AEP Baffles WV PSC with BS

If you can’t dazzle them with brilliance, baffle them with BS.  That seems to be AEP’s approach to dumping its coal-fired dinosaurs on WV rate payers.

Back in December, AEP filed its plan at the WV PSC to sell half of its Mitchell plant and 2/3 of one of the units at the giant John Amos plant to APCo, guaranteeing recovery of both costs and profits from WV rate payers for those plants.  In that plan, AEP included what it claimed were three scenarios generated by its Magic 8 Ball ™ computer program Strategist ®.  While the AEP filing tells us a little bit of information about their magic program and the assumptions they used in their scenarios, their main reasoning is “trust our magic computer program.”

Last week, AEP filed an annual update on the status of its ENEC (enhanced net energy charges – don’t ask me what that means, I speak English) with the WV PSC.  ENEC charges are essentially all the variable costs, like fuel and purchased power charges, that WV power companies can legally recover from rate payers.  In WV, power companies get to charge us for these costs before they are incurred, and then there is an adjustment if actual costs are lower than predicted.  In that case, rate payers get a refund, and electric rates go down.

In its recent ENEC filing, AEP told the PSC that, in fact, they will owe WV’s APCo and Wheeling Power rate payers $168.7 million for money they will over-collect from their rate payers for 2012/13 costs.  But, as FE proposed last fall, AEP wants to use sleight of hand to take away WV rate payers’ refund.  To make the $168.7 million disappear, AEP will charge its WV rate payers the fixed cost portion of the Amos/Mitchell coal plant transfer ($110 million), the costs of the APCo/Wheeling Power merger ($19.3 million), the financing fees that are tacked onto to the bond bailout coal debt ($31.5 million) and a small construction surcharge (~$6 million).

And, like FE, AEP is claiming that they are protecting their WV customers from the psychological trauma of seeing their rates go down.

This Commission has historically worked with utilities to help keep customer rates stable by not lowering or raising them in a frequent and isolated fashion, but by making rate changes that take into account multiple issues and a long-term view. The Companies have a proposal that could provide their customers with a high degree of rate stability.

So, when rates go up, it’s all about doing what WV law requires, but when rate payers are about to get a refund, suddenly it’s all about maintaining “a high degree of rate stability.”

The WV PSC didn’t let FE get away with its now-you-see-it-now-you-don’t play.  We’ll see what the Commission does with AEP’s new game.  AEP has had an advantage over FE in this situation, because AEP has a whole range of costs to dump on its WV rate payers in this ENEC filing.

Note that most of the costs AEP wants to use to take away its WV refund come from the $110 million they want to charge for the transfer of the Amos and Mitchell plants.  This transfer has not yet been approved by the WV PSC.  AEP’s Steven Ferguson notes that this $110 million is not a cost that is included in a normal ENEC case, because the costs of the power plant transfers are costs for the purchase of assets that could be handled in a base rate case or with an add on surcharge, as FE has asked for in their Harrison case.

The main purpose of AEP’s filing last week was to set up a deal to prevent paying WV rate payers the refund the company owes.  Of course, in its press release on the ENEC filing, AEP tried to make it look like they were holding down rates for the second year in a row.  The company spinmeisters were spinning hard:

The company is requesting no rate change for the second year in a row. In its filing, Appalachian proposed considering the costs for several cases together in order to keep rates stable for customers:

  • Fuel and construction costs, which are included in the annual ENEC filing;
  • Consumer Rate Relief Charge payments; and
  • Costs associated with the transfer of certain generating assets and the merger of Appalachian and Wheeling Power.

The net effect of all these costs is that customer rates will stay the same. If the PSC rules in favor of Appalachian’s proposal for the ENEC, rates are not expected to change in 2013 and into 2014. Rates have not changed since mid-2011.

Nowhere in the press release will you see the inconvenient fact that Ohio-based AEP is taking away a refund it owes WV rate payers.

We can sum up this FirstEnergy gambit by AEP this way:  different Ohio power company, same BS.

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