George Hohmann Gets It About APCo Bond Scheme

The Charleston Daily Mail’s George Hohmann does a very good job explaining the Appalachian Power bond scheme in today’s edition of the Gazette-Mail.

Hohmann hits all of the points we have noted on earlier posts here on The Power Line.  Here are some of his points:

Why not leave the debt on Appalachian’s books and have the ratepayers pay the utility? This would eliminate the need for high-priced bond lawyers and specialists. Alas, the company would not have a revenue stream dedicated to paying off the debt. Accountants might require the company to write it off, resulting in a big loss to stockholders.

And:

Also, did Appalachian’s corporate parent, American Electric Power, do an adequate job hedging against the risk of rising fuel costs and going after coal companies that promised to deliver coal but didn’t?

And:

Selling ratepayer-backed bonds would not set a precedent. Several years ago Allegheny Energy sold similar bonds to finance the cost of pollution control equipment. At the time, Allegheny was in a financial jam and had less money in its treasury than you have in your checking account. The bonds seemed like the only way to pay for the equipment.

I think there’s one big difference: Allegheny’s ratepayers, who are still paying on the bonds, have some equipment and cleaner air to show for their debt. The Appalachian deal feels like putting groceries on a credit card and paying off the balance with minimum monthly payments.

And:

But wouldn’t issuing bonds always be more appealing than a rate increase?

Exactly.

Delegate Nancy Guthrie (D-Kanawha) stood up to the push for APCo’s bond bill, HB4530, and got the bill amended limiting HB4530 to just APCo’s current situation.  That took away credit cards for all WV power companies.  But WV rate payers will still be stuck with APCo’s 2008 boo boo.

Are the governor and legislators, who are in such a rush to pass APCo’s legislation, really helping rate payers?  Or are our elected officials helping the big power company that puts money in their campaign bank accounts?  Rate payers will have to pay the fuel cost, no matter what.  And, as Hohmann points out, if the debt remains on APCo’s books, and can’t be paid back, eventually this debt will have to be written off at the expense of AEP shareholders.

One thought on “George Hohmann Gets It About APCo Bond Scheme

  1. Thank you, Delegate Guthrie! Finally, a legislator with some common sense!

    Hohman also gets it. The bond bill was not in the best interests of consumers. Since the PSC made provisions to pay off this old fuel debt in past rate cases, why was it not paid off? It’s because ApCo has continued to spend more on fuel than they had planned for in their rate cases, consuming the rate increases consumers have paid intended to retire this old debt. This indicates that ApCo is underestimating anticipated future costs when they apply for a rate increase. They do this because once the money is spent, the law requires that they be reimbursed by ratepayers. If ApCo was honest up front about how much fuel was expected to cost, they might get some push back from the PSC during a rate case. By hitting consumers after the fact in a subsequent rate case, there’s nothing the PSC can do.

    This very succinctly illustrates why we so desperately need least cost planning. If ApCo wants to pretend that their own internal planning process is so inept that they can’t predict their fuel costs in advance, then the legislature needs to help them learn proper planning.

    Or West Virginia’s electric consumers can keep re-financing their mortgage to pay off credit card debt… while still using the credit card to run up more debt. We all know how financially stupid this is. Why doesn’t our legislature and our PSC? Scary to think what their personal finances must look like….

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