Virginia regulators approve bill increase for Appalachian Power’s fuel costs

State regulators approved an average monthly residential bill increase of $20.17 for customers of Appalachian Power, the state’s second-largest electric utility, so that the company can recover increased fuel costs.

The State Corporation Commission, which oversees the state’s public investor-owned utilities, approved the increase following the request from the utility in the fall, which initially sought a bill increase of $33.24 per customer before the company volunteered a mitigation plan.

The approved increase had been in effect on a temporary basis since Nov. 1. The Commission previously approved a fuel-factor increase of $14.93 in September for Dominion and is also reviewing bill increases for natural gas customers amid rising supply costs. 

The commission noted inflationary pressures in issuing its final order, but added  “We are deeply concerned about the significant rate increase requested in this case, and its impact on customer bills.

“The impact of the increase is worsened by its introduction during the winter months, which are typically higher usage months, and by other recent APCo rate increases.”

With the mitigation plan, which calls for recovery of the increased fuel cost over a two-year period starting Nov. 1, 2022 instead of a one-year period, the bill increases allow the company to recover $279 million for its fuel factor – or costs for fuel to generate electricity. 

“When the company made its annual fuel factor filing last year we asked that the fuel cost be spread over two years knowing the increase would be difficult for many people and customers,” Teresa Hall, a spokesperson for Appalachian Power said by email Monday. “We are extremely pleased that this request received approval.”

The Monday fuel factor approval, and the mitigation plan, came with the support of the Office of the Attorney General.

“Even with the two-year mitigation approach, there will be rate shock to all classes of customers from the 88 percent increase to the fuel factor,” wrote Scott Herbert, assistant attorney general, in a letter to the commission. “There are no good options for customers in light of the substantial increases in the Company’s fuel costs, and Consumer Counsel supports the mitigation proposal volunteered by the Company”

The approval also came after Dana Wiggins, director of outreach and financial advocacy for the Virginia Poverty Law Center, a ratepayer advocacy group, testified during the case that bill impacts will be felt by the company’s customer base, who earn incomes lower than the state median.

By phone interview Monday and referencing a recent Supreme Court of Virginia decision to allow APCo to recover coal-plant-retirement costs, Wiggins said these increased fuel factors costs, which are passed on to customers with no changes, make it “all the more critical” to scrutinize the cost increases utilities seek. 

As part of the approval, the Commission will also conduct a retroactive fuel audit of the company from Jan. 1, 2019 to Dec. 31, 2022; the results will be included in the utility’s next proceeding on setting the fuel factor rate. As part of the audit, the Commission will analyze Appalachian Power’s coal fuel procurement activities, which the company told the West Virginia Public Service Commission in October had become difficult.

In the company’s request for the fuel factor increase, the utility, which must decarbonize its grid by 2045 under the Virginia Clean Economy Act, said its growing use of renewable energy such as solar and wind will reduce fuel costs. At that time, about 6% of the company’s power supply came from renewable energy.