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Storm costs may hit APCO customers in 2014

By Megan Workman

CHARLESTON, W.Va. -- Appalachian Power customers' rates may increase next year to offset the nearly $100 million cost of both the derecho and Superstorm Sandy that swept through West Virginia last year.

Appalachian Power and Wheeling Power said Monday that they would not seek a rate increase in West Virginia this year. However, the company does plan to file a base rate case in the future, said Phil Moye, spokesman for Appalachian Power.

"The storm costs, that's the type of thing we would seek to recover in a base rate case, and we don't have plans to file a base rate case this year," Moye said. "It will likely be part of a future base rate case."

That would ultimately increase rates for customers, said Byron Harris, director of the state Public Service Commission's Consumer Advocate Division.

A company files a base rate case with the PSC if it is permitted to earn a profit, but they don't believe they are earning a sufficient profit, Harris said. The PSC looks at the company's costs and revenues to determine if a rate increase is necessary, he said.

"With the costs from Hurricane Sandy and the derecho, APCO is deferring on its books and will request recovery from those at some certain point," Harris said.

The June 29 windstorm caused more than 500,000 West Virginians -- 330,000 of them Appalachian Power customers -- to lose power. The damage cost the power company $71 million, said Charles Patton, president and chief operating officer for Appalachian Power, in a letter to the Gazette.

Sandy caused 182,000 outages and $27 million in damage, Patton said in the letter.

"While these expenses are legitimate costs of doing business, we do not expect to file an application with the Public Service Commission seeking rate recovery this year," Patton wrote.

Appalachian Power customers' rates have increased 50 percent in the past four years.

In December 2009, a winter storm left 237,000 West Virginia customers without power.

Appalachian Power initially proposed a 17 percent rate hike in May 2010 for residential customers to recover about $155.5 million the company spent during the storm, as well as recouping higher costs to maintain and improve power plants, substations and transmission lines.

As part of a settlement with the PSC's Consumer Advocate Division and the power company's largest customers, Appalachian Power lowered the increase to 5.36 percent and $60 million in revenue in December 2010.

State regulators modified that settlement agreement and residential rates increased by 4.6 percent on March 31, 2011.

That previous rate increase will generate an additional $51 million in revenue for Appalachian Power and Wheeling Power. Both are subsidiaries of American Electric Power.

Appalachian Power spent more than $18 million during the December 2009 winter storm, which the company will pay down over the next seven years.

Patton told the Gazette in a July 2012 interview, "History has shown that we have gone to the commission in instances like this."

Harris said if it weren't for AEP's desire to transfer ownership of its coal-fired plants -- John Amos, near St. Albans, and Mitchell, near Moundsville -- to Appalachian Power, "there is no question that rates would be going down."

"Their proposal is, 'Oh, we'll keep rates where they are and that would pay for Mitchell and Amos,' which [the PSC] hasn't decided we would take yet," Harris said.

Patton wrote in the letter that the transfer of the coal-fired plants "is not expected to have a significant impact on rates."

"This transfer allows us to move from being a renter to an owner," Patton wrote. "It is the least-cost, least-risk option to meet our power generation needs."

Reach Megan Workman at megan.workman@wvgazette.com or 304-348-5113.


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