Electricity costs more than it used to, and you deserve to know why.
The cost of coal and environmental controls are the two biggest drivers of your electric bill
More than 90 percent of the electricity we generate at Appalachian Power is fueled by coal – and the price of coal has been increasing. However, we make no profit on fuel costs. Instead, the actual cost we pay, subject to Commission review and approval, is “passed through” to our customers. In recent years, coal prices have spiked and continue to be volatile.
Retrofitting our generating plants with emission controls to meet Federal environmental regulations has greatly increased our costs. Since 2005, we have spent more than $2 billion to install scrubbers and other emission control equipment at our plants. It is likely there will be other requirements going forward.
Customers' growing demands for electricity have also required Appalachian to purchase even more power to supplement its generation fleet.
Increased cost of purchased power
Appalachian Power does not have enough of its own generation to serve its customers’ peak demand and has for years purchased power from other utilities to supply the deficiency. The cost of this purchased power has increased, driven by many of the same factors causing upward pressure on Appalachian’s costs. The purchases have increased from approximately $140 million to nearly $400 million annually in just a few years.
And there are other reasons too.
Off-system sales – Appalachian Power sells any excess power that it is able to generate to other utilities. The profit from these sales goes back to customers in the form of a credit. In 2006, this provided $259 million to help offset rising costs. In 2010, that had fallen to $107.6 million.
Material costs – The cost of the materials Appalachian purchases has risen dramatically over the past several years. For example, since 2000, the price of transformers has risen 90 percent, and wire and cable prices have risen 88 percent.
The national average residential price for electricity is 11.93 cents per kilowatt-hour. While Appalachian Power rates remain below the national average and are competitive with other regional utilities, the long-term trend continues to be upward.
We know higher rates are a burden, and that’s why at Appalachian Power we’re making every effort to hold down our costs by:
- Reducing our operating budget
- Implementing a limited travel policy
- Reducing our capital budget, slowing or halting construction projects where possible
- Reducing our workforce
- Putting six units at three of our older generating plants on an extended start-up basis, running them only when electricity demand is highest.
Rates for Appalachian Power are designed to balance safety, reliability, price and earnings, and are established to allow the company to provide safe, clean, reliable electric service while keeping prices as affordable as possible and to earn a fair return on investment.
Appalachian Power is working hard to keep costs down. And by working together, we can lessen the burden of rising electricity costs.
Learn more about Appalachian Power's current rate requests.
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