Maybe WV Can’t Afford Appalachian Power
Keryn raises an excellent point over at StopPATH WV. Maybe WV just can’t afford the power Appalachian Power wants to sell us.
Just like the mortgage hustlers in the 2000s, AEP’s Appalachian Power is pushing a loan program to hide the high cost of their coal fired power. APCo has refused to diversify its fuel sources and insists on pouring coal-fired power into WV. At the same time, the WV Legislature and the WV PSC have failed to help homeowners and WV businesses make the initial investments in small scale renewable power generation that would begin to diversify WV’s sources of electricity to lower cost alternatives.
The result is that APCo faces the public relations nightmare of having to ask the WV PSC for a new 40% rate increase to cover the outrageous costs of their coal fuel.
APCo’s “solution” is to propose a bill in the Legislature that would allow them to sell bonds to spread out their fuel cost recovery, with interest, from WV rate payers. But this bill does not apply just to APCo’s current PR problem. APCo’s bill would apply to any rate increase or any power company in the future. How long will it be until “securitizing” rate increases for coal becomes a way of life for WV power companies and the WV PSC?
WV power company lobbyists claim that selling these deceptively named “consumer rate relief” bonds will actually save rate payers money because the bond interest rates would be lower than the commercial rates that power company shareholders must pay to borrow money to cover their rising fuel costs. Right now, it is possible for power companies to recover their interest costs from rate payers, but they must justify the need for that cost in a regular PSC rate process. The PSC may or may not determine that the power company interest cost is “just and reasonable,” as required by WV law.
HB4350, the power companies’ bubble bond bill, would short circuit the PSC process and lock in interest rates for up to 20 years that would be passed on to WV rate payers. When the bonds were issued, the bill would allow power companies to add fees and adjustments which would likely wipe out the small margin of interest savings that might be available under the bonding system.
In recent legislative discussions, Consumer Advocate Byron Harris has stated that HB4350 is fine with him, because it would “only cost” WV rate payers about one cent per month on their electric bills. Even assuming this number is true, for which there is no evidence, increasing electric rates is not “consumer rate relief.” Besides, we have heard this “only cost” argument before, from Mr. Harris himself. He repeated power company claims about “how little” PATH and other new transmission lines would cost WV rate payers because the costs of these lines were spread out across PJM. As we have seen, PATH is still “only costing” WV rate payers money, and it will never be built. Not such a good deal after all.
The motivation behind HB4350 is not hard to figure out. It is the same logic that drove the housing bubble in the 2000s. What? You can’t afford that big new house? Not a problem. Here’s a “loan package” that lets you lie about your income and lets you set your own monthly payments (but we’ll reset everything to really high payments in a couple of years).
This is exactly what APCo is saying with their new legislation. They went out and sold WV a lot of electricity that cost way too much money. WV rate payers can’t afford to pay the power companies for this power, so APCo has designed a nice financing plan to make their 40% rate increase “disappear.” As my dad always said, if it sounds too good to be true, it is.
Let’s keep it simple. Let’s keep it real. Let’s continue with the system we have, without trying to hide power companies’ mistakes. If we can’t afford the power APCo is trying to sell, maybe we should try something else. Borrowing money to pay our electric bills can never end well.