Appalachian Power, a utility subsidiary of American Electric Power (NYSE: AEP) that covers a portion of the Smith Mountain Lake area, has filed its annual fuel factor update with the Virginia State Corporation Commission (SCC) and is requesting a reduction in the fuel rate for its Virginia customers.
Fuel costs are about 20 percent of a residential customer’s electric bill. The fuel factor recovers those costs, which are mostly for natural gas and coal. The SCC reviews the company’s fuel rate each year to determine whether it should be increased or lowered.
“Managing fuel costs is an important part of service delivery,” said Chris Beam, Appalachian Power’s president and chief operating officer. “What we’ve witnessed over the past several months is a drop in natural gas costs. Our request before the SCC ensures that approximately $40 million in savings is passed along to our customers.”
The current fuel factor is 2.3 cents per kilowatt-hour (kWh). Appalachian’s proposal reduces the fuel factor to 1.999 cents per kWh, or a savings of $3.01 for a customer using 1,000 kWh/month.
If approved, the reduction will go into effect in November. With the adjustment, Virginia residential customers using 1,000 kWh/month will pay 10.6 cents/kWh, well below the national average. According to the Edison Electric Institute’s (EEI) January 2020 report, the average residential U.S. cost for electricity is 12.93 cents per kWh.
Appalachian Power has 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power). It is part of American Electric Power, which states that it is focused on building a smarter energy infrastructure and delivering new technologies and custom energy solutions. AEP’s approximately 17,400 employees operate and maintain the nation’s largest electricity transmission system and more than 221,000 miles of distribution lines to deliver power to nearly 5.4 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 5,200 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 state 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.
• The ability to attract and retain the requisite work force and key personnel.