7/15/2009
Appalachian Power Files New Rate Case in Virginia; Announces Efforts to Help Low-Income Customers

RICHMOND, Va., July 15, 2009 – Appalachian Power, a subsidiary of American Electric Power (NYSE: AEP) today filed requests for increased rates with the Virginia State Corporation Commission (SCC). Compared to current rates and assuming an average of 1,000 kilowatt hours (KWH) a month, residential customers will be paying about $3.61 a day for their electricity as a result of this action. That is an average daily increase of about 55 cents over today´s rates.

At the same time, Appalachian significantly increased its contributions to the Neighbor-to-Neighbor Program and announced changes to components of its deposit and collections policies to further help customers having difficulty paying their electric bills. The company made three separate filings; two will directly affect customer rates. The first is Appalachian´s initial filing under the Commonwealth´s regulatory statutes. It is referred to as a pre-biennial review and its purpose is to determine a utility´s costs of providing service and correspondingly fix base rates for a period of two years—essentially through 2011. In accordance with the law, electric utilities are required to file similar cases every two years.

The second rate-related filing is for a new bill component to recover transmission costs. The new component recognizes federal regulatory authority over transmission services and allows the company to recover charges approved by those regulators for the transmission of power flowing through the independently-operated transmission grid. The filing will remove transmission costs from base rates and apply it to customer bills much like the state´s fuel factor.

The base rate filing seeks adjustments that will increase current base rates by $169 million; the transmission adjustment will increase rates about $24 million; together that is a total increase of $193 million or about 16 percent over current rates. The percentage impact will vary across customer classes. Residential customers will see an increase of approximately 19 percent. The residential increase, which is higher than the overall average percentage, reflects the proposed removal, in part, of rate subsidies historically provided for residential customers by larger commercial and industrial customers under the company´s rate structure.

A third filing will not increase rates. It seeks approval of two demand response tariffs that allow commercial and industrial customers to be rewarded for agreeing to reduce power consumption during periods of high prices and emergencies and actually doing so when notified by the company. This is an important initiative in the overall development of opportunities for customers to not only control their usage, but to have rates which reflect that option.

Dana Waldo, Appalachian Power president and chief operating officer, said, "These applications come when our customers and the company are attempting to balance rising costs with a recessionary economy. In order to reliably serve our Virginia customers, the company must spend substantial amounts of money for mandated environmental and other necessary energy-related programs at a time when capital is more difficult and expensive to obtain.

"The company continues to tighten its belt with serious cost-containing measures resulting in essentially a flat level of discretionary expenditures as we go forward. Consequently, our filings today reflect the total level of costs Appalachian requires to serve its customers and ensure that the electric infrastructure is ready as we begin to help turn around the area´s economy." Waldo also acknowledged recent comments and concerns from customers and elected officials throughout Southwest Virginia regarding the effects of rising energy costs. "We recognize the impact of increased costs of electricity being added to the growing costs of housing, food, transportation and other necessities," he said. "That is one reason I´m pleased to also announce today a number of steps we are taking to help." Among those:

  • The company will immediately increase from $210,000 to $1,025,000 its contribution to low-income energy assistance programs in its service territory. Virginia´s Neighbor-to-Neighbor program will receive $500,000.
  • Initiate improved deposit and collections efforts for customers with a history of delinquency.
  • Make it easier for customers to make "settle-up payments" under the company´s budget billing plan.
These efforts, when combined with federal funding for weatherization programs that has grown to $96 million in Virginia, provide a significant increase in assistance to customers who have difficulty paying for electricity.

Waldo noted that part of the pre-biennial rate application also asks approval of an Economic Development Rider which will provide incentives for larger commercial and industrial customers to grow their businesses in Virginia.

"We are doing our best, within the terms and conditions of our service in Virginia, to soften the economic impact on our customers. We continue to search for innovative ways to keep our costs as low as possible, help customers through these troubled times, and prepare for better days ahead, "Waldo said.

Appalachian Power is a long-time supporter and promoter of wise energy use and management by its customers. A year ago it established a consumer outreach effort and Web site that explains and provides energy efficiency tips and assistance. Watt, Why and How information is available at www.wattwhyandhow.com

See a video message to our customers (WMV : 42MB)

ESTIMATED RESIDENTIAL IMPACT OF JULY 15 FILINGS WITH SCC

KWH /mo Current bill Full approval
500 $50.69 $59.15
1000 92.97 109.89
2000 177.54 211.38
3000 261.84 312.60
4000 345.87 413.55


Note: The estimates shown here include the $8.40 monthly customer charge and state consumption tax; they do not include local taxes which vary. Estimates assume full approval and implementation of the company´s July 15 requests.

Update:
In August, the Virginia State Corporation Commission issued an order in Appalachian´s fuel factor case approving a 9.4 percent overall increase in rates.

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 AEP 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: 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 AEP´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; 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 for new investments, transmission service and environmental compliance); resolution of litigation (including pending Clean Air Act enforcement actions and 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; 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 and other energy-related commodities; changes in utility regulation, including the potential for new legislation in Ohio and membership in and integration into regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP´s pension and other postretirement benefit plans; 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

Corporate Communications

540-985-2912

tfburns@aep.com

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