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Borrowing money to pay for electricity

Power company customers find themselves facing a choice between a really big rock or a rather long hard stretch. A group working to find a way out recommends that the Public Service Commission approve the latter.

It's certainly better than the alternative, but it's not pretty.

As Daily Mail Business Editor Jared Hunt explained this week, Appalachian Power and Wheeling Power spent several hundred million dollars providing service that they have not been able to recover from customers.

Power companies can't provide service at a loss.

Most of the debt comes from unexpectedly large

increases in coal costs in 2008 and 2009.

Despite three rate increases - 10.5 percent in 2009, 7.2 percent in 2010 and 7.3 percent in 2011 - the companies have not been able to recover $311.9 million of those fuel costs.

The companies also have suffered about $64 million in other costs not related to coal prices - $41.5 million in one-time costs and $22.7 million in unpaid bills for power used by Century Aluminum.

To cover these losses, the electric companies would have to either 1) raise current rates by 30 percent to 40 percent all at once or 2) sell $376 million worth of bonds, raising rates a little to cover debt service, and repaying the borrowed money over 15 years.

The PSC has already ruled that the companies can use a bond sale to address the $22.7 million owed by Century Aluminum's Ravenswood plant.

Obviously, a 30 percent to 40 percent rate increase all at once would devastate many customers.

Consumers could more easily pay these costs over time.

But make no mistake. Shoving the cost of past power consumption into the future is an unusual, even desperate, move.

It's just one more indicator of why West Virginia so badly needs robust economic development.

Only that would produce more industrial, business and residential customers, making it easier for everyone to bear the load.

 


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