State Corporation Commission Denies Appalachian Power Rate Increase Request

From the Virginia Mercury:

By Sarah Vogelsong

November 24, 2020

Appalachian Power Company, Virginia’s second largest electric utility serving more than half a million customers in and around Southwest Virginia, will not be allowed to raise its rates for the upcoming three years, regulators decided Tuesday.

The State Corporation Commission also slightly decreased the company’s allowed profit margin, from 9.42 percent to 9.2 percent. Appalachian, which has about 450,000 Virginia customers, mostly in the southwestern part of the state, had argued it should be increased to 9.9 percent.

In ruling that the current rates should remain in place, the State Corporation Commission rejected a December 2019 accounting decision by the utility that sought to expense $88 million in costs related to the retirement of eight coal-fired units in 2014 and 2015.

The effect of the December 2019 writeoff was so significant that it allowed Appalachian to claim it had underearned over the past three years despite reporting tens of millions in overearnings in 2017 and 2018. Virginia’s Office of the Attorney General decried the move as “highly unreasonable” and “unconscionable.”

Appalachian, though, argued that changes to the law made by the Grid Transformation and Security Act of 2018 permitted the utility to expense costs related to the early retirement of fossil fuel plants. It also claimed that the language of that law prohibited the State Corporation Commission from weighing whether or not the decision had been reasonable.

Appalachian Power’s service territory. (APCO)

The State Corporation Commission rejected that argument, stating that it did have the authority to conduct such a review and pointing out that up to December 2019, Appalachian had treated the plant closures as normal retirements. In that month, the utility “fundamentally changed course,” regulators wrote.

Ultimately, the commission determined that between 2017 and 2019, Appalachian Power overearned just shy of $2 million. Virginia statute does not authorize refunds to be made to customers unless earnings are more than 0.7 percent above the approved profit margin.

Will Cleveland, an attorney with the Southern Environmental Law Center who had argued against the expensing of the $88 million, praised the commission’s decision.

“The idea of using accounting gimmickry to engineer a rate increase in the middle of a global pandemic is exactly the wrong direction for Virginia right now, and I believe the commission properly applied the law and found that accounting maneuver was improper,” he said.

Appalachian could not immediately be reached for comment.

This is a developing story.

This story was originally published by the Virginia Mercury. For more stories from the Virginia Mercury, visit VirginiaMercury.com.