The Register-Herald, Beckley, West Virginia

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November 19, 2012

Mother Nature costs W.Va. more than $370 million

Power, insurance industries hit hardest by June, October storms

CHARLESTON — Weather-related damage in West Virginia likely will cost more than $370 million this year, according to regulatory filings and government estimates.

The state was slammed first in late June by a wall of wind known as a derecho. That windstorm knocked out power across the state for several days.

In late October, the remnants of Superstorm Sandy dumped snow across the eastern side of the state and left hundreds of thousands again without power and stuck in the snow.

The costs of Sandy still are largely unknown, but Appalachian Power estimates repair costs could rise to $25 million. The state’s other major power company, FirstEnergy, has yet to estimate its costs from Sandy. The state Division of Highways expects to spend $6 million.

That’s about $31 million for Sandy based on only a few preliminary figures.

A fuller reckoning of the costs of the June 29 derecho is already known. The costs are widespread and remarkable, totaling roughly $340 million.

There are two major expenses.

Appalachian and FirstEnergy together claim they had to pony up $172 million for storm-related repairs.

FirstEnergy, which serves the northern half of the state, has said it suffered $110 million in damages. Appalachian Power said its costs were $62 million.

The two companies inevitably will ask customers to pick up some of those costs, as well as the untold but likely smaller costs from Sandy.

The state’s insurance companies are dealing with another large storm-related expense.

Property and casualty insurers are expected to face $130 million to $140 million in claims because of the summer storm, according to projections from the state Offices of the Insurance Commissioner.

The West Virginia Insurance Federation, the state insurance industry’s trade group, provided the figures. Representatives for the insurance commissioner’s office did not return calls and e-mails Wednesday.

But the commission looked at property and casualty insurance claims a month after the June 29 storm. By then, companies already had paid about 37,000 in storm-related claims with losses totaling more than $87 million — or about $2,400 per claim. Those costs were projected to rise to as much as $140 million.

Separately, the state-run Board of Risk and Insurance Management said it had received $3.7 million in derecho-related claims from state agencies, county school boards and charities.

Normally, BRIM pays about $70 million in claims a year, so the storm-related increase is significant.

As of early October, the board had paid about $260,000 in claims. That figure is modest mainly because the Federal Emergency Management Agency may cover some of the claims BRIM has received.

BRIM Executive Director Chuck Jones said the insurer would not pay a claim until it is assured the claim will not be covered by FEMA.

The state parks system filed the largest single claim, $667,000, with BRIM.

“The state park systems were the hardest hit because the June 29 storm occurred right before the July 4 weekend,” Jones said. “So they had damage to the buildings, the lodges — they lost income because of visitor cancellations, so it had the disruption of their revenue.”

The U.S. Farm Service Agency estimates West Virginia suffered $2 million in agricultural losses related to the derecho, almost all in farm buildings and equipment, said state Agriculture Department spokesman Buddy Davidson.

FEMA already has paid $2 million to West Virginians who suffered losses during the storm, though that figure continues to rise. The agency also has paid several million dollars to government agencies, but those costs may overlap with other figures.

Some other figures in this article may overlap slightly, although there are other costs like ruined food, lost work time or property damage that did not result in insurance claims and are not accounted for.

There are other, smaller costs from the summer storm: Frontier Communications expects nearly $6 million in damages and West Virginia American Water reported $750,000 in storm-related repairs.

The overall effect on the state’s tax collections may be minimal, said Deputy Revenue Secretary Mark Muchow.

“There was likely some loss of labor income for certain hourly workers during a few days after the June storm,” he said in an e-mail.

“However, the clean-up efforts also produced some additional labor income for other workers. The biggest loser is the electric utility company with the loss of customer revenue coupled with added cleanup and repair costs. Lower regional electric power consumption could have some marginal impact upon coal and natural gas energy suppliers.”

But year-to-date sales tax collections are running slightly ahead of estimates. Personal income tax collections are slightly behind estimates, although that’s “due to lower employment within the coal industry,” he said.

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