5/14/2010
APPALACHIAN POWER, WHEELING POWER
SEEK INCREASE TO COVER GROWING OPERATING COSTS

CHARLESTON, W.Va., May 14, 2010 – Appalachian Power and Wheeling Power, both subsidiaries of American Electric Power (AEP), today filed a request with the Public Service Commission of West Virginia for a $155.5 million revenue increase. If approved, the request would raise rates in West Virginia by approximately 13.8 percent overall. The exact amount of the increase will vary by customer class and usage. Customers in other states will not be affected.
 
The additional revenue is needed to recover increasing operating costs of maintaining and improving the electric system – including plants, substations, and transmission and distribution lines.
 
These day-to-day costs of running the electric utility are recovered in what is commonly called the company’s “base rates.” While the company has increased prices to recover the cost of fuel – mostly coal – and environmental improvement construction projects, the company has not had an increase in its West Virginia base rates since 1992.
 
“We know that reliable service is important to our customers,” said Dana Waldo, Appalachian Power president and COO. “In this difficult economy, it’s up to us to balance the need to keep prices as low as possible with the need to keep the lights on. To ensure that service remains reliable, we need to make investments to maintain our infrastructure.”
 
Appalachian and Wheeling maintain 20,295 miles of distribution lines in West Virginia, along with an additional 2,592 miles of transmission lines in the state.
 
Rates will not be put into effect until approved by the Commission, which can take up to 300 days to make its decision. Upon approval, typical residential customers will see an increase in their electric bills of about 45 cents a day. Residential customers who use 1,000 kilowatt-hours a month will see their monthly bill rise from $80.47 to $94.14, an increase of 17 percent. The increase for other customer classes, like commercial or industrial customers, will range from 12 to 15 percent.
 
Residential Customer Usage and Costs

Usage
in KWH
Current
Rate
Proposed
Rate
Increase
1,000
$80.47
94.14
13.67
2,000
$150.83
176.58
25.75
 
Waldo said that rates for the company are designed to balance safety, reliability, price and earnings.
 
“The rates the Commission approves for our company are established to allow us to provide safe, clean, reliable electric service while keeping prices as affordable as possible and earning a fair return on investment,” he said.
 
Since 2008, the company has drastically reduced its operating budget, implemented a no-travel policy and lowered its capital budget by slowing or halting construction projects. Still, in 2009 net operating income was down 11.3 percent compared to 2008. In April, the company announced an employee severance program that also is expected to reduce expenses considerably. And beginning in June, the company will idle six coal-fired generation units at three plants in West Virginia and Virginia, operating them just during peak months and reducing the work force at those plants.
 
In its July 2006 order, the Commission authorized a 10.5 percent return on equity for Appalachian. Since then, the company has earned only 5 to 7 percent each year, or roughly half the authorized return. The company will request an 11.75 percent authorized return on equity.
 
Earning a fair return on equity is critical to Appalachian’s ability to do business. It directly impacts bond ratings and therefore our costs to finance infrastructure improvements, make long-term investments and provide reliable electricity. AEP, Appalachian’s parent company, has spent more than $5 billion on federally-mandated environmental controls, with over $2 billion of that in Appalachian Power. 
 
AEP employs approximately 2,780 people in West Virginia, making it the fifth largest employer in the state. It is one of the largest taxpayers in the state, paying $107 million in state and local taxes in 2009.

Rates for Appalachian’s customers are among the lowest in the country. The national average residential price for electricity is 11.76 cents per kilowatt-hour, compared to Appalachian’s proposed 9.4 cents. Customers are urged to manage their energy use wisely and to visit the company’s Internet site (www.WattWhyAndHow.com) for energy-saving tips and a free home energy calculator that can help explain how to conserve electricity. 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. 




 
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: 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 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 canceled) 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 or contraction 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 impacting 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 markets; 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 implementation of the recently passed utility law 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 and the impact on future funding requirements; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.


Jeri Matheney
Corporate Communications Manager
(304) 348-4130
jhmatheney@AEP.com

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