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Appalachian Power seeks rate increase in SCC hearing

Appalachian Power seeks rate increase in SCC hearing

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A request to raise electricity rates was defended by Appalachian Power Co. and disputed by critics during a five-day hearing before the State Corporation Commission that concluded Friday.

The SCC said it will issue a written decision by late November.

Appalachian is asking the commission to approve its application for a 5% overall increase in base rates. Under the request, bills for residential customers would go up 6%, or about $10 a month for the average home.

But the accounting practices used to support the higher rate were questioned by the attorney general’s office, which called them “unconscionable.” And calculations by the SCC staff concluded that Appalachian is not entitled to a rate increase.

The utility says it needs more revenue to cover the costs of providing service to more than 500,000 customers in Virginia. In opening statements Monday, Appalachian attorney Noelle Coates said denying the request would send the company into “regulatory purgatory.”

In prefiled testimony, Appalachian president and chief operating officer Chris Beam said the state’s recommendations would “condemn” the company to earn a return on equity of no more than 7.5%. The company’s current authorized rate is 9.4%.

Should the commission adopt such a “punitive” suggestion from its staff, Beam said, “we would not have even a remote possibility of recovering our cost of service, which puts the health of the company at risk.”

But isn’t it true, SCC chairwoman Judith Jagdmann asked during another part of the proceeding, that customers have complained in the past about rates being too high?

William Castle, the company’s director of regulatory services, conceded that is the case, most often during the winter when lower-income customers rely on electric heat.

“They really get walloped and they get a bill they can’t pay,” he said. To address those concerns, Appalachian is proposing a rate discount from December through February of every year.

In addition to the attorney general’s Division of Consumer Counsel, nearly a dozen parties — including the Virginia Poverty Law Center and the Sierra Club — joined the proceeding to make objections or ask questions.

Among other things, the company was challenged on its request to raise its basic service charge, which remains the same for every bill, from $7.96 to $14 per month.

One of the key issues in the case is whether Appalachian should be allowed to list the costs of the early retirement of coal-fired power plants to offset its earnings. Doing so brought the utility’s return on equity over a three-year period to below 9.4%, which in turn allowed it to seek a rate increase.

But opponents pointed out that the shutdowns actually occurred in 2015 and 2016, before the beginning of a three-year period on which a rate increase is based.

“To be blunt, the company is relying on bad-faith accounting tricks to rip off customers at a time when families and small businesses are struggling to make ends meet,” Lori Rouse of Chilhowie said in one of more than 70 written comments submitted by customers to the SCC.

Appalachian counters that its actions were allowed by state law when it made its rate request in March. If, however, the SCC rules that a law passed by the General Assembly earlier this year precludes the practice, it could prevent Appalachian from getting a rate increase.

The company filed its application just as the coronavirus pandemic was sweeping the state, causing a public health and economic crisis. Appalachian says it did so because it was required by a 2018 law that overhauled the state’s regulation of utilities.

“The company is acutely aware of the financial stress that some of its customers are experiencing,” Beam said. “We did not file this case to add to their burden.”

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Laurence Hammack covers environmental issues, including the Mountain Valley Pipeline, and business and enterprise stories. He has been a reporter for The Roanoke Times for more than three decades.

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