The Charleston Daily Mail’s Ry Rivard has a summary of AEP’s latest rate increase case at the WV PSC. As I noted last week, AEP has thrown every expense it can into its attempt to max out how much its rate payers will be forced to borrow to pay for its high coal costs.
The opening paragraphs of Rivard’s story lay out AEP’s plan for the PSC:
Appalachian Power and Wheeling Power have given state utility regulators three options: raise rates about 30 percent, spread the increase over two years or totally avoid a rate hike by allowing the companies to float customer-backed bonds.
The companies, both subsidiaries of American Electric Power, prefer the third option.
To that end, company officials hope the Public Service Commission will choose to take advantage of a new law that allows companies to sell low-interest bonds guaranteed by ratepayers.
Obviously, AEP’s subsidiaries like what’s behind door number 3, because they can throw all their debt into the bond bill and transfer the liability to their WV rate payers. In the process, the WV PSC is transformed from a regulator in charge of evaluating power company electric rate increases into a collection agency for AEP.
As Rivard notes:
Under the bond plan, the PSC would ensure that about 500,000 customers pay rates high enough for the companies to pay off the multi-year bonds.
Once the PSC approves the bond plan, the PSC takes responsibility for “ensuring” AEP’s rates are high enough to meet the bond payments every year. It was not clear in the recent legislation that the WV Legsilature passed in the 2012 session, but now the PSC will have to devise a process to automatically raise rates to cover bond payments.
AEP claimed to the Legislature that the forced bonding would eliminate the need for a rate increase this year. That is simply the salesman’s “no money down” pitch. In fact, for the life of the bonds, AEP’s rate payers would be forced to pay this debt, plus interest, PLUS any additional increases in the price of coal that AEP faces.
As Rivard points out in his story, the PSC has yet to determine if AEP’s WV rate payers actually owe what AEP is claiming. The PSC must first determine the legitimacy and amount of costs that AEP can actually recover, before the PSC determines whether it will move forward with the bonding scheme. So AEP’s “30% rate increase” to pay off the company’s coal debt may be a bit premature. If the PSC cuts the required rate increase, and then accepts the plan to pay off the costs in two years instead of one, there seems to be a way out of AEP’s bogus “rate payer relief.”
As Consumer Advocate Byron Harris put it:
“The ‘no increase’ depends upon their getting approval of this securitization, and whether or not there is an increase depends upon how much you securitize, and how much you securitize depends on how much of the costs they have included to securitize are legitimate costs, …”
AEP’s Jeri Matheney was spinning hard, claiming that “whether the bonds are used or not doesn’t change the amount of money the company is owed.” In fact, she is just wrong. “The amount of money the company is owed” is what the WV PSC determines is owed. Then the decisions will proceed from there.
One thing is for sure, creating bonds and turning the PSC into AEP’s enforcer, is not about “rate relief.”