Appalachian Power is asking for $641 million in recovery costs, although the company’s representatives are proposing some methods that could soften the blow for customers.
Appalachian Power, along with Wheeling Power, filed the request on Friday with the Public Service Commission.
“The Companies are keenly aware of the significant impact to customers should this requested increase be implemented all at once,” power company representatives wrote in the request.
The big amount has piled up, consisting of an accumulated under-recovery balance of about $552.9 million plus increased projected costs of about $88.8 million for the forecast period of this coming Sept. 1 through August 31 , 2024.
So the companies are offering two possible alternatives to recover the money.
One would be to increase rates by $88.8 million for the projected costs while also spreading the deferral recovery over three years, for a total first-year rate increase of about $293.1 million.
The second option would be securitization of the under-recovery balance along with a $88.8 million rate increase starting Sept. 1 to cover projected costs.
The securitization, which means pooling income-producing assets to turn them into a single product for investment, would come through consumer rate relief bonds.
The power company could do that because of a bill passed this most recent legislative session, House Bill 3308.
“Among other things, this legislation authorizes the Commission to approve the recovery of certain costs requested by an electric utility through the issuance of consumer rate relief bonds,” said John Scalzo, vice president of regulatory services and finance for Appalachian Power and Wheeling Power in testimony submitted to the PSC.
As coal and natural gas prices rose dramatically in 2021 and remained high throughout 2022, the company says it paid far more for fuel and purchased power than the amount included in rates. Over a year, unrecovered costs grew from $216 million to almost $553 million.
And earlier rate increase requests wound up getting bumped along without resolution.
One of the delays was because of the work going into a prudency review of how the power companies handle their operations at the Amos, Mountaineer and Mitchell coal plants.
The extensive review examined fuel purchase practices, power plant use, bidding strategy to sell generation into the PJM energy market and reliance on PJM energy relative to self-supply options.
The review concluded that “the Companies did not appear to exercise common sense and prudency in their decisions to fulfill ‘their obligation to serve their customers’ with economic, safe, resilient and reliable electricity based on the use of the coal plants as established by the Commission.”
Still, the companies say their costs continued to mount even as the review was occurring. The under-recovery balance continued to go throughout 2022.
So, “the Companies became increasingly concerned about the impact of recovering such a large under-recovery balance from their customers using traditional recovery approaches,” Scalzo stated in his testimony, referring to the latest Expanded Net Energy Cost filing.
The ENEC is the mechanism for reimbursing the company for purchased power, and for the cost of coal and natural gas used to fuel power plants.
More company representatives testified that the alternative proposal to collect those costs could alleviate the financial burden on customers.
“Although an increase of that amount is warranted, the Companies appreciate that it is a very large increase and would impose a considerable burden on their customers if implemented all at once in the conventional way,” testified Jason Stegall, director of regulatory services for American Electric Power and its subsidiaries.
The companies are asking for the Public Service Commission to approve one of the cost recovery proposals.
“Recovering these costs over the traditional one-year period would place an enormous burden on our customers,” said Aaron Walker, Appalachian Power president and chief operating officer. “To that end, we are proposing two creative cost recovery solutions in this filing that will minimize rate impact.”