CHARLESTON, W.Va. (AP) -- Seeking to avoid a one-year rate hike of 30 to 40 percent, Appalachian Power is asking the West Virginia Legislature to allow it to issue bonds instead to recoup energy costs.
The electric utility estimates its costs from steadily rising coal prices tops $350 million, spokeswoman Jeri Matheney said Wednesday. Lower demand attributed to the recession and fragile recovery also is a factor, she said. But the crunch is hitting the utility on the heels of four years of rate increases triggered by a spike in coal prices last decade, Matheney said.
"Without something unusual, we would have to put that in a rate increase this year," she said of the $350 million. "We know that this is something that our customers cannot handle."
Legislation introduced Tuesday in the House and Senate would allow the Public Service Commission to consider and approve such bond sales. The commission regulates such utilities and already oversees the rate changes they request.
Matheney said the company hopes to sell low-interest bonds that would allow the utility to recover the energy costs immediately. The existing rate structure should provide enough revenues to repay those investors over the life of the bonds, she said.
"We have already bought the coal, we have already made the power and customers have already used that power," Matheney said. "We're facing this large amount of money that has already been spent."
A group that advocates for West Virginia consumers, the Coalition for Reliable Power, opposes the legislation. Spokeswoman Keryn Newman said the current process also gives consumers a break when fuel prices fall below what utilities budget for.
"The way it's set out now, it's a balancing act and they're trying to take away the balance," Newman said Wednesday. She also said of the proposal, "It's just a smoke-screen. It's hiding a bigger rate increase."
The utility estimates that its yearly per-ton coal costs jumped 70 percent between 2007 and this year. Matheney said the normal process has proved unable to cope with such circumstances.
"When it doesn't work well is when those expenses accumulate much faster and grow to become much larger than you anticipated," Matheney said. "We feel that's where we are right now."
Newman's group supports separate legislation that would require utilities to develop "least-cost" plans. These weigh such factors available energy sources, demand, market changes and the age of infrastructure to arrive at the lowest practical cost for power. Electric utilities have questioned that bill's approach.
Other states have provided such financing alternatives to utilities. Lawmakers in Texas, for instance, approved a similar proposal in 2009 as electric utilities struggled with costs from restoring power systems in the wake of Hurricane Ike. West Virginia's PSC also allowed Allegheny Energy that year to sell $105 million in bonds so it could install a scrubber to remove sulfur dioxide and mercury from emissions at a Monongalia County power station.
A subsidiary of AEP, Appalachian Power, has around 500,000 customers in southern West Virginia as well as in Ohio and Marshall counties. The legislative session ends March 10, and each chamber has until Feb. 29 to approve its respective bill.
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