This is due to the Consumer Debt Bond Bill passed by the legislature and signed by Gov. Tomblin that will simply mortgage this year's rate increase, caused by unrecovered coal costs, by having consumers pay for it over the next ten years, plus costs and interest.
Although AEP did not include the filing for "securitization" in their ENEC case (it will be a separate filing), they sure had plenty to say about it.
"As was the case several years ago, the Companies and their ratepayers are faced with a very large ENEC rate increase, given the existing ENEC under-recovery balance. The Companies judge that it would be burdensome for their customers to shoulder the entirety of that increase over the course of a single year under the traditional ENEC mechanism. They are therefore proposing two alternative approaches. The first, and the most advantageous for all concerned in the Companies’ estimation, is the use of a securitization mechanism whereby the ENEC under-recoveries involved in this case would be financed through the issuance of comparatively low-interest bonds.
Legislation authorizing the Commission to consider securitization was enacted by the West Virginia Legislature during its 2012 regular session and signed by the Governor on March 15, 2012. The Companies will be filing an application with the Commission pursuant to the new law and the Commission will decide whether to issue a financing order permitting the issuance of bonds for the recovery of the deferred ENEC balance. Under this approach, if the bonds are authorized and issued, the Companies do not think that there will need to be any ENEC rate increase in this case."
So, how much is AEP looking to collect and leave consumers paying the mortgage on for the next ten years? $391.8M.
This includes previous under recovered coal costs of $329.4M, $25.8M of carrying charges on the under recovered balance, $22,695,371 of old debt for deferred Century Aluminum electricity costs, $4.2M of deferred "industrial customer credit," "bonus coal payments" and other deferrals -- in other words, they're cleaning house and throwing all old debt and deferrals into the bond that consumers end up financing. There is also a $23.4M under recovery for 2011 proposed to be tossed into the bond.
That $329.4M of old coal debt was supposed to be paid off over the past 3 years through previous rate increases. What excuse does AEP have for the outstanding balance still remaining?
"The Companies have identified the following as key contributors to why the ENEC under-recovery balance did not decline as projected following last year’s ENEC rate increase:
- Continued increase in coal prices;
- Lower off-system sales margins; and
- Lower retail sales due to the economic downturn"
Here's what AEP's "expert" has to say about coal prices:
"The trend from recent years of steadily rising coal prices matched with lower coal market volatility continued through the first half of 2011. In spite of the recent economic downturn, the market did not experience significantly lower coal prices for the majority of 2011 because demand for coal in other countries continued to support the price of coal from the Central Appalachian Basin, the main type of coal consumed by APCo. However, starting in the fourth quarter of 2011, Central Appalachian coal prices have dropped significantly in response to weak domestic demand.
In 2011 APCo saw a slight increase in generation need over 2010. This increase in generation resulted in APCo consuming more coal in 2011 than in 2010, but continued low power demand as a result of the economic downturn still prevented coal prices from rising significantly.
Coal prices are believed to be continuing on a general upward trend as easily- mineable eastern bituminous coal sources are becoming rarer, but there is also some uncertainty regarding future EPA rules and how the implementation of those rules may affect future coal consumption. This uncertainty is reflected in the District of Columbia’s Circuit Court of Appeals decision to stay implementation of the EPA’s Cross-State Air Pollution Rule (“CSAPR’) on December 30, 2011, less than two days before the rule was to take effect. The stay of the CSAPR has not yet had a significant impact on the market price for coal, but future developments regarding CSAPR and the recently-finalized Mercury and Air Toxics Standard (“MATS") do have the potential to cause a downward effect on prices due to lack of demand if utilities have to shutter non-compliant coal-fired power plants. These rules could also lead to increases in price for lower sulfur coals, as utilities look to contract for cleaner coals. It is uncertain what the overall impact of these influences may be on the coal market as a whole."
If there's any humor to be found in this sad situation, it's this article in today's Charleston Daily Mail. Byron Harris, WV's "Consumer Advocate" that played the perfect patsy for AEP by supporting the Consumer Debt Bond Bill at the legislature, gets a swift kick in the teeth from AEP's spokeswoman for his trouble.
"Harris also wonders if it's possible to cut rates this year using bonds.
Matheney cautioned against misleading people with that kind of talk."
Misleading people? Ha ha ha! Isn't that the pot calling the kettle black after the way AEP's lobbyists snowed the legislature and the PSC with their Consumer Debt Bond Bill, claiming that it would result in NO RATE INCREASES? Seriously, you slay me... thanks for the laugh!