of the purchased power.

The SCC also reduced APCo’s revenue increase through the use of the latest balances for the actual under-recovery of fuel costs in the past 12 months, and directed that the projection for off-system sales in the 14 months covered by this fuel factor order be based on half of the difference between APCo’s projected off-system sales as contained in its application and APCo’s historic off-system sales.

In its application, APCo had proposed an alternative to its total $226.8 million revenue increase, which would have included deferring some of the amount for later recovery from APCo customers, along with recovery through base rates of carrying costs on the amount deferred.

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