The Register-Herald, Beckley, West Virginia

Money

September 16, 2012

Appalachian Power officials predict rates won’t increase any time soon

BLUEFIELD —  

During a meeting last week with the Bluefield Daily Telegraph editorial board, Appalachian Power Co. (APCO) president and CEO Charles Patton said that he wasn’t there to talk about rate increases as usually is the case.

In fact, he said he didn’t think that electric utility customers of Virginia and West Virginia will face anything like they have in recent years in the immediate future.

Patton and Jeri Matheney, APCO West Virginia spokesperson, made a Power Point presentation to the board. They said the cost of electricity has gone up considerably in the two Virginias over time. During the past five years, Virginia APCO customers have had to live with almost a 70 percent increase in power costs while West Virginia customers saw their electric bills increase 50 percent, with the other 20 percent secularized.

“We can’t do that any more,” Patton said. “When you look at what we have already done and the capacity of the customers in our footprint to pay,” he predicted that the rates won’t increase like that again. “We have to be cognizant of what our customers can pay,” he said.

It doesn’t take a rocket scientist to explain the math behind the rate hikes of the past. The Environmental Protection Agency took an aggressive position in enforcing clean air and clean water regulations, and the regulations had a major impact on utilities like APCO and American Electric Power that are coal-based utilities.

“At APCO, we’re an overwhelmingly coal-based utility,” Patton said. “American Electric Power is the biggest coal-burning utility in the western hemisphere.”

The EPA’s requirements involved the installation of expensive “scrubbers” on some power plants, and the low cost of natural gas  has made it impractical to install billion-dollar scrubbers on coal plants that still can’t comply with clean air standards.

Add those costs to dramatic cost increases for coal. Patton said that in 2001, APCO bought coal for $35 per ton. He said in 2008, that cost had jumped to $100-plus per ton of thermal coal. He said that the present cost for thermal coal is $63-$64, but APCO needs to add a $2.2 billion scrubber.

Patton explained that APCO has coal-fired plants that are fitted with scrubbers, but with natural gas at a more affordable price and the fact that the company can build a 1,000 megawatt gas-fired plant for $1 billion or a 1,000 megawatt coal-fired plant for $3 billion, that natural gas is the more affordable choice to keep customer costs “stable,” he said.

Patton and Matheney explained APCO’s immediate plans to continue keeping costs down for customers, but pointed out, “This is just a plan, and plans are subject to change,” Matheney said.

In addition to maintaining “stable” rates, Patton said that APCO will be doing more tree trimming in the future to resolve some storm-related problems. And in terms of the future: “We don’t see anything significant in terms of a rate increase,” Patton said.

— Bill Archer is a reporter for the Bluefield Daily Telegraph.

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