According to AEP Spokesperson, Jeri Matheny, the company needs the proposed rate increase to cover current and future costs.
“First, we are making a lot of improvements in our infrastructure. In other words, we are putting money into the distribution and the transmission system that serves our customers, and it’s all about reliability. We have a lot of aging infrastructure in our service territory in West Virginia, so we’ve got lines and poles that are 50, 60, 75 years old. It’s time to replace them so we can continue to serve our customers reliably,” Matheny explained.
Matheny added that the Public Service Commission will review the power company’s request very carefully to make sure none of their fixed costs are wasteful. The commission will then move forward to approve or deny the request.
Charleston, WV – Appalachian Power Company and Wheeling Power filed a request with the Public Service Commission of West Virginia for a $114.6 million revenue increase May 9, 2018. If approved, the request would raise rates in West Virginia by 7.85 percent.
“Today we submitted a request to the Commission in which we present our costs of providing safe and reliable electric service to our customers,” Appalachian Power president and COO Chris Beam said. “It includes the cost of maintaining and improving utility infrastructure, higher state and local taxes, a reduction in federal income taxes and significantly lower customer usage.”
According to AEP, approximately half of the requested increase is due to a significant decline in the amount of electricity used by customers. Traditionally, revenue from increasing customer usage has been used to offset some increases in the cost of doing business, thereby lessening the need for rate increases. However, customer usage has been declining for the last several years. For residential customers as a whole, electricity usage has dropped by 14 percent since 2013. The number of residential customers has also declined, dropping by 11,000 since 2013.
The company said major infrastructure investments in the last several years are contributing to the increase. These include investments in generation facilities, the transmission system serving the region, and distribution facilities, including upgrades to the underground distribution networks in Huntington, Charleston and Wheeling.
According to a company press release, the filing reflects the lower federal income tax rate and other benefits of the Tax Cuts and Jobs Act of 2017. The release also reported the changes in federal income taxes reduced the company’s request by approximately $52 million. The company also recently filed a proposal to use additional federal tax reform savings to offset almost $132 million in unrecovered fuel and vegetation management costs, allowing rates for those charges to remain unchanged. Additional federal tax reform savings will be addressed in a separate ongoing Commission proceeding.
While the company requested a June 8, 2018, effective date for its proposed tariffs, rates will not be put into effect until approved by the Commission, which can take up to 300 days to make its decision.