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Charles Patton: Cost increase, more reliable service on power company’s plan

By Charles Patton

At Appalachian Power, our goal is to do more than provide power for your home or your business. In fact, we hope that you will come to see us as part of the infrastructure that opens up the possibilities of your life. We've put that into words as a new statement of purpose: we power life's possibilities. With this goal in mind, I'd like to tell you what you can expect from Appalachian Power this year.

I'll address our rates first, because I know planning and managing your budget is important. In March, the company filed a request with the W.Va. Public Service Commission for a $68 million increase to recover fuel, purchased power and other annually reviewed costs. This is a pass-through expense that includes no profit for the company. For a residential customer using 1,000 kilowatt hours, that would raise the monthly bill 4.4 percent, from $94 to $98.14. Other customer classes would have proportional increases. The request marks the first time in three years we've asked for an increase in fuel and purchased power charges. Last year, there was actually a 3 percent reduction in the fuel rate. This increase, if approved by the PSC, will be on customer bills beginning in July.

Second, by June 30, we will file what's called a "base rate case," in which all of our costs are examined. Included in those costs will be costs for a new vegetation management program just approved by the PSC. We will move our right-of-way maintenance to a four-year cycle that will result in more reliable electric service. Any change in rates associated with this case will not appear on bills until after PSC approval, which will likely be in the second quarter of 2015.

Managing costs is important to our company, just as it is to you. We are implementing an efficiency program called Lean throughout our service territory. This internationally known program, utilized by Toyota and other multinational corporations, is designed to engage front line employees in finding ways to eliminate waste and add value to customers.

Many of the challenges facing Appalachian Power are national issues. The energy supply mix is changing, due to both economics and environmental regulations. We all know the growing role that natural gas is playing in the electric generation industry. Both our state and our customers will benefit from projected long-term low prices for natural gas. While our existing coal-fired power plants are economical relative to gas, the economics make new coal plants highly unlikely.

This year we'll work to resolve our own changing energy supply mix. During 2015 we will close our older, smaller coal-fired generating units at Philip Sporn and Kanawha River plants in West Virginia and Glen Lyn Plant and one unit at Clinch River Plant in Virginia. Kammer Plant in Moundsville, which is owned by Appalachian's sister company Ohio Power, also will close.

To help make up for those losses, we are converting two units of the Clinch River Plant from coal-burning to natural gas-burning. This will further enhance our fuel diversity and provide a low-cost solution for adding much-needed capacity. We also acquired 867 megawatts of generation at the John Amos Plant, which previously was owned by one of our sister AEP companies. And, to secure a reliable long-term power supply for customers in the Northern Panhandle of the state, Wheeling Power is seeking to acquire a 50 percent share of the Mitchell Plant in Moundsville. Finally, the company continues to implement and expand energy efficiency and demand response programs to offset the need for additional generation.

In 2014, Appalachian and our affiliate transmission company will invest more than $600 million in our service area. This expenditure serves two purposes. First, we will improve reliability through system improvements, station rebuilds, right-of-way expansions, transformer replacements and additions, and special projects. Second, most of the transmission improvements are mandatory changes needed because of the upcoming plant closures. The Kanawha Valley Transmission Reinforcement Project is one example that you'll see begin construction this year. These costs are spread among 13 states because of the regional impact on the electrical grid, greatly reducing the cost impact on Appalachian's customers.

Also this year, we're redefining our own culture, taking a close look at what's most important. For example, we want the experience you have as a customer to be easy and positive. We'll be looking at how we can improve that through new services like cell phone alerts to let you know the status of a power outage, new web applications, and better personal contacts with our employees.

At Appalachian Power, we are here to provide you with the most reliable electric service possible, at a reasonable price and with the best possible customer experience when you deal with us. That will be our focus this year as we work through these and other issues facing our industry.

Charles Patton is president chief operating officer of Appalachian Power.


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