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Appalachian Power allowed to raise rates to cover improvements to coal-fired plants

Appalachian Power allowed to raise rates to cover improvements to coal-fired plants

Mountaineer plant

Appalachian Power Co.'s Mountaineer plant 

The average residential customer of Appalachian Power Co. will pay an extra $2.17 a month for environmental improvements to two coal-fired power plants that generate the bulk of the utility’s electricity.

In a written decision Monday, the State Corporation Commission approved the increase effective Oct. 1.

But the SCC stopped short of giving Appalachian all it asked for — denying a portion of the company’s request to boost the bill of an average residential customer by $2.50 in order to keep the coal plants in operation through 2040.

Appalachian, which relies on coal to produce more than 60% of the power it sells to homes, businesses and institutions, has come under increasing public and legislative pressure to convert more rapidly to renewable energy.

The SCC’s ruling, while not final, could force the closure of the Amos and Mountaineer plants — both in West Virginia — by 2028, Appalachian has said in filings with the commission.

That would put the utility in the “precarious situation” of finding a way to replace the output of the plants on an accelerated basis, which could lead to “drastic increases in customer rates,” the company said.

The rate adjustment clause approved Monday comes just three months after the SCC allowed another such increase to cover Appalachian’s higher transmission costs. Effective July 1, that raise translated into an extra $11 for the average home account, which uses 1,000 kilowatt-hours per month.

“We are sensitive to the effects of rate increases, especially in times such as these,” the SCC wrote in its 14-page order.

“The Commission, however, must follow the laws applicable to any rate increase, as well as the findings of fact supported by evidence in the record. This is what we have done herein.”

Part of the problem is that the Amos and Mountaineer plants went online in the 1970s, before the Environmental Protection Agency passed regulations to curb greenhouse gases and other pollution caused by burning coal.

Appalachian said, and the SCC agreed, that it would need $27.4 million in the rate year that starts Oct. 1 to upgrade the plants’ coal ash disposal methods and treatments of flue emissions.

The commission approved that amount, to be recovered through the rate increase, and ordered that it be reviewed on an annual basis for possible adjustments. Once completed, the improvements will keep the plants in operation until 2028.

But the regulatory body balked at an additional $4.7 million that Appalachian wanted for additional surface water protections, which would have extended the plants’ lifespan by another 12 years.

Appalachian failed to show that those costs were reasonable and prudent, the SCC found.

However, the utility would be allowed a second chance at that part of the proposed increase if it provided more documentation to show it was needed. Among other things, Appalachian was told to consider the impacts of the Virginia Clean Economy Act.

Passed by the General Assembly in 2020, the Act requires Appalachian to use all carbon-free electricity by 2050 for its approximately 524,000 customers in Virginia.

Coal and natural gas currently make up about 80% of the company’s power portfolio.

Jeri Matheney, a spokesperson for Appalachian, said Monday that the SCC decision “ensures we will be able to operate the plants and provide reliable, affordable service to our customers, and security for our communities and employees, for at least the next seven years through the end of 2028.”

About half of the cost for improvements to the Amos and Mountaineer plants was covered by a separate rate request to regulators in West Virginia, where Appalachian has about 458,000 customers.

With conflicting orders in the two Virginias, Matheney said the utility is evaluating options to “determine the best path forward to meet the resource needs in each state, and return to the commissions for consideration of our updated costs and plans for the plants.”

In SCC filings, Appalachian says that the rates it charges to Virginia customers have remained stable over the past decade.

But a number of requests made over the past year, if approved in full, would boost the average household bill by about $22 a month. In May, the SCC approved a rate adjustment clause to cover increased transmission costs.

Appalachian had also sought an increase to its base rate that would have amounted to another $10 per month for residential accounts. The SCC rejected that increase last November. Appalachian has appealed to the Virginia Supreme Court, where the matter is pending.

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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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