5/15/2009
APPALACHIAN MAKES ANNUAL FILINGS
TO ADJUST FUEL AND ENVIRONMENTAL AND RELIABILITY COST RECOVERY

ROANOKE, Va., May 15, 2009 – Appalachian Power, a subsidiary of American Electric Power (NYSE: AEP), today filed two rate increase requests with the Virginia State Corporation Commission (SCC) seeking to recover the cost of fuel and investments in equipment to meet environmental compliance requirements and improve service reliability.

Recognizing the current economic situation, the company is proposing steps to reduce the overall increase for customers. If Appalachian’s recommendations, including mitigation measures in the fuel case, are approved, the cumulative effect of both requests would be approximately a 16 percent increase in overall rates implemented in two steps by January.   Average residential rates would increase closer to 13 percent.

  “At Appalachian we recognize that increases in electric rates can be difficult for our customers, especially with a downturn in the economy.” said Dana Waldo, Appalachian Power president and COO. “That’s why in the face of increasing costs, we’ve come up with a recommendation to the Commission that would lessen the impact to customers.”

 
Fuel Factor
Appalachian Power has asked the Commission to increase the current fuel factor by slightly less than 1 cent per kilowatt-hour (kWh) – from 2.16 cents per kWh to 3.05 cents per kWh. The new factor would increase annual revenue by $141.7 million to cover the company’s increasing cost of fuel. This annual filing reflects fuel and purchased power costs at no profit for the company.

Several reasons are driving the requested increase in the fuel factor: The company’s actual cost of coal is higher than what is in the current fuel factor and fuel costs are expected to remain at an increased level through the proposed new fuel factor period. Additionally, Appalachian has seen a sharp decline in electricity sales it makes to other utilities for a number of reasons, including a slowing economy. Seventy-five percent of the profit from Appalachian’s sales to other utilities benefits Virginia customers in the form of a credit to the fuel factor.

In recognition of the current economic situation, Appalachian is asking the Commission to reduce the immediate average rate increase for all customer classes from 17 to about 12 percent. Residential customers would see a lower increase in the range of 9 to 10 percent, depending upon usage. Higher-usage customers – including commercial and industrial customers – may see larger increases.

The proposed new fuel factor would cover the period July 1, 2009 through August 31, 2010. Appalachian has asked to implement the new fuel factor for services rendered beginning July 1.

Environmental and Reliability Surcharge
The second filing seeks recovery of $41 million in additional environmental and reliability (E&R) costs for expenses incurred between January 1 and December 31, 2008. The company asks to implement the revised surcharge beginning Jan. 1, 2010. If approved, it would increase the overall average electric rates by 0.27 cents per kWh or about 3.5 percent for an overall bill.

The E&R rider recovers actual incremental costs associated with specific projects, including environmental investments to reduce sulfur dioxide and nitrogen oxide emissions, and reliability investments including right-of-way maintenance, transformers and other equipment aimed at minimizing the frequency and duration of power interruptions.

Combined Fuel and E&R
Appalachian Power’s Virginia customers pay some of the lowest electric rates in the country. For example, a residential customer using 1,000 kWh a month currently pays an averaged 9.2 cents per kWh. With approval of both requests, Appalachian Power customers in Virginia will pay an averaged 10.5 cents per kWh, still less than most other electric utility customers.

Estimated Virginiaresidential customer bill impact of fuel factor and E&R adjustment

KWH /mo
Current bill
July 1 (Fuel)
January 1 (E&R)
500
$50.69 
$55.14
56.80
1000
92.97
101.87
105.18
1500
135.26
148.61
153.58
2000
  177.54
195.34
201.96
3000
  261.84
288.54
298.47
4000
345.87
381.47
394.71
5000
429.90
474.40
490.95
 
 








Note: The table 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 the new fuel factor on July 1 and the E&R surcharge on January 1.
 
An effective way to manage rising energy costs is to become a knowledgeable consumer and use energy wisely. Appalachian Power customers are urged to visit the company’s Web site at www.wattwhyandhow.com  to 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 control energy usage and lower total costs.

The SCC will assign and publish case numbers and schedules for the applications filed today. Documents relating to the case will be found on the Commission’s Web site at www.scc.virginia.gov .

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.
---
 
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 the registrants 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: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness and performance of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; AEP’s ability to recover regulatory assets and stranded costs in connection with deregulation; 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 (including the company’s ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs through applicable rate cases or competitive rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances; 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 (including disputes arising from the bankruptcy of Enron Corp. and related matters); AEP’s ability to constrain operation and maintenance costs; the economic climate and growth in AEP’s service territory and changes in market demand and demographic patterns; inflationary and 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 refinance existing debt at attractive rates; AEP’s ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; 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 debt; volatility and changes in markets for electricity, natural gas, coal, nuclear fuel and other energy-related commodities; changes in utility regulation, including the potential for new legislation in Ohio and the allocation of costs within regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, other postretirement benefit plans and nuclear decommissioning trust; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.
 
                                            # # #

Todd Burns,
Appalachian Power Corporate Communications
540-985-2912
540-798-2686
tfburns@aep.com

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