Jan. 7- According to an article in the Friday's Martinsville Bulletin, Appalachian electric power rates will raise again. Todd Burns, Corporate Communications Manager was interviewed recently.

Source: Martinsville Bulletin Friday, January 7, 2011 By PAUL COLLINS - Bulletin Staff Writer The new president of Appalachian Power Co., Charles Patton, said Thursday he believes electric rates will go up, but he doesn’t know how much. Appalachian will determine a rate of the increase before it requests a base rate hike by March 30, according to Todd Burns, corporate communications manager for Appalachian. Patton said he will alert customers to the request before then. Patton made his comments to about 30 community leaders at an informal luncheon at the Dutch Inn in Collinsville. He said he is holding such sessions because Appalachian needs to do a better job of communicating to let the public know “what’s coming down the pike and what the drivers of cost are.� Appalachian officials have been meeting with large customers, community leaders and legislators, he said. Appalachian’s prices are good compared with other utilities in the state, region and nation, Patton said, but “we have a significant number of people� who struggle to pay their electric bills. He said it impacts him when he hears people say they are having to choose between paying their electric bills and buying food or medicine or paying other essential bills. Appalachian’s costs may be increasing, but “their Social Security isn’t increasing,� he said. One of the best things customers can do is enroll in the average monthly payment plan, which he said is the equivalent of a “no-interest loan,� Patton said. The plan uses a 12-month rolling average to avoid spikes in electric bills, Burns has said. Only about 4 percent of Appalachian’s customers are enrolled in the average monthly payment plan, Patton said. Appalachian is looking at its billing structure to see if there’s a way to accomplish the same thing without customers having to sign up for the plan, he said. Explaining why electric rates will rise, Patton said Appalachian will have to either upgrade some smaller coal-fired power plants to meet environmental regulations or, more likely, build new natural gas plants. The availability and price of natural gas, unknowns about coal and the high operating and maintenance costs for old coal-fired power plants indicate natural gas may be a more attractive alternative, Patton said. Another reason rates may rise is that Appalachian’s “off-system sales� have decreased sharply in recent years. Off-system sales refer to power Appalachian sells to such entities as other electric utilities, co-operatives or local governments. It uses those revenues to essentially give customers a subsidy, according to Burns and Patton. Burns said off-system sales have decreased, in part, because the economy has slowed. Another reason is natural gas. “Our coal-fired power plants were economic and a good buy when (natural) gas prices were higher,� he said, but the price of natural gas has dropped dramatically as it has become more available. According to a handout distributed Thursday, Appalachian’s off-system sales margins dropped from $247.3 million in 2008 to $101.3 million in 2009, then rose slightly to $107.6 million in 2010. That is part of the reason customers’ electric bills increased the last two years, Burns said. Appalachian’s current residential electric rate is 9.62 cents per kilowatt-hour, Burns said. That is a 79.8 percent increase since 2004. According to Patton and Burns, Appalachian has taken measures over the years to reduce operating costs, such as closing some local offices, reducing some services and using technology. Since May, American Electric Power (AEP), parent company of Appalachian, has reduced its work force by 14 percent, including in Virginia, Burns said. AEP has several operating companies serving 11 states, Burns said. The work force reduction was part of a reorganization that also will give operating companies more decision-making power, according to Patton and Burns. Appalachian hopes to save money through its proposal to eliminate a pool in which it buys power to meet customers’ peak demand from other AEP utilities. Under the proposal, which would require approval by state and federal agencies, Appalachian would be able to buy power from the most affordable sources, Burns said. He said the pool worked well for a long time, but in recent years, prices have increased as AEP utilities have invested heavily to meet environmental regulations. Another factor is that Appalachian has had to buy more power in recent years to meet customers’ peak demand because customers are using more power. He said the peak has risen from 6,000 megawatt hours to more than 8,000 mwh. “Financially, we continue to struggle as a company,� Patton pointed out. Financially, Appalachian is the worst performing utility in AEP and one of the worst in its peer group of utilities in surrounding states, Patton said. Burns said in recent years the State Corporation Commission (SCC), which regulates electric utilities, has generally authorized a rate of return of 10 to 10.5 percent for Appalachian, but “the fact is we have not been able to earn our authorized reasonable rate of return.� Appalachian generally has been earning in the low single digits to 5 percent profit, he said. In response to questions about the possibility of Appalachian developing nuclear or renewable energy facilities, Patton said both technologies are expensive. Henry County Administrator Benny Summerlin asked how can a locality be considered by Appalachian as a site for a natural gas facility. Patton said he’s “90 percent sure� Appalachian’s next facility will be built in Virginia. Summerlin asked, “How do we interest you?� Patton said a number of factors are considered. All else being equal, he said, one of the most important factors is whether there is a reliable source of natural gas, he said. Another is whether there are high-voltage transmission lines near the site, Burns said. In response to a question about what kind of economic development tariffs could be offered to make Virginia localities near the North Carolina line more competitive when “Duke Power offers two for one,� Patton mentioned an economic rider that the SCC approved last summer. Burns said that rider provides a discounted rate for up to three years for a new customer with a certain level of demand for electricity and employing a certain number of new employees. “That has been a factor in at least one company locating in Appalachian’s territory in recent months,� Burns said. Reference: www.martinsvillebulletin.com