Customers of Appalachian Power Co. could soon pay less for the fuel used to generate their electricity. But any savings may be eclipsed by an increase in base rates.
Appalachian announced Tuesday that it has asked the State Corporation Commission to approve a reduction in the fuel factor portion of its monthly bills.
If approved by the SCC, the annual adjustment would trim $3 from the bill of an average residential customer using 1,000 kilowatt-hours a month.
The proposal is being made independently of Appalachian’s request to increase its base rate by 6% for residential customers, which would lead to a $10 hike in monthly bills.
The SCC is scheduled to hold a multi-day hearing on that request starting Sept. 14. If approved, the base rate increase would take effect early next year.
Base rates take into account a customer’s energy usage and all costs to produce it. The SCC reviews base rates to ensure they are providing neither insufficient nor excessive revenues, while allowing for an investor-owned utility’s need to provide a return to its shareholders.
The fuel factor, which amounts to about 20% of a residential customer’s bill, is limited to the company’s cost for coal and natural gas.
A drop this year in the price of natural gas — which makes up about 19% of Appalachian’s energy portfolio — is largely responsible for the company’s request to lower its rate.
“Our request before the SCC ensures that approximately $40 million in savings is passed along to our customers,” Chris Beam, Appalachian’s president and chief operating officer, said in Tuesday’s announcement.
Unlike base rates, the fuel factor is reviewed annually by the SCC and does not factor in a profit for the utility. Such “dollar-for-dollar” portions of a bill are known as rate adjustment clauses.
The current fuel factor is 2.3 cents per kilowatt-hour. Appalachian’s proposal reduces the rate to 1.9 cents per kilowatt-hour. If approved by the commission, the reduction would take effect in November.
Appalachian, a subsidiary of American Electric Power, has about 500,000 customers in Virginia.
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