ROANOKE, Va. – A rise in the cost of coal, natural gas and purchased power over the past year will likely increase the rate Virginia customers pay for electricity starting November 1. Appalachian Power, a utility subsidiary of American Electric Power (Nasdaq: AEP), outlined the effect of rising energy market prices and the steps it is taking to reduce customer costs in its annual fuel factor update filed this week with the Virginia State Corporation Commission (SCC).
The SCC reviews the company’s fuel factor each year to determine whether it should be increased or lowered. Fuel costs are the portion of a customer’s bill used to recover the cost of purchasing natural gas and coal for its power plants, as well as the cost of purchased power. Appalachian Power does not earn revenue from fuel.
Energy costs began to spike in 2021. The rapid rise was due to several factors including the resurgence of the economy following the COVID-19 pandemic, inflation, and the ongoing war in Ukraine.
Instead of recovering the increased costs over one year, the company has asked the SCC for approval to spread the amount over a two-year period, decreasing the impact on customers. The new rate would take effect in November. For a typical residential customer using 1,000 kilowatt hours in a month, this will result in an approximate $20 monthly increase in their bill.
“We recognize these are challenging financial times for many people and families,” said Chris Beam, Appalachian Power president and chief operating officer. “We strive each day to keep fuel costs as low as possible, continuously monitoring energy markets for opportunities to purchase fuel and energy at prices that are advantageous to customers.”
Incorporating more renewable sources of power into the company’s energy mix is another step in reducing customer fuel costs. As Appalachian Power adds more renewables, there is less need for coal and natural gas to generate power. At present, approximately six percent of power used by the company’s customers is generated by renewable sources to include solar and wind. The company will continue to add to its renewables mix to comply with the Virginia Clean Economy Act, which requires Appalachian Power generate electricity with 100 percent carbon free sources by 2050.
Customers experiencing difficulty paying their monthly bill are encouraged to contact the company for assistance. Appalachian Power offers energy efficiency programs and payment options including the Average Monthly Payment Plan (AMP), which helps customers avoid seasonal spikes in their monthly bills by spreading costs throughout the year.
Appalachian Power has 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power). It is part of American Electric Power, which is focused on building a smarter energy infrastructure and delivering new technologies and custom energy solutions. AEP’s approximately 16,700 employees operate and maintain the nation’s largest electricity transmission system and more than 224,000 miles of distribution lines to efficiently deliver safe, reliable power to nearly 5.5 million customers in 11 states. AEP is also one of the nation’s largest electricity producers with approximately 31,000 megawatts of diverse generating capacity, including 7,100 megawatts of renewable energy.
This report made by American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: changes in economic conditions, electric market demand and demographic patterns in AEP service territories; inflationary or deflationary interest rate trends; volatility in the financial markets, particularly developments affecting the availability or cost of capital to finance new capital projects and refinance existing debt; the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material; decreased demand for electricity; weather conditions, including storms and drought conditions, and AEP’s ability to recover significant storm restoration costs; the cost of fuel and its transportation, the creditworthiness and performance of fuel suppliers and transporters and the cost of storing and disposing of used fuel, including coal ash and spent nuclear fuel; the availability of fuel and necessary generating capacity and the performance of AEP’s generating plants; AEP’s ability to recover fuel and other energy costs through regulated or competitive electric rates; AEP’s ability to build or acquire renewable generation, transmission lines and facilities (including the ability to obtain any necessary regulatory approvals and permits) when needed at acceptable prices and terms and to recover those costs; new legislation, litigation and government regulation, including oversight of nuclear generation, energy commodity trading and new or heightened requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances that could impact the continued operation, cost recovery, and/or profitability of AEP’s generation plants and related assets; evolving public perception of the risks associated with fuels used before, during and after the generation of electricity, including coal ash and nuclear fuel; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions, including rate or other recovery of new investments in generation, distribution and transmission service and environmental compliance; resolution of litigation; AEP’s ability to constrain operation and maintenance costs; prices and demand for power generated and sold at wholesale; changes in technology, particularly with respect to energy storage and new, developing, alternative or distributed sources of generation; AEP’s ability to recover through rates any remaining unrecovered investment in generation units that may be retired before the end of their previously projected useful lives; volatility and changes in markets for coal and other energy-related commodities, particularly changes in the price of natural gas; changes in utility regulation and the allocation of costs within regional transmission organizations, including ERCOT, PJM and SPP; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of AEP debt; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, OPEB, captive insurance entity and nuclear decommissioning trust and the impact of such volatility on future funding requirements; accounting standards periodically issued by accounting standard-setting bodies; other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes, naturally occurring and human-caused fires, cyber security threats and other catastrophic events; and the ability to attract and retain the requisite work force and key personnel.