PSC approves $88.8M rate hike for Appalachian Power and Wheeling Power

Appalachian Power and Wheeling Power had requested $88.8 million to meet reported revenue requirements before inclusion of under-recoveries resulting from fuel costs exceeding revenue collected from fuel cost rates.

The PSC approved the hike without ruling on the prudency of the companies’ past fuel procurement in a separate case.

Critical Technological Consulting, an Arizona-based, power industry-focused consulting firm selected by PSC staff to conduct an agency-ordered review of the prudency of the utilities’ fuel costs, found the PSC should disallow $202.7 million in cost under-recovery. In a filing submitted in April, CTC concluded that the American Electric Power-controlled utilities failed to take steps that could have better controlled soaring fuel costs.

The PSC recorded receiving 441 public comments against the rate hike proposal and zero for it.

The PSC’s order Wednesday did not list average monthly rate increases for classes of ratepayers. The agency ordered Appalachian Power and Wheeling Power to file tariff sheets reflecting the rate hike within 15 days.

The companies in April sought a $641.7 million fuel cost rate hike, which they said would require a roughly 37% increase over current revenues under a traditional one-year recovery.

To limit customer impacts, the companies proposed two alternative recovery mechanisms, both of which would raise rates by $88.8 million.

The first mechanism would spread recovery over three years, with average monthly rate increases of $19.61 (12.1%) for residential, $68.44 (16.3%) for commercial and $57,715 (23.4%) for industrial customers.

The second mechanism would use securitization of the under-recovery and other cost items, with average monthly rate increases of $5.69 (3.5%) for residential, $21.16 (5%) for commercial and $18,074 (7.3%) for industrial customers.

The West Virginia Legislature enabled the second option in March by passing a law with Appalachian Power backing: House Bill 3308. HB 3308 authorizes the PSC to issue financing orders to utilities to allow recovery of certain costs through securitization via consumer rate relief bonds.

The PSC denied an Appalachian Power and Wheeling Power $297 million fuel cost rate hike request in February pending its staff’s review of whether the companies’ policies for maintaining adequate fuel inventory levels are prudent. That request would have raised the monthly bill for a residential customer using 1,000 kilowatt-hours by $18.41.

The PSC has approved more than $174 million in fuel cost rate hikes for Appalachian Power and Wheeling Power since 2020.

In its report filed in April, CTC said Appalachian Power and Wheeling Power didn’t pursue longer-term or creative approaches to obtain fuel needed for higher capacity factors required by the PSC.

Capacity factor, or use rate, is the ratio of electrical energy produced by a generating unit for a given time to the electrical energy that could have been produced at full power during the same span.

The companies’ fuel procurement oversight and proposed fuel cost rate hike were the focus of a four-day evidentiary hearing at PSC headquarters in ÂÒÂ×ÄÚÉä last week.

West Virginia electric bills have ballooned as the state has clung to coal for the vast majority of its electricity, even as other states increasingly embrace alternatives. West Virginia’s clip of coal-fired generation, 91%, is easily the highest in the country.

State ratepayers faced a 90% climb in average residential electricity retail price from 2005 to 2020, according to Energy Information Administration data. Only Michigan had a greater increase by percentage.

From the start of 2017 to March 2023, Appalachian Power received 14 rate increases raising the average monthly residential rate from $128.09 effective March 2019 to the current rate of $162.43, according to the company. Over half of that $34.34 increase has consisted of fuel cost recovery — $18.70.

In its 2023 proxy statement, AEP reported that Nick Akins, the company’s executive chairman of its board of directors, made over $16.3 million in 2022. Akins stepped down as company president in August. Akins’ successor, Julie Sloat, made over $5.8 million last year, per AEP’s proxy report.

The PSC held public hearings throughout the state on the utilities’ rate increase proposal, at which ratepayers urged the agency to deny the utilities’ request.

“[I]t is as if AEP is on drugs,� Pamela Nixon, a lifelong Kanawha County resident who was West Virginia Department of Environmental Protection environmental advocate before retiring in 2014, said at a PSC public comment hearing at the agency’s headquarters. “The more money they take, the more money they want. And you, the Public Service Commission, are contributing to their addiction with our money. It is time for you to use tough love and just say no.�