Fuel costs have sharply driven up West Virginia ratepayer bills in recent years.
Some bills will go up further after another state Public Service Commission-approved cost recovery increase for Appalachian Power and Wheeling Power.
The PSC last week approved a $20.4 million increase in the fuel cost surcharge for the American Electric Power subsidiaries.
Although West Virginia residential customers using 1,000 kilowatt-hours per month will see a rate decrease of $0.39, or 0.23%, commercial and industrial customers whose bills are more heavily influenced by energy use will see an average increase between 1.4% and 2.66%, Appalachian Power spokeswoman Karen Wissing said. The rates took effect last week.
The fuel cost recovery approval stems from the utilities reporting incurring $25 million more in those costs than previously estimated for a review period spanning Sept. 1, 2023, through Aug. 31, 2024, with a $4.6 million decrease projected for Sept. 1, 2024, through Aug. 31, 2025. The West Virginia Consumer Advocate Division, an independent arm of the PSC charged with representing ratepayer interests, had recommended no fuel cost increase based on advised changes to the companies’ fuel procurement processes.
But the PSC ruled that potential fuel procurement improvements weren’t adequately known or measurable to justify adjustments to the companies’ projected costs.
The PSC also dismissed recommendations from renewable energy and energy efficiency advocates to protect ratepayers from coal procurement mismanagement, even after a PSC finding that the utilities have failed to manage their coal-fired power plant operations prudently.
Meanwhile, the Legislature is pushing measures to support the state’s coal-fired energy status quo linked to its escalating power bills as a potential double-digit rate increase looms.
Testimony: Coal boosts cost nearly $87 million in one year
In its March 11 order allowing the $20.4 million fuel cost recovery, the PSC put Appalachian Power and Wheeling Power on notice that they should “achieve the most effective mix of fuel procurement and dispatch to ensure electric reliability” and maximize “economical use” of their power plants to “protect customers against high-priced and less reliable purchased power.”
But coal has put ratepayers on the hook for rising energy costs as well as maintenance and environmental upgrades of aging coal plant infrastructure while renewable energy outmatches coal economically.
In the case resulting in the PSC granting the $20.4 million in fuel cost recovery, company losses followed their attempts to address coal oversupply.
The utilities’ response of boosting the operation of their coal units and the amount of coal burned while operational costs exceeded market revenues the units could draw resulted in losses of nearly $87 million over a March 2023-February 2024 review period, a witness for the West Virginia Citizen Action Group, Solar United Neighbors, and Energy Efficient West Virginia testified during the case.
The witness, Chelsea Hotaling, a Canton, N.Y.-based consultant at Energy Futures Group, a clean energy consulting company, found the utility coal-fired plants’ energy margins were negative 10 out of 12 months at Appalachian Power’s Amos and Mountaineer plants in Putnam and Mason counties, and 11 out of 12 months at Wheeling Power’s Mitchell plant in Marshall County. Energy margin is the difference between operating revenues and fuel and maintenance costs.
The West Virginia Citizen Action Group, Solar United Neighbors, and Energy Efficient West Virginia recommended that Appalachian Power and Wheeling Power should be directed to record daily costs and energy revenues of their coal-fired generating units.
Energy Efficient West Virginia policy director Emmett Pepper said the PSC’s order emphasizing “economical” power plant use makes him hopeful plants will be operated based on whether the energy they produce is most cost-effective for ratepayers.
“I’m concerned that if AEP continues buying too much coal and burning it at a loss, we could keep seeing increased burdens on families and small businesses through higher electric rates that lead to higher bills,” Pepper said in a statement Thursday.
The PSC and Appalachian Power and Wheeling Power filed a proposed settlement with the Sierra Club and two West Virginia residents Friday of a lawsuit the environmental group and those residents filed in federal court in August seeking to block a PSC directive for the companies to run their coal-fired plants at least a 69% capacity factor, a measure of a plant’s efficiency in using its possible output, when doing so is uneconomic.
Energy experts, the companies themselves and Virginia utility regulator staff overseeing Appalachian Power operations in Virginia have indicated the 69% capacity factor is uneconomic, forcing an overreliance on coal upon Appalachian Power’s and Wheeling Power’s captive ratepayers.
Per the proposed settlement filed Friday, the PSC will not interpret a 69% capacity factor as setting a minimum operational threshold but may assess the capacity factors of the coal-fired plants as part of a “wholistic evaluation” of whether the plants are being prudently operated.
“We West Virginians can breathe a sigh of relief today, knowing we’ll no longer foot the bill for the PSC’s misguided and harmful coal mandates,” Bruce Perrone, a Kanawha County resident served by Appalachian Power and co-plaintiff in this lawsuit, said in a statement released by the Sierra Club Monday.
But West Virginia legislators are moving to preserve the state’s place as easily the most dependent in the country on coal-fired electricity.
The state Senate on Monday adopted Senate Concurrent Resolution 18, citing the PSC-established 69% capacity factor as “designed to optimize plant operation,” directed state agencies to convene to strategize for development of coal production and in-state coal consumption. Consideration would include new coal-fired and coke plants and regulations to set up a program for coal-fired utilities to upgrade coal plants to extend their life and agreements required to keep coal plants from closing “prematurely.”
The Senate Energy, Industry and Mining Committee on Thursday advanced in Senate Bill 505 legislation Appalachian Power has said could cause higher power bills.
SB 505 would require an evaluation of each generation unit’s ability to meet an electric utility’s capacity contributions to system reliability during times of peak power demand for each unit an applicant proposes to remove from its generation portfolio.
Isaac Orr, vice president of research at Always On Energy Research, a pro-fossil fuel, anti-wind energy analysis group, called the legislation “my idea” in committee meeting testimony. Orr said SB 505 hasn’t been implemented in other states and would reduce the incentive for utilities to shot down plants he said are “already perfectly good and servicing the needs of West Virginia residents.”
But Appalachian Power president and chief operating officer Aaron Walker on Monday said SB 505 would negatively impact Appalachian Power’s and Wheeling Power’s ability to meet the needs of new and existing customers that require a diverse portfolio. SB 505 could make it difficult for the utilities to “obtain the resources needed for competitiveness in today’s global market,” Walker said in an emailed statement through a spokesperson.
“If this is the path the legislature chooses, we will align with the state’s policy, but this change could lead to higher electricity bills for our customers,” Walker said.
PSC Chairman Charlotte Lane told the committee prior to it advancing SB 505 the PSC already takes reliability into account.
“[E]xcept for the additional administrative burden of filing a lot of reports and keeping all of these reports, everything in this bill we already have currently jurisdiction to do,” Lane said.
Pepper predicted SB 505 would result in less affordable electricity and that it would make it nearly impossible for power plants to retire even if retirement was the best option for ratepayers.
“I hope that our legislature gets serious someday about lowering electric bills, as well as empowering people to take control of their energy bills on their own, instead of forcing us to keep subsidizing monopoly-owned power plants,” Pepper said. “But here we are.”
Senate bill would require coal-fired power site designations
The Senate Energy, Industry and Mining Committee on Monday approved SB 678, which if enacted would require the Department of Economic Development to issue a preliminary report to the Joint Energy and Manufacturing Committee by Dec. 31, 2025, outlining a minimum of four initial locations under consideration each for coal electrical generation and coke production, respectively.
By Dec. 31, 2026, under SB 678, the Department of Economic Development would have to designate at least one site each for coal electric generation and coke production and issue a report to the Joint Energy and Manufacturing Committee.
Failure to meet requirements under SB 678 would automatically trigger a 25% reduction of state funding for the Department of Economic Development in the following fiscal year.
Lawmakers’ moves to support coal-fired electricity follow a September 2024 Appalachian Power and Wheeling Power request for a $265.1 million, 15.4% revenue increase at ratepayers’ expense.
The utilities have asked to send bills soaring to cover non-fuel costs — but with a new wrinkle they say would result in much smaller monthly bill increases.
The traditional option the utilities presented would increase their annual revenues by $250.5 million, raising rates in West Virginia by 14.1%. A residential customer using 1,000 kilowatt-hours per month would see with a net increase in their monthly bill of roughly 13.5%, or $23.74.
But Appalachian Power and Wheeling Power have proposed a new “Electricity Rate Stabilization” surcharge they say would provide stability in future rate cases and limit the frequency of rate adjustments. The companies have asked to increase their revenue requirement under the newly proposed surcharge without filing an application for PSC approval.
Without securitization, per the utilities’ proposal as filed last year, average monthly bills would rise:
Residential — $27.15 (16.2%)
Commercial — $57.09 (14%)
Industrial — $32,385 (11.6%)
The average monthly residential utility cost for Appalachian Power and Wheeling Power for 1,000 kilowatt-hours rose from $55.28 in 2005 to $169.69 in 2024, according to PSC data — a 207% increase.
Under the alternative plan, the utilities would use a process to recover costs through consumer rate relief bonds — called securitization — to soften the blow for ratepayers. It would yield a shorter monthly bill climb of 3.8% — or $6.72 — for a residential customer using 1,000 kilowatt-hours.
Heavy financial and environmental costs
West Virginia had the nation’s third-highest total household electricity costs as a percentage of income in a 2022 nationwide review of electric utility performance by the Citizens Utility Board of Illinois, a consumer advocate group based on federal data largely from 2020.
In a rate hike application filing, Appalachian Power and Wheeling Power president and chief operating officer Aaron Walker cited “challenges” that included:
Fluctuations in the price of fossil fuels
Evolving environmental regulations
Aging utility infrastructure
Gross losses by power plants operated by Appalachian Power, Wheeling Power and FirstEnergy’s West Virginia-serving subsidiaries Mon Power and Potomac Edison totaled just over $320.5 million from 2015 through 2023, according to analysis by RMI, a nonprofit that analyzes measures to cut greenhouse gas emissions.
RMI found the Amos plant and the FirstEnergy-controlled Harrison and Fort Martin power plants in Harrison and Monongalia counties were responsible for $6.93 billion in health costs.
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