A bipartisan group of four lawmakers said Tuesday that they will back legislation that focuses on Appalachian Power electric bills, with one delegate quipping that “Apco bills are just too darn high.”
That delegate, Sam Rasoul, D-Roanoke, was joined by Sen. David Suetterlein, R-Roanoke County; Del. Joe McNamara, R-Roanoke County; and Sen. Creigh Deeds, D-Charlottesville, at a news conference in Richmond to discuss HB1075 and SB961.
Their proposed legislation would add new factors for state regulators to consider when they next review Appalachian Power’s rates this year. It would direct state officials to study alternative ways of regulating the company’s profit levels. And it would instruct state officials to examine the utility’s costs associated with power generation, transmission and storm recovery.
Their proposal comes as the average Appalachian Power residential monthly bill has risen at three times the rate of inflation since 2007 and as both Democratic and Republican elected officials have named affordability as a top priority this year.
“Across Southwest and Western Virginia, we are hearing from families about the high cost of electricity and the challenges it’s creating,” Suetterlein said.
Appalachian Power, a subsidiary of Columbus, Ohio-based American Electric Power (NASDAQ:AEP), has about 540,000 customers in western Virginia.
In a statement to Cardinal News, the company disputed some of the assertions that lawmakers made Tuesday and said that it “will continue to pursue additional affordability measures including seasonal rates, energy efficiency investments, home weatherization programs, and more.”
Among the proposals in the multifaceted bill:
- The SCC could not raise Appalachian’s authorized rate of return — essentially, its ability to earn profit for investors — unless the utility can show that such an increase is justified and won’t impact customer affordability.
- The SCC would include factors such as inflation, customer disconnections and the affordability of Appalachian’s existing rates when next determining a fair rate of return.
- The commission would review whether the utility using its own power sources, such as its West Virginia coal plants, is more cost-effective than buying electricity from a regional market.
- The SCC would review Appalachian’s expenses for electricity transmission and storm recovery to ensure “the lowest reasonable costs for customers.”
- The Attorney General’s Office would work with an independent expert to develop recommendations for improving how regulators determine Appalachian’s rate of return. The office typically participates in utility rate review cases as an advocate for consumers.
Regulated utilities earn money through what’s known as the cost-of-service model. Under that model, regulators allow utilities to earn reasonable rates of return on the capital investments in their systems, such as building new substations and transmission lines.
Lawmakers at Tuesday’s news conference said that this means that, unlike other businesses, Appalachian Power is not motivated to keep costs down.
“They are incentivized to own a lot of expensive things, and then those transmission costs are then passed on to the end consumer,” Rasoul said.
Appalachian Power’s authorized rate of return is 9.75%, but the company said in its statement that it “has not even approached” that rate in 10 years.
Its rates of return in 2023 and 2024 were just over 3%, according to data provided by the utility.
“The State Corporation Commission closely scrutinizes all of the company’s costs and rates to ensure they are reasonable and prudent,” Appalachian Power said.
Rasoul and Suetterlein said that the SCC should have the authority to require Appalachian to buy electricity from a regional market if it’s cheaper than the utility using its own power generation.
“They’re currently incentivized to go with their own generation because that’s what’s most profitable for them,” Suetterlein said.
Appalachian Power said that its own power generation sources give customers the best price for electricity.
“All power purchases are reviewed by the SCC to ensure they are reasonable and prudent,” the company said.
Regarding its storm recovery costs, Appalachian noted that after Hurricane Helene, the utility restored power to more than 280,000 customers, requiring more than 1 million work-hours. Of those customers, nearly 176,000 were in Virginia.
Rising costs, by the numbers
In 2007, the Virginia General Assembly passed a sweeping electric utility regulation law that established the current regulated business models for Dominion Energy and Appalachian Power.
[Disclosure: Dominion is one of our donors, but donors have no say in news decisions; see our policy.]
Between 2007 and 2024, the average Appalachian Power residential bill rose from $66 to about $174, according to the SCC. That’s an increase of 164%.
For context, inflation rose about 50% between 2007 and 2024, according to the U.S. Bureau of Labor Statistics.
More recently, the average bill went down about $10 as of Nov. 1 as Appalachian Power decreased the fuel costs that it passes directly to customers. State regulators approved an increase of about $4, set to take effect in March, related to renewable energy costs.
Deeds said that his district includes customers of Dominion Energy, Appalachian Power and electric cooperatives.
“Utilities have to share a lot in common but the one thing that’s not in common, is the people I hear from the most about bills are in Appalachian territory. We’ve got to figure that part out,” Deeds said.
McNamara echoed Deeds’ statement.
“Affordability is the big issue and when you drill down into affordability, what I hear about most often is electric rates,” he said.
Appalachian Power bills were in spotlight last year
This is not the first General Assembly session that lawmakers have cast an eye toward Appalachian Power customers’ electric bills.
Last year, legislators passed a law that allows the company to use 20-year bonds to recover costs related to storm damage and two coal power plants instead of bundling those costs into its base rates for electricity.
The company has said that the plan would save tens of millions of dollars and would lower customers’ bills.
Separately, a proposal last year from Sens. Travis Hackworth, R-Tazewell County, and Todd Pillion, R-Washington County, would have expanded the circumstances under which Appalachian customers could potentially buy power from another provider. It failed to advance out of a Senate committee.