Appalachian Power Customers Pay 4% Less for Electricity

Appalachian Power residential customers in Virginia will pay around US$4 less per month.
Published: Mon 09 Mar 2015

An average residential customer in Virginia using 1,000kWh of electricity per month can expect to see their monthly power bill drop by US$4, from US$119 per month to US$114.92. The rate decrease is dependent on each customer and their level of consumption.

This Is good news for consumers since consumption has been particularly high over the most recent winter months. An Appalachian report revealed that consumption has hit an all-high with a peak demand of 8,697MW. Last year’s peak was recorded at 8,460MW.

Expiry of electricity Rate Adjustment Clauses

The decrease is as a result of the reduction or expiry of three Rate Adjustment Clauses (RAC):

  • The Environmental RAC (E-RAC) which ended on 12 February

  • The Generation RAC (G-RAC) was reduced on 15 February

  • The Renewable Portfolio Standard RAC (RPS-RAC) was suspended 1 February

Also referred to as “rate riders,” RACs help utilities recover costs for mandated environmental improvements, construction of a power plant or energy efficiency programmes.

Virginia law holds that the State Corporation Commission must consider rate rider requests on a standalone basis without regard to other utility costs or revenues. Even though the base rate that Appalachian Power charges Virginia customers will be frozen through 2020 — courtesy of a law passed during this session of the General Assembly — there may be times when adjustments to RACs offer savings to customers and times when they don’t.

“Costs that can be recovered through a rider vary each year,” said Ken Schrad, a spokesman for the SCC.

“So, there is a proceeding to adjust the rider, up or down, annually, and a rider typically will remain in place until no longer required,” Schrad said, such as when a power plant comes on line or an energy efficiency programme ends.

Lowered RAC’s is good news for all

Says Charles Patton, Appalachian president and chief operating officer of the reduced rates: “Following a period of significant increases to pay for about US$2 billion of required environmental upgrades, we have enjoyed relatively flat rates in Virginia for the past few years. Now that these RACs can be lowered, it is even better news for our customers and the economy.”

The environmental upgrades included the installation of environmental controls to help Appalachian’s coal-fired power plants meet federal clean air regulations. The scrubbers that were added to the company´s Mountaineer and John Amos plants have reduced SO2 emissions by 98%. Selective catalytic reduction equipment reduces NOx emissions by as much as 90%. The cost of the environmental controls are recovered through mechanisms such as an Environmental RAC. In West Virginia costs are recovered through an annual Expanded Net Energy Cost, or ENEC, filing.

The company´s plants use 13 million tons of coal each year.

The changes in the overall customer bill are due to the use of RACs for the collection of costs that are mandated or are investments specifically approved by the Virginia State Corporation Commission (SCC). RACs are regulated by the SCC and generally provide no profit for the company.

RAC adjustments are separate from the base rate. The base rate accounts for approximately 60% of the bill customers pay for electricity. The other major component of the bill is determined by RACs which are adjusted periodically to reflect actual costs

Appalachian Power is cheaper than most

Appalachian’s residential customer bills remain approximately 15% below the national average, 21% below the East Coast average and are lower or comparable to other Virginia utilities.

Appalachian Power has 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power). About 500,000 customers are in Virginia. It is a unit of American Electric Power, one of the largest electric utilities in the US, which delivers electricity to more than 5 million customers in 11 states.