Jan 27 - McClatchy-Tribune Regional News - Duncan Adams and Michael Sluss The Roanoke Times, Va.


Confusion, shock, a resigned shrugging of shoulders, anger and near despair.

These reactions continue to surface as customers of Appalachian Power Co. receive sometimes staggering electric bills for service in December and early January -- a period that included a prolonged cold snap, related jumps in customers' power consumption and, most controversially, additional rate increases.

For Appalachian, just as the General Assembly powers up, the timing is unfortunate.

"It complicates things," acknowledged Todd Burns, a spokesman for Appalachian, a subsidiary of Columbus, Ohio-based American Electric Power. "It's a difficult time to be able to communicate with our different audiences."

 The outrage over the rate increases has resonated with legislators who represent Appalachian's service area. At least nine bills have been filed that would have the effect of limiting the company's ability to increase rates. Some lawmakers are contemplating more severe measures if Appalachian won't provide relief for its Virginia customers.

"If something isn't done, there's going to be near armed revolt down in my part of the world," said Del. Ward Armstrong, D-Henry County, during Monday's meeting of the Commission on Electric Utility Regulation. "People are upset and they're not going to take inaction very lightly."

Del. Terry Kilgore, R-Scott County, said lawmakers will take action to help Appalachian customers if the company fails to provide some relief on its own. Kilgore and other Southwest Virginia legislators said they have been besieged with calls from angry and distressed constituents.

"We've got to do something," said Kilgore, the chairman of the House Commerce and Labor Committee, which handles legislation dealing with utility regulation.

Legislators from Appalachian's service area are scheduled to meet privately today with Dana Waldo, the company's president and chief operating officer, to discuss their concerns. Regional legislators and Appalachian officials also met last week.

"AEP is taking a real hammering at the General Assembly," said Irene Leech, a professor of consumer studies at Virginia Tech, president of the Virginia Citizens Consumer Council and a longtime utility watchdog.

Armstrong, the House minority leader, has filed legislation to return Appalachian to a cost-of-service regulatory model that existed before Virginia began deregulating utilities in 1999. Bills sponsored by Armstrong and Del. Bill Carrico, R-Grayson County, would prohibit utilities from billing customers for rate increases before the Virginia State Corporation Commission approves them. Appalachian imposed an interim base rate increase in December of about 12.8 percent for an average residential customer, but the SCC has yet to approve the increase.

Kilgore said the legislation eliminating interim rate increases "maybe takes the right approach."

Burns noted that interim rate increases will essentially "go away" after the current base rate case because the SCC now faces a deadline for issuing decisions.

Carrico also has a bill that would limit base rate increases to 5 percent in areas with unemployment rates of 5 percent or greater.

And House Majority Leader Morgan Griffith, R-Salem, is sponsoring legislation that would exempt a utility such as Appalachian from the 2007 restructuring act until it has an approved plan to build a generating facility in the state. Griffith questioned whether a utility should get a guaranteed rate of return when jobs associated with its power generation are out of state.

Burns said any regulatory change that limits Appalachian's ability to recover expenses, "many of which are mandated and relate to compliance with federal and state environmental regulations, is going to be a problem for us."

Both Appalachian and the SCC have attributed the dramatic jumps in electric bills for usage in December and early January to an unusually long period of cold weather -- a point Burns reiterated Tuesday.

"You've got a situation where customers have used more electricity than they have in the past and it's important for them to understand why their bills are higher," he said.

Rate increases played a role, he said, but if customers conclude rate increases are the primary culprit, they might not embrace conservation measures that could reduce their consumption and bills, Burns said.

Still, rate increases alone, when comparing December 2007 with December 2009, have boosted by more than 60 percent the monthly bill of an average residential customer who consumes 1,000 kilowatt hours a month.

Armstrong represents a district that includes a portion of Martinsville -- where the 20 percent jobless rate in November was again the state's highest.

He said the widespread adverse impact of rising electricity bills on his constituents trumps the closing 10 years ago of Tultex Corp., which once employed thousands in Martinsville and Henry County.

And if Appalachian and parent company AEP won't budge, said Armstrong, maybe another utility should serve the residents of Southside and Southwest Virginia.

"It's not saber rattling if you are willing to pull the saber," he said.

Armstrong said he will attend today's meeting with Appalachian officials. The focus is likely to include the impact of re-regulation legislation passed in 2007. Many legislators and consumer advocates such as Leech believe the 2007 legislation is utility friendly.

Although Armstrong voted in 2007 for re-regulation, he and Sen. Roscoe Reynolds, D-Henry County, who voted against the re-regulation, have been vocal opponents to continued rate increases for Appalachian.

In turn, Appalachian officials say the rate increases are necessary to recover the regulated utility's costs of doing business plus a fair rate of return for investors during a time when environmental regulation of the coal-dependent power company is increasing expenses.

Leech is one who believes the 2007 re-regulation legislation gave electric utilities more muscle when negotiating rate increases than the SCC, which oversees regulated utilities.

"Much more than protecting consumers [the SCC] is protecting the interests of investor-owned utilities," Leech said.

Leech said she does not blame the SCC, which must comply with state law.

According to Leech, Armstrong and others, that legislation, among other impacts, has limited the SCC's discretion when calculating a fair rate of return on common equity for Appalachian and has added a tangle of new rate categories and cases for SCC review.

In turn, Burns notes that the only rate case reflecting provisions of the 2007 legislation is the current base rate application. As such, he said, there is no history of SCC action to judge.

duncan.adams@roanoke.com 981-3324

mike.sluss@roanoke.com 981-3373

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