Appalachian Power seeks recovery of environmental and reliability costs in Virginia

RICHMOND, Va., July 5, 2005 (PRNewswire-FirstCall) — Appalachian Power made a filing with the Virginia State Corporation Commission seeking approval for the recovery of $62.1 million in new environmental and reliability costs.

The company requested that an Environmental and Reliability (E&R) cost recovery factor be applied to electric service bills on an interim basis beginning Aug. 1. If approved, it will be applied as a 9.18 percent surcharge to customer bills.

Appalachian estimates implementation of the E&R factor will result in an increase on a 1,000 kilowatt-hour monthly residential bill from the current amount of $57.87 to $63.18. The estimate does not include taxes.

The filing is the first under a new Virginia statute that extended capped rates and the implementation of market pricing until 2011 under the Electric Utility Restructuring Act. It also specifically provided for the recovery of incremental costs of complying with governmental environmental requirements and the incremental costs of transmission and distribution system reliability. The statute became effective July 1, 2004.

The company’s base rates in Virginia have been capped by the Act since 1999 but have been subject to change on a limited basis. For example, the existing fuel factor component of customer bills allows the company to recover and “true-up” fluctuating fuel costs for power generation. In a similar manner, the company’s proposal in this request will allow annual adjustments for environmental and reliability costs in Virginia.

Appalachian requested in the filing that this first E&R factor go into effect Aug. 1, 2005 because the company has incurred substantial incremental costs since the July 1, 2004 effective date of the statute. The company says in its application that costs already incurred and those that continue to be incurred are to be recovered in a timely manner. The company encouraged the Commission to place the E&R factor into effect for collection while the SCC reviews the entire application. Dollars collected during that period could be subject to refund based on outcome of the SCC final order.

American Electric Power, parent company of Appalachian Power, will invest approximately $3.7 billion through 2010 to install additional environmental controls on its efficient coal-fired generation fleet. The new construction and retrofitting will meet the first phase of the Clean Air Interstate Rule and the Mercury Rule finalized earlier this year by the U.S. Environmental Protection Agency.

Most of the $62.1 million request filed consists of Appalachian’s Virginia share of those environmental compliance costs: $38.7 million, or 62 percent of the total. The application also includes cost recovery for work on the new Wyoming-Jacksons Ferry 765 KV transmission line and other incremental transmission and distribution system reliability work.

Appalachian Power continues to rank among the lowest-cost providers of electricity in Virginia and in U.S. comparisons. Appalachian Power customers in Virginia, using 1,000 kilowatt-hours of electricity in a month, pay less today than in January 1985.

About Appalachian Power

Appalachian Power provides electricity to 1 million customers in Virginia, West Virginia and Tennessee. It serves almost 500,000 customers in southwestern Virginia. It is a unit of American Electric Power, the nation’s largest electricity generator. AEP owns more than 36,000 megawatts of generating capacity and is one of the nation’s largest electric utilities, with more than 5 million customers in 11 states.

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