Photo by: Steven Allen Adams
The West Virginia Public Service Commission held an evidentiary hearing and public hearing on a request by Appalachian Power and Wheeling Power for a rate increase on Monday at its headquarters in Charleston.
CHARLESTON — Lawyers for environmental and consumer protection groups on Monday questioned the decision-making of subsidiaries of Columbus-based American Electric Power regarding coal shipments as the companies seek reimbursement for their expenses.
In the meantime, the companies have submitted an application to the Public Service Commission for an increase in their basic tariffs for the first time in six years.
The PSC held an evidentiary hearing and public hearing on Monday regarding a $20.4 million increase in enhanced net energy cost (ENEC) and vegetation management program rates for Appalachian Power and Wheeling Power requested in April.
The companies are seeking a $1.9 million reduction in ENEC rates for residential customers, while seeking a $22.3 million increase for all other customers. The companies are also seeking a $1.2 million, or just under 1 percent, increase for their vegetation management program. According to AEP, residential customers would see a 0.47 cent, or -0.27 percent, reduction in their monthly bills in September if both rate increases are approved.
The $20.4 million tariff requested by ENEC represents a 1.13% increase in total revenue. The last time the companies received an ENEC tariff increase was in September 2023. Back then, the companies were granted more than $321 million in tariff increases over a 10-year period starting in September.
“We have requested compensation for this ENEC case that reflects our position at the end of the historical period and what we believe will happen during the forecast period, which is an increase of approximately $20.4 million,” said Randall Short, director of regulatory services at AEP, during his testimony.
“There are a lot of things that go into the ENEC filing. That’s why it’s called expanded net energy cost,” Short continued. “This year it’s a much smaller number. I’m happy about that, but I’m under no illusions that it’s still a $20 million increase plus amortization.”
But Monday morning’s questioning focused on issues for Appalachian Power/Wheeling Power in 2021 related to coal procurement. Instead, the two companies bought power from PJM Interconnection, a wholesale energy transmission company that serves a 13-state region in the Northeast.
The companies had originally requested through the PSC a tariff increase from ENEC of $552.9 million for costs incurred but not reimbursed between March 1, 2021, and February 28, 2023. The companies also requested $88.8 million to cover projected costs between September 1, 2023, and August 31.
Instead, the PSC only allowed the collection of $321.1 million in ENEC costs over ten years – approximately $32.1 million per year, or about $2.50 per month for residential customers.
In its Jan. 9 order, the PSC found that the companies were responsible for covering part of ENEC’s $552.9 million claim because they purchased power from PJM rather than generating it themselves. Both Appalachian Power and Wheeling Power claim they were required to purchase power from PJM rather than generating power from their three coal-fired power plants in the state because coal prices had risen at the time and 3.8 million tons of coal were not delivered in violation of the contract.
“The two contracts that were terminated contained clauses that said they had to deliver a certain percentage of the total (of coal) for the year. And when they didn’t deliver that total for the year, that gave us the right to terminate those contracts,” said Kimberly Chilcote, AEP’s coal and reagent procurement manager. “We have four contracts that contained that clause. Two of the suppliers met their obligation, the two did not terminate.”
An earlier PSC order set an expectation that coal-fired power plants would have to achieve a capacity factor of at least 69 percent so that utilities in the state could generate their own electricity and reduce their dependence on purchased electricity.
According to a report commissioned by the PSC, Appalachian Power/Wheeling Power could have avoided applying for the $552.9 million ENEC grant and realized $231.7 million in cost savings if they had generated their own electricity at their three coal-fired power plants in the state. According to the report, the Mitchell Power Plant in Moundsville operated at 6% capacity between September and December 2021, the John Amos Power Plant in Winfield operated at 3% capacity and the Mountaineer Power Plant near New Haven operated at 0% capacity.
“Are you now satisfied that you have contracted enough coal to keep the plants running for the foreseeable future?” asked PSC Chair Charlotte Lane.
“I think so,” replied Chilcote.
“We believe we have a solid strategy in place to maintain safe inventory levels in our plants and work with our suppliers,” Short said. “We believe we are taking the steps to avoid this, but we also believe we have acted prudently, and that’s relative to others within PJM and our other peer groups. We think we’re in very good shape.”
While Appalachian Power and Wheeling Power are seeking ENEC’s $20.4 million rate increase, the companies filed a new rate review request with the PSC on Aug. 2 so commissioners can consider a 15.4% base rate increase, or more than $265 million in additional revenue. If approved, residential customers would face a monthly bill increase of $28.72, or 17.6%.
The reimbursement includes $118 million for costs incurred from severe storm damage since 2019. If approved by the PSC, the $118 million would be repaid over three years. The last time the companies were approved for a base rate increase was in 2018, and since that year the companies have invested more than $1 billion. The two companies serve more than 460,000 customers in West Virginia.
According to the U.S. Energy Information Administration, the average price of electricity for residential customers increased by 1.35 cents per kilowatt hour over the 12-month period, from 14.63 cents per kilowatt hour in May 2023 to 15.98 cents per kilowatt hour in May 2024.
According to the PSC’s Division of Consumer Protection, Wheeling Power/Appalachian Power’s residential monthly electric bills rose from $120.93 per month in 2017 to $138.58 per month in 2021 – a 15% increase in five years.
