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Utilities ask for rates to stay the same

For the second year in a row, Appalachian Power and Wheeling Power have asked the state Public Service Commission to leave overall power rates unchanged as part of an annual process to evaluate the companies' fuel costs.

But PSC Consumer Advocate Division director Byron Harris said the power companies can afford to reduce rates, even if for just a short period of time.

The two companies, which plan to merge by the end of the year, made the request Monday as part of an annual Expanded Net Energy Cost filing.

The surcharge, referred to as ENEC, is designed to reimburse the power companies for their past and ongoing fuel and purchased power costs.

While the current charge is more than enough to cover current fuel costs, the companies want the PSC to keep rates the same to cover extra costs - including plant purchases and bond payments - they intend to take on later this year.

Harris, however, said the matters should be dealt with separately. He thinks the companies should use the current ENEC case to give state consumers a break.

"Rates should be going down," Harris said. "Now they may go back up again because of these other things, but as we sit here today, rates should be going down."

According to the filing, there was a $74.9 million "over-recovery" from the ENEC rate structure last year - meaning customers paid more for fuel costs than the companies incurred.

The companies forecast a $93.8 million over-recovery should rates be extended through June 2014, bringing the total overage to $167.6 million.  

Appalachian and Wheeling officials want to use this surplus to cover a series of costs they expect to incur over the next year. Otherwise, those costs eventually would require rate increases.

The most significant they would like to cover in the next year is $129.3 million worth of costs connected to the company merger as well as the purchase of some power plants in the American Electric Power network.

In a separate case before the PSC, Appalachian Power is seeking to acquire 50 percent of Ohio Power's Mitchell Plant and the remaining two-thirds of one unit at the John Amos plant in Poca that it does not own.

The overall purchase has been valued at more than $1 billion.

APCo officials also estimate they need about $31.5 million to cover financing costs for bonds they plan to sell later this year.

The company expects to sell about $376 million worth of bonds to cover outstanding fuel costs and debts from prior years. The bond sale is intended to avert a 30 percent rate increase that would otherwise be needed to cover those costs.

While the company proposes dealing with these costs in one case, Harris said he plans to ask the commission to deal with the matters separately.

"We're going to encourage the commission to implement the ENEC decrease and what happens with the merger and what happens with the asset transfer will be determined elsewhere," Harris said.

He said he planned to work with Consumer Advocate Division staff to file a formal response in the power companies' case.

"I think telling people the impact of the asset transfer on a standalone basis is more transparent," Harris said. "Right now they're trying to blend it in and basically say it all adds up to what we're paying today."

In testimony filed with the commission, Appalachian Power director of regulatory services Steven Ferguson said the companies' proposal is designed to provide stability for customers.

"This commission has historically worked with utilities to help keep customer rates stable by not lowering or raising them in a frequent and isolated fashion, but by making rate changes that take into account multiple issues and a long-term view," Ferguson said.

"The companies have a proposal that could provide their customers with a high degree of rate stability."

One potential future cost not included in the power companies' request is an increase in tree trimming and right-of-way maintenance costs expected later this year.

The PSC asked power companies to improve those programs in response to the power outages that followed last summer's derecho.

Power companies are expected to present new program plans - as well as any potential rate increases needed to cover their costs - to the commission this summer.

 Appalachian, however, is not expected to file a rate case this year to recover damage costs from last year's major storms.

In a letter sent to customers Monday, APCo President Charles Patton said the company would not file for a rate increase this year to recover the $98 million in in-state damages suffered as a result of the derecho and Superstorm Sandy.

"While these expenses are legitimate costs of doing business, we do not expect to file an application with the Public Service Commission seeking rate recovery this year," Patton said.

Contact writer Jared Hunt at business@dailymail.com or 304-348-4836. 


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