5/27/2015
Public Service Commission approves increase for Appalachian Power, Wheeling Power customers; Rates to increase less than 50 cents a day for residential customers

CHARLESTON, W.Va.  – The Public Service Commission (PSC) of West Virginia on Tuesday approved a $123.5 million revenue increase for customers of Appalachian Power and Wheeling Power, both subsidiaries of American Electric Power (AEP). The increase will raise electric bills about 47 cents a day for residential customers.

The Commission ordered residential customer rates to be phased in over a two-year period. According to the PSC, average residential customers will see an immediate increase of $14.30 a month. A year from now, rates will increase an additional $5.20 a month. The increase for other customer classes, like commercial or industrial customers, will vary. Even with the increase, rates for Appalachian’s customers are below the national average of 12.24 cents per kilowatt-hour. *

“We want the same thing our customers want, and that’s safe, reliable electric service that is affordable,” said Charles Patton, Appalachian Power president and COO. “The Commission has the tremendous responsibility of trying to balance the economic realities of the state with the financial health of the companies it regulates. This decision moves us in the right direction; however, we are in an increasing-cost business. Ultimately, the financial health of the company affects the future reliability of service, the scope of services and even the future cost of electricity, because an unhealthy company pays significantly more to attract investors.”

The order includes $13.7 million in cost recovery for two major storms that struck the state in 2012, the Derecho and Superstorm Sandy. Those costs will be spread over five years.

Also included is $44.5 million in cost recovery for the company’s new cycle-trimming vegetation management program. While cycle trimming won’t eliminate outages from major events like the Derecho and Sandy, it is helping improve reliability and reduce power restoration times. The program calls for every circuit to be trimmed end to end every four years. Appalachian has doubled the number of tree crews in the state, and already is seeing a reduction in the frequency and length of outages on circuits that have been fully trimmed.

To better manage costs, over the past five years the company has implemented two major cost-cutting initiatives, reduced its operations and maintenance budget by $15 million, and reduced its workforce by more than 10 percent. The company also is implementing an efficiency program called Lean throughout its service territory. The internationally-known program, used by Toyota and other multinational corporations, is designed to engage front line employees to increase efficiency and add value to customers.

Appalachian Power has worked with the Commission on several programs to spread costs for coal and storms over an extended period so they have less impact on customers. Still, the company has seen its investment in physical infrastructure to meet customer needs grow over the past 10 years from $5.9 billion to $9.6 billion.

The Commission order authorized a 9.75 percent authorized return on equity. Earning a fair return on equity is critical to Appalachian’s ability to do business. It directly affects bond ratings and therefore the cost to finance infrastructure improvements, make long-term investments and provide reliable electricity.

AEP employs approximately 2,300 people in West Virginia, making it one of the largest employers in the state. It is also one of the largest taxpayers in the state, paying $82 million in state and local taxes in 2014.

Customers are urged to manage their energy use wisely and to visit www.AppalachianPower.com to learn more about the company’s many energy efficiency programs. The site also provides information on payment options available to customers.

Appalachian Power provides electricity to 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power) and Wheeling Power provides electricity to customers primarily in Marshall and Ohio counties in West Virginia. Both companies are units of American Electric Power, one of the largest electric utilities in the United States, with more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

* According to the U.S. Energy Information Administration, released May 26, 2015

http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_06_b

 

 

This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: the economic climate, growth or contraction within and changes in market demand and demographic patterns in AEP’s service territory; inflationary or deflationary interest rate trends; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing AEP’s ability to finance new capital projects and refinance existing debt at attractive rates; the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material; electric load, customer growth and the impact of retail competition, particularly in Ohio; weather conditions, including storms and drought conditions, and AEP’s ability to recover significant storm restoration costs through applicable rate mechanisms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of necessary generating capacity and the performance of AEP’s generating plants; AEP’s ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP’s ability to build or acquire generating capacity and transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs (including the costs of projects that are cancelled) through applicable rate cases or competitive rates; new legislation, litigation and government regulation, including oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances, or additional regulation of fly ash and similar combustion products that could impact the continued operation, cost recovery and/or profitability of AEP’s generation plants and related assets; evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including nuclear fuel; a reduction in the federal statutory tax rate that could result in an accelerated return of deferred federal income taxes to customers; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance; resolution of litigation; AEP’s ability to constrain operation and maintenance costs; AEP’s ability to develop and execute a strategy based on a view regarding prices of electricity, and other energy-related commodities; prices and demand for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; AEP’s ability to recover through rates or market prices any remaining unrecovered investment in generating units that may be retired before the end of their previously projected useful lives; volatility and changes in markets for capacity and electricity, coal, and other energy-related commodities, particularly changes in the price of natural gas; changes in utility regulation and the allocation of costs within regional transmission organizations, including PJM and SPP; the transition to market generation in Ohio, including the implementation of ESPs; AEP’s ability to successfully and profitably manage our Ohio generation assets in a startup, nonregulated merchant business; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of AEP debt; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, other postretirement benefit plans, captive insurance entity and nuclear decommissioning trust and the impact on future funding requirements; accounting pronouncements periodically issued by accounting standard-setting bodies; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, cyber security threats and other catastrophic events.

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