Last week's news headlines trumpeted, "PSC issues order to keep AEP electric rates from rising," and the PSC issued a press release titled, "PSC Maintains Current Level for Electric Rates." Nothing could be further from the truth! However, APCo and the PSC think you ratepayers are dumb and easily fooled by their semantics games. A review of the PSC's order in the case reveals that the claims of "no rate increases" are nothing but smoke and mirrors, and here's why:
1. The "current rates" that are being "maintained" are the product of a series of rate increases over the past four years that were supposed to pay down a huge unrecovered fuel cost balance from 2008 and 2009. These higher rates were supposed to be temporary increases granted to pay off a debt to the company. However, APCo has continued to overspend, and at the end of the temporary rate increase period no substantial amount of old debt has been retired, or paid, by these increased rates! Therefore, the 2008 and 2009 balance owed to APCo by ratepayers remains, and now has $25M in carrying costs (interest) tacked on to it! Here's how the PSC describes it in their order:
"Over the past several years, the APCo/WPCo customer rates have increased significantly primarily because of the increased costs to acquire fuel (coal) for power
generation and expenditures to meet more stringent environmental regulations. The 2012 ENEC filing was intended to be the last year of a four-year phase-in rate plan approved in Appalachian Power Co. & Wheeling Power Co., Case No. 09-0177-E-GI (Order dated September 30,2009) (2009 ENEC).
In the 2009 ENEC proceeding, the Companies filed for the largest rate increase ever requested by a utility in the State. That filing related to the energy cost increases
experienced in 2008 and 2009. In the 2009 ENEC, the Commission authorized a four-year phase-in plan of a $366.7 million rate increase, with the first ENEC increase of approximately $106.6 million, or a 10.5 percent increase in overall rates, and an $18.1 million Construction and Post-construction surcharge increase."
2. APCo didn't ask for, and the Commission didn't approve, an additional ENEC rate increase because the company, the PSC, and the legislature are trying to avoid your scrutiny and anger over another huge rate increase. These entities passed legislation this year that allows them to simply hide the huge rate increase necessary to pull their feet out of the fire. They are hiding the gigantic rate increase by mortgaging it in your name over a 10 year period and tossing words and ideas around that they are hoping will confuse you. "Securitization," or the "selling of bonds," is nothing more than the company taking out a mortgage and sticking you with the payments and interest. APCo is tired of carrying this huge unrecovered balance. If they "sell bonds" it means they take the cash from the mortgage loan, and the obligation to repay belongs to ratepayers. This is a rate increase you will be paying over the next ten years, with interest. APCo has tossed all its debt, both historical and current, into the amount of the rate mortgage that they will be applying for soon. There is no rate increase simply because the actual rate increase will be a separate "securitization" case that is expected to be filed in the next couple of weeks. The PSC took no action to "keep rates from rising," they simply deferred the huge rate increase to another case. Parent company AEP stated in a recent presentation to their investors that the amount of the West Virginia rate increase will be $400M.
3. Let's talk about utility "deferrals." When the utility spends money that they are unable to recover through current rates, they "defer" it by creating a regulatory asset in their accounting system. This debt belongs to the ratepayers, and at some point, the utility will ask the PSC for permission to recover it from you through a future rate increase. APCo plans to clean up all outstanding deferrals on its books through "securitization" and transfer all that debt to ratepayers. APCo also plans to put you right back into debt by "deferring" $56M of recent storm restoration costs. You will pay for this "deferral" later. APCo "deferred" its gigantic fuel cost increase from 2008 & 2009, and the cost of certain deals for lower rates it made with certain industrial customers in prior rate cases (such as Century Aluminum). When APCo negotiates a lower rate for certain big electric users, they are not absorbing the discount. They simply book the difference between their cost and the lower rate that these customers pay as a "deferral." Now APCo wants you to pay for the discount other customers received in their bills in prior years.
"Deferrals" and "securitization" and the "selling of bonds" are not actions that cost APCo money. They are debts that are incurred in your name by the utility, and they will all come due. It's time for APCo customers to pay the piper, while the PSC and your state legislators hide behind big words and accounting mumbo-jumbo and try to trick you into believing that there will be no rate increases.