By CHARLES OWENS
Bluefield Daily Telegraph
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BLUEFIELD —Representatives of Appalachian Power visited the Daily Telegraph last week to discuss rates in Virginia, questions regarding company profits and what customers can do to lower their monthly electric bills.
While there has been a recent public outcry regarding electric bills in Virginia, it is important to remember that Appalachian Power has kept its rates low for decades, Mark Dempsey, vice president of external affairs for APCO, said.
Dempsey said rates have recently risen to reflect increasing costs. According to the company, the unusually cold and long winter drove usage rates up for many customers, while others may have seen spikes in their electric bills last winter due to the use of baseboard heaters and other more costly heating sources.
“What we had this year is that it was much colder,” Dempsey said of the extreme cold and snow last winter. “It stayed in the 20s and 30s for almost 30 days in a row, and that was abnormal. So anywhere under 30 degrees is where a heat pump becomes less efficient. The heat pump will continue to contribute to the heating of the house, but the colder it gets the quicker it goes down.”
“This past winter our customers passively consumed electricity at a higher rate, but didn’t realize,” Todd Burns, a corporate communications manager for Appalachian Power, said.
“The customers I talked to, and what I was seeing also was they were using space heaters,” Mary Begley, manager of external affairs for APCO, said. “I talked to people who were turning off their heat pumps, and placing space heaters around their homes. We are trying to get the message out to customers that that is really not an efficient way to heat their homes.”
“The average payment plan can help,” Dempsey said. “It averages out payments and makes them as close to equal throughout the year. We are going to increasingly encourage customers to look at that. That is valuable to have a plan where your bill doesn’t alter throughout the month.”
Begley said customers are reminded of ways they can help to keep their homes warmer, including ensuring their homes are property insulated, using energy-efficient appliances, keeping drapes and blinds closed on cloudy days, and participating in the company’s average monthly payment plan.
While base rates in Virginia increased on Aug. 1 by about 6 percent, the company’s fuel factor rate decreased by 24 percent. As a result, rates were decreased by about 8 percent Aug. 1 over all customer bases. The Virginia State Corporation Commission estimates that average monthly bills should have decreased by about $2.50, or $101 a month, as of Aug. 1.
According to data provided by the company, rates in Virginia remained flat between 1983 and 2005. However, several federal rule changes drove major expenditures between 2006 and 2010. During the time period, the company spent $2 billion on environmental controls to meet the new federal requirements, including Clean Air Interstate Rules and Clean Air Mercury Rules.
The company also saw fuel costs driving increases. That included a spike in coal prices that impacted Virginia’s fuel factor price.
“We were paying $60 and $70 a ton, and had about $40 a ton built into rates,” Dempsey said. “And that is for both West Virginia and Virginia.”
“For an average customer bill — about a third of their bill is going just to pay for coal,” Burns said. “It’s a pass-through cost. The fuel factor is adjusted in Virginia on an annual basis. It corrects for any over recovery and under recovery over a prior year. What happened this year is we ate away at a big under recovery. Last year we increased rates by 7 percent and coal rates subsided. So in June we went in and asked the commission to reduce our fuel factor by $100 million. The difference in Virginia is it hit all at once. In West Virginia, we entered a plan to recover that in four years.”
Dempsey said company profits have remained modest when compared to other electric utility providers. The company reported a 4.7 percent return on average equity between 2007 and 2009. For every $100 bill received by a customer, Burns said only $5 of the bill is actually a company profit.
“Profit is important,” Dempsey said. “First of all you have to be able to pay your investors some return, or you won’t have any investors. If you aren’t making any money and are constantly running on the edge, no one will want to loan you money. What bothers me is when you see the allegations of greed and disinterest for our customers. It is absolutely not true. I sincerely mean this is not a factor of greed. This is a factor of need for us to stay competitive and to do the things that need to be done.”
While the company was granted a $61.5 million increase in its 2009 pre-biennial case by the Virginia State Corporation Commission, the increase was partially offset by the $100 million decrease in the company’s fuel factor.
The company also provided a detailed chart looking at anticipated federal regulations between now and 2017. The study concludes power will be cleaner, but not cheaper, in the years ahead.
“This is the Environmental Protection Agency’s own slide,” Dempsey said. “It is showing all of the benchmarks between now and 2017 of coal-fired plant issues. The point being almost everyone of those (benchmarks) will have a cost driving associated with it. We aren’t going to argue if these are or aren’t needed. All we are going to tell you is it is going to cost money. None of us knows what will come out of the final results of those rules. What we are asking or advocating is something quite similar to what Sen. Rockefeller has suggested with the CO2 (carbon dioxide) applications. Let’s take a two-year time out here. See what the benefits are. See what the best course of action is. That sort of approach would seem to make the best sense to us.”
Dempsey said the looming federal regulations will have a significant impact on coal producing states such as West Virginia and Virginia. In West Virginia, the company estimates that 99 percent of all electricity is generated from coal. In Virginia, more than half of the state’s electricity generation comes from coal.
“Part of the real answer for us is improving the economy where we live,” Dempsey said. “We’ve got a huge challenge there. To the extent that something is going to have a dire impact on our economy, we have to be very careful going down that path. The best thing that can happen for us with controlling rates is growth. Growth does a lot of wonderful things for the economy.”
The company was asked to comment on the growing debate over whether State Corporation Commissioners in Virginia and Public Service Commissioners in West Virginia should be elected by popular vote as opposed to the current process of appointing commissioners. The company also was asked about the findings of a new SCC report that detailed concerns over communications by the company with customers and local emergency officials following the Dec. 18, 2009 monster snowstorm.
“We don’t know,” Dempsey said of the election of commissioners. “One thing we fear is undo political influence that may artificially keep our rates low and damage us to keep it politically popular. I think most states view them (commissioners) as more of a judiciary type position that needs to be free of running for office. We think that system works. I know customers have this vision or opinion — I’ve seen the word rubber stamped being used - but anyone that is in the commission business knows that rubber stamps is something we don’t do. It is a very tedious and precise process we go thorough.”
Dempsey said the company has learned from the Dec. 18, 2009, snow storm, and will be ready for the next major storm.
“In terms of the communications department, we are going to take that to heart, and look at ways we can improve that,” Dempsey said. “There were places (following the Dec. 18, 2009 storm) that we couldn’t even get to look at the damage. We are going to do our best to better coordinate with local entities such as the highway departments.”
Dempsey said APCO also had great cooperation with West Virginia during the storm, including help from state Homeland Security Director Jimmy Joe Gianato.
“We hold hands and pray every morning that we won’t have another winter like that,” Dempsey said.
– Contact Charles Owens at cowens@bdtonline.com
