The fuel factor is aimed at dollar-for-dollar recovery for the cost Appalachian Power incurs for fuel, primarily coal, and purchased power, including some wind generation purchases. There is no profit in the fuel factor.
The request addresses a growing imbalance between what Appalachian Power pays for fuel and what it is collecting from customers.
Appalachians proposal would increase overall rates about nine percent. Residential rates would increase about seven percent from 10.5 cents per kilowatthour (kWh) to 11.26 cents per kWh. Certain higher-usage industrial customers could see larger percentage increases depending on their usage. Appalachian anticipates no further rate changes in 2012.
Although the fuel factor is often adjusted annually, Appalachians last increase in the fuel factor was in 2009. In 2010, it was adjusted downward, and it was left unchanged in 2011. The decrease has been in effect for more than 20 months.
In this request, Appalachian Power asked to increase the fuel factor from 2.197 cents per kWh to 2.953 cents per kWh, a level comparable to the one in effect about three years ago.
Appalachian proposes to collect a portion of the increase over an extended period to help reduce the impact on rates. The new factor is proposed to take effect in early June, subject to the review and approval of the SCC. Any over-recovery or under-recovery will be reflected in the next adjustment.