Rate hike attempt prompts protests from Appalachian Power customers

by Heather B. Hayes
for Virginia Business
April 2007

Many businesses served by Appalachian Power are protesting its efforts to get a 25 percent rate increase. The State Corporation Commission (SCC) hasn’t approved the request, which was submitted in May 2006, but electric bills have reflected the new rates since October.

Appalachian Power would collect $198.5 million in new revenue as a result of the increase. “We had to ask for what we need, and that’s what we need, and we feel that we have made a good case,” says company spokesman John Shepelwich.

Business owners say they understand the need to raise prices, but they believe a 25 percent increase is excessive. Appalachian Power already has received approval from the SCC for a 3.2 percent increase on its environmental and reliability surcharge and another 3 percent increase in its annual fuel-factor adjustment.

Vaughan-Bassett Furniture in Galax estimates that its power costs will jump $330,000 a year.

“Our energy costs have skyrocketed, and we simply cannot increase our prices because we’re in competition with low-cost imports from China,” says Doug Bassett, vice president of sales for Vaughan-Bassett.

Appalachian Power, a subsidiary of Ohio-based American Electric Power, serves 929,000 customers in the Roanoke Valley and parts of Central and Southwest Virginia, along with parts of West Virginia and Tennessee.

The last time Appalachian Power asked for a base-rate increase was in 1993. In 1999, Virginia’s Electric Utility Restructuring Act deregulated electric generation services (though not distribution) and capped all electric rates, first through 2007 and then, after the General Assembly amended the law in 2004, through 2010. During the 2004 session, however, Appalachian Power was able to persuade lawmakers to grant it an exemption, which gave the company a one-time opportunity to apply for a rate increase before 2007.

Because competition for electric generation services has failed to materialize over the past eight years, this year’s General Assembly passed legislation to re-establish regulation of the industry.

SCC spokesman Kenneth J. Schrad says that, if the commission disapproves Appalachian Power’s application for a base rate increase or finds that it should be less than the requested 25 percent, customers will receive refunds with interest.