Appalachian Power wants to reduce how much it charges customers for the fuel used to generate electricity, which would decrease the average residential monthly bill by about $10.
The lower charge would take effect Nov. 1 if approved by the State Corporation Commission, which regulates utilities in Virginia.
Most of the proposed reduction is due to Appalachian Power having paid off much of the fuel costs that it incurred after a spike in energy prices in 2021 and 2022, said company spokesperson George Porter.
As a regulated utility, Appalachian Power applies to the state each year for permission to adjust the customer charge, called the fuel factor, to cover the costs of fuel and purchased power.
“Fuel and purchased power are ‘pass-through’ expenses, and Appalachian Power does not earn a profit on its fuel costs,” Porter said in an email. “However, our commitment to delivering reliable and cost-effective energy solutions remains our top priority, and we are excited to be able to lower the fuel rate ahead of winter heating months.”
According to testimony filed with state regulators, Appalachian’s total fuel costs yet to be paid off are forecast to be $62.1 million at the end of this month.
Under the proposed fuel factor rate of about 3.1 cents per kilowatt-hour, down from the current rate of 4.1 cents, that total would fall to just under $70,000 by the end of next October.
By comparison, it stood at more than $270 million at the end of October 2023.
Appalachian Power’s proposal is also influenced by stable price forecasts for coal and natural gas through 2026 and renewable energy resources lessening the company’s need to buy fuel, Porter said.
Between the power it generates and purchases, Appalachian Power’s portfolio is about 63% coal, 19% natural gas and 18% solar, wind and hydroelectric.
The proposed $10 drop in the average monthly residential bill would bring that total bill from about $174 to about $164, or about a 6% decrease.
The average monthly bill has risen by about $50 since July 2022.
A significant portion of that increase came in late 2022, when the utility filed to raise its fuel factor by about $20 per month on average because of rising energy prices attributed to economic recovery after the COVID-19 pandemic, inflation and the war in Ukraine.
In 2023, Appalachian sought a fuel factor decrease of about $1.80 per month on average. Last year, it asked to keep the fuel charge steady.
Appalachian’s request joins others that the utility has pending before the SCC.
The utility has filed to spend $135 million on grid upgrades, to recover costs related to renewable energy and environmental compliance, to evaluate a Campbell County site for a potential small modular nuclear reactor and to issue bonds to cover costs related to storm damages and two coal-fired power plants.
A public hearing in the bonds case begins Wednesday. The utility has said it anticipates that proposal will also lower customer bills by recovering some expenses through low-interest bonds instead of through traditional methods of recovering expenses, such as raising base electric rates.