Group says state utility rate increases possible
CHARLESTON, W.Va. - West Virginians are facing a "perfect storm" that could lead to higher utility rates in the coming years, according to one of the state's largest advocacy groups.
While the average utility customer saw a slight decrease in rates over the last year, West Virginia AARP spokesman Tom Hunter said the state Public Service Commission would soon be forced to deal with some major cases that could send those rates higher.
"While we're experiencing some stability in the utilities market here in West Virginia, we believe the future is very uncertain for West Virginia utility ratepayers," Hunter said.
"It's a perfect storm of rate filings that could potentially have a negative impact on consumers moving forward starting in 2013."
The PSC is already considering requests from Appalachian Power and First Energy to approve billion-dollar power plant purchases in the state. Those purchases could result in surcharges to consumers.
PSC Consumer Advocate Division director Byron Harris said First Energy has submitted a request to the PSC asking for approval to impose a $63.4 million surcharge to consumers to cover their acquisition of a Harrison County power plant.
Also, Appalachian is asking the PSC for approval to securitize nearly $400 million worth of fuel costs racked up since 2009.
If the plan is approved, Appalachian will sell bonds to cover the lingering costs and those bonds would be paid off by a surcharge on consumers in coming decades.
Additionally, utilities have yet to approach the PSC with requests to recover damage costs from the June 29 derecho and Superstorm Sandy.
Last year, APCo and First Energy submitted reports to the PSC estimating their derecho damage topped a combined $192 million.
Harris said it's likely the utilities would file requests to recoup those costs sometime this year.
"I don't think they're just going to write those costs out," he said. "I expect to see those sometime in the next 12 months."
The PSC has asked the utilities to implement better right-of-way tree-trimming programs - a response to the derecho - and asked utilities to submit estimated costs of those programs sometime this year.
Harris said consumers could also be affected by a pending federal power company request.
PJM Interconnection, which was responsible for the PATH transmission line project, has asked the Federal Energy Regulatory Commission to recover $122 million worth of costs it incurred during the failed transmission line project.
The costs would be passed on to regional power companies through an increase in wholesale power rates. Harris said the state has little recourse to contest that increase, should FERC approve it.
"Once FERC signs off, it is billed to all of the utilities and they have to pay," Harris said. "We can't question that cost because it's a federal wholesale rate. The state can't change a wholesale rate."
In addition to electricity requests, the PSC is also set to consider a $24.2 million rate increase request from West Virginia American Water sometime this year.
Hunter said these potential rate increases pose a substantial risk to low and middle-income West Virginians. He said one in four of them have utility costs greater than 15 percent of their total income.
"Our goal is to mitigate as much of a negative ratepayer impact as we possibly can, particularly for those older, low income west Virginias where any increase at all is a significant hit to their household budget," Hunter said.
He said AARP - which represents more than 300,000 state residents - would be closely following all rate proceedings and fight against any rate increases it believes to be unnecessary.
"We understand again that these are for-profit ventures and there's a cost of doing business, but it is our strong view that utilities should only be making what's fair and reasonable but not a dime more," Hunter said.
The PSC will begin holding hearings on Appalachian Power's $400 million securitization request later this month.
Harris said that while the request would be an additional charge on bills for coming decades, it could actually end up reducing overall rates.
Currently, the PSC holds annual hearings to determine what power utilities can bill consumers each year to recover fuel costs. That rate has to take those accumulated past costs into account.
By mortgaging those costs over the long-term, consumers may be able to pay less in fuel costs each year.
"We have an opportunity here to reduce rates," Harris said. "If those past due costs are now taken and securitized, the rate increment necessary to make payments on that is a lot less than what we've got now."
Contact writer Jared Hunt at email@example.com or 304-348-5148.