Storm damage cost could raise APCo rates

It’s too soon to calculate the costs of restoring electricity to customers of Appalachian Power Co. who were left in the dark by last month’s ferocious windstorm.
The bill might come next year, in the form of a rate increase.
An APCo spokeswoman declined to say last week whether the utility will pass the costs of power line repair along to its customers through higher monthly bills.
But interviews with utility experts and watchdogs — plus the fact that rates went up after the region’s last major storm — suggest that an increase is likely.
“I’d bet money on it,” said Mary Martin, a consumer watchdog from Henry County who closely follows APCo and utility rate issues.
While APCo spokeswoman Jeri Matheney said it’s impossible to say today whether higher bills will follow the storm’s devastation, she acknowledged that the utility has few options.
“That’s where we get our money, from customers, to run a business,” Matheney said.
Matheney declined to offer even a rough estimate of what it has cost so far to fix the largest power outage APCo has ever encountered. At the peak of the crisis, about 243,000 customers in Virginia were powerless.
Whatever the cost, it will be next year before customers might feel the impact.
Appalachian Power Co. will factor the costs of restoring electricity in its next biennial proposal, due in March 2013, to the State Corporation Commission, the state agency that has the final say on rate increases, Matheney said.
At that time, APCo will take the storm’s impact into account along with other routine factors, such as operational costs, in determining whether its base rate should change.
By then, the SCC should have a detailed accounting of the financial impact of the storm that swept across central and Southwest Virginia the night of June 29, downing trees and power lines with wind gusts of 80 mph. Subsequent storms on June 30 in the Twin Counties, followed by another brief storm later that week, caused even more damage and outages.
“The logistics are just huge.” Matheney said of an ongoing repair operation that involved 5,200 workers, most of them non-Appalachian employees drawn from 22 states.
That might be true, Martin said. But why can’t shareholders and executives of the investor-owned utility feel some of the pain?
“There comes a time, when you are a company with the billions that Appalachian is, when you have to let your shareholders bear some of the costs of doing business,” Martin said. “Everything does not have to fall on the consumer.”
In April, American Electric Power Co., the parent company of APCo, reported its first-quarter earnings rose by more than 10 percent.
The Columbus, Ohio-based company said that its net income rose to $389 million, or 80 cents per share in the January-to-March period, compared with $353 million, or 73 cents per share, a year earlier.
Investors who profit from those margins “need to pick up their end of the deal,” Martin said.
Although Matheney declined to offer even a rough estimate of APCo’s expenses so far, she pointed to a massive snowstorm in December 2009 as an example of what Mother Nature can do to the bottom line.
To recover costs of about $25 million for that storm, APCo sought a rate increase that was approved by the SCC. As a result, the average residential customer is being billed an additional 35 cents a month over the course of five years.
And that was for a storm that knocked out power to 46,000 of APCo’s Virginia customers — about one-fifth of the total affected by the recent storms.
Should this lead to higher bills down the road, it would be the latest in a series of increases borne by APCo customers. So far this year, the SCC has approved two sets of rate increases by APCo, for a total monthly increase of about 14 percent for the average residential customer. Those increases were for environmental compliance and fuel costs.
Still, an analysis by the state attorney general’s office in January — before the most recent increases took effect — found that APCo had the third-lowest rates in the state among the 33 public utilities, private cooperatives and municipalities that sell electricity in Virginia.
Because some of the smaller providers rely on power from APCo, their rates likely would rise proportionally.
It’s not uncommon for utilities to receive regulatory approval to raise their rates in the wake of a natural disaster, utility experts said.
“In general, the costs of storm restoration is covered by the customers,” said Clay Perry, a spokesman for the Electric Power Research Institute, an independent, nonprofit organization.
“Of course, you can’t predict storms or estimate how much they will cost,” he said.
But according to Martin, the costs of having to do without electricity for days have already been incurred by people forced to throw out spoiled food they can barely afford, and by small businesses that have lost revenue to the storm and the darkness that followed.
To add a rate increase on top of all that is just too much, Martin said.
“The compassion for the customers is zip,” she said. “And in this day and time, when you don’t have compassion for your fellow human beings, I don’t know what’s going to happen.”