5/30/2008
APPALACHIAN POWER FILES TWO RATE-RELATED CASES IN VIRGINIA;
PROPOSALS WOULD NOT AFFECT CUSTOMER BILLS UNTIL FALL, WINTER

ROANOKE, Va., May 30, 2008 – Appalachian Power, a subsidiary of American Electric Power (NYSE: AEP), today made two separate filings at the Virginia State Corporation Commission (SCC). The first addresses the company’s need to increase customer revenue through base rates and the second seeks recovery of additional incremental environmental and reliability (E&R) costs through its existing customer surcharge.
            If approved by the SCC, the base rate filing would increase customer costs by an average of 23.9 percent or $207.9 million annually. A residential customer using 1000 kilowatt hours (KWH) in a month would see an increase from the current bill of $71.48 to $88.01. (Other estimates of residential bills may be found at the bottom of this news release.) The company is requesting a final decision in the case within 150 days in order to avoid implementation of interim rates.
The second filing seeks the recovery of $17.6 million in additional environmental and reliability (E&R) costs over the current surcharge and is recovering expenses incurred between October 2006 and December 2007. The company asks to implement the revised surcharge beginning January 1. If approved, it would increase projected then-current customer bills by an average of less than two percent.
“We recognize that an increase in electricity costs is an added burden for customers already struggling with significantly higher prices for gasoline, groceries and other necessities,” said Dana Waldo, Appalachian Power president and chief operating officer. “The company is doing its best to control its costs and improve its efficiencies.
              “A major complaint heard from customers during our last rate case was the inconvenience and uncertainty caused by implementation of interim rates. Consequently, we have proposed a timeline for the SCC review of the case in order to avoid customer uncertainty and added costs, and to assure rate stability for customers.”
Waldo noted that Appalachian is in a precarious financial situation in Virginia.  Despite the implementation of a $24 million annual rate increase in the last base rate case, financial results in the jurisdiction continue to decline. The company continues to make capital investments, responds to environmental requirements and incurs operating expenses at levels required to meet its public service obligation. As a result, the base rates established in the last rate case, which were based on costs for the 12 months ended December 2005 and adjusted to June 2006, do not provide a reasonable opportunity for Appalachian to earn even its currently authorized rate of return in Virginia on an ongoing basis.
“Despite cost control efforts, it is clear that earned returns in the company’s Virginia jurisdiction are not close to meeting even minimally acceptable financial results,” Waldo said. “Within the last six months two financial rating agencies have downgraded Appalachian Power based partly on its inability to recover costs in Virginia.
“We also understand our own expenses will continue to grow and ultimately have an impact on customers. For example, the rising cost of coal will, more than likely, create a need to seek additional cost recovery in the fuel factor portion of rates soon. That has already been seen in regulatory cases filed by other Virginia utilities this month,” he added.
Appalachian’s rates in Virginia are among the lowest of electric suppliers in the nation.  A recent quarterly survey conducted by the Jacksonville Electric Authority ranks the company’s Virginia rates as the fourth lowest of 55 listed electric utilities. In the January 2008 Edison Electric Institute (EEI) rankings of Residential Average Rates per KWH for utilities across the nation, Appalachian Power in Virginia is ranked 158 out of 181, meaning the company has lower rates than 87 percent of the utilities in the country.
             The SCC will assign and publish case numbers and schedules for the cases filed today. Documents relating to the cases will be found on the Commission’s Web site at www.scc.virginia.gov.
Appalachian Power customers are urged to visit the company’s Web site at www.AppalachianPower.comto learn about energy saving ideas. Included on the site is an interactive Energy Calculator that allows customers to see how easy changes made to homes and businesses can help manage energy costs more efficiently.
Appalachian Power provides electricity to 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power). It is a unit of American Electric Power (NYSE: AEP), 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.
 
Estimated Virginia residential customer bill impact

KWH /mo
Current bill
Nov 2008
% Change
Jan 2009
% Change
500
$     40.23
$    48.51
    20.58%
$    48.89
       0.78%
1000
       71.48
      88.01
    23.13
      89.36
       1.53
1500
     102.74
    127.53
    24.13
    129.84
       1.81
2000
     133.99
    167.04
    24.67
    170.32
       1.96
3000
     196.22
    245.81
    25.27
    251.01
       2.12
4000
     258.19
    324.30
    25.61
    331.43
       2.20
5000
     320.16
    402.80
    25.81
    411.85
       2.25
 
 
 
 
 
 
 
 
 
 
NOTE: Estimates shown include an $8.40 customer charge and the state consumption tax; they do not include local taxes which vary. This chart assumes full approval and implementation of base rates (Nov.) and E&R surcharge (Jan.).

John Shepelwich
Corporate Communications Manager
(540) 985-2968
jeshepelwich@AEP.com

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