Update on AEP/APCo Blackout Costs
George Hohmann provides an excellent breakdown of AEP’s blackout assessment. Here is the cost story, including information about what rate payers are currently paying for the 2009 blackout:
The June 29 windstorm that swept through the eastern United States cost Appalachian Power about $94 million, with about $56 million of the cost occurring in West Virginia, said company spokeswoman Jeri Matheney.
In comparison, a Dec. 18, 2009, snowstorm cost the company $31.6 million in West Virginia. Appalachian Power asked the state Public Service Commission to recover $22.8 million of that cost and was granted $18 million. The average residential customer is being charged about 14 cents a month over eight years to pay that $18 million, Matheney said.
Matheny’s numbers differ somewhat from information included in AEP CEO Nick Akins’ recent investor conference call. It is hard to tell which numbers are more accurate.
Hohmann provides some detail from the Akins’ conference call on how AEP plans to have rate payers pay for their repairs (keep in mind that these numbers apply to all of AEP, not just APCo):
Brian Tierney, AEP’s executive vice president and chief financial officer, provided details.
Tierney said that of the $230 million total, “We believe approximately $70 million will be classified as ‘capital (expense),’ and will be recovered in various future rate proceedings. Of the remaining $160 million of O&M (operations and maintenance expense), we believe we will ultimately be able to defer for future recovery up to $130 million. We recognized $4 million in expenses related to this series of storms in the second quarter, leaving an estimated expense for the third quarter of about $26 million.”
I hate to be picky, but someone should tell the Daily Mail editors that the picture of the collapsed steel lattice tower on the 500 kV transmission line is owned by FirstEnergy’s Mon Power, and had nothing to do with AEP’s system.
Meanwhile, AEP and FirstEnergy had 11,000 customers blacked out yesterday as what APCo’s spokesman called “a typical strong summer thunderstorm” swept through southwestern WV. Power seems to have been restored relatively quickly, but are we now entering a period of blackouts from every severe thunderstorm we get in WV?
AEP told the Daily Mail reporter that they staged a number of out of town repair crews before the storm hit, and were able to get repairs done quickly. This begs the question So I have to ask: Is importing repair crews for every “typical strong summer thunderstorm” less expensive than building reliability into WV’s distribution and local transmission systems?
Note: The Daily Mail links will probably die after a week or so.
So, what does this do to Charlie Patton’s “no rate increases” scheme?
Both numbers are accurate. The latest set just breaks them down further — to APCo and then to APCo in WV – $56M of that $230M. What’s lacking are the details provided in the earnings call regarding how much they expect to recover in an upcoming rate case, how much they plan to defer as a regulatory asset, how much was already in the budget, and how much the company is going to write off (or… does insurance cover some of this… why didn’t Hohmann ask that?)
And still… this incredible amount of damage pales in comparison to the $400M in deferred coal costs they’re planning to mortgage in WV consumers’ name. APCo’s over-dependence on coal is still a bigger disaster for ratepayers than the “derecho.”