TAZEWELL, Va. — Residents of Southwest Virginia could soon see another increase in their monthly electric bills.

Appalachian Power announced Friday it had filed for an approximate 16 percent rate increase with the Virginia State Corporation Commission.

The company is seeking an adjustment to the fuel factor component of rates equaling to an increase of about 12 percent to be effective July 1. The company also is seeking a 3.5 percent increase in the environmental and reliability surcharge. The company also indicated it would file a base rate increase with the commission on July 1.

Daniel Carson Jr., vice president of Appalachian Power, said the company is tightening its belt in tough economic times.

“The company has fixed wages and salaries accordingly,” Carson said. “We are basically working on a no-growth budget. Our ’09 budget is essentially the same as ’08. We haven’t frozen hiring, but we have greatly curtailed hiring. A lot of our people are retiring, and we are looking very closely at replacing people. The company is taking steps to live within its means.”

Carson said the company is still working on the base case that will be presented to the commission on July 1. He said the company has been ordered by the commission to file a base rate case on July 1 under new rules pertaining to the regulation of electricity utility rates.

Carson, along with External Affairs Manager Dan Adams and Corporation Communications Manger Todd Burns, visited the Daily Telegraph offices to explain the rate increase filings.

The commission approved a 17.5 percent base rate increase for the company last year. The company said the 2008 cases were in response to sizable increases in operating costs due to environmental compliance investments and coal prices.

The fuel factor filing allows the company to recover through its rates the actual costs of fuel, which is primarily coal. Carson said changes to the fuel factor will help to correct any prior over-or under-recovery costs experienced by the company as well as the recovery of costs that are estimated to be incurred during the time period that the few fuel factor rate will be effective.

The company is citing two reasons why the adjustment is needed, including an increase in actual fuel costs that are higher than the cost level reflected in the current fuel factor and a decline in the economy and off-system sales profits that serve as an offset against fuel factor costs. As a result of those two factors, the company is currently under-collecting at a rate of approximately $8 million.

“If the economy returns, and those credits improve, hopefully we won’t continue to experience an under-recovery,” Carson said.

Carson said the environmental and reliability surcharge will be eliminated after 2010.

— Contact Charles Owens at cowens@bdtonline.com