Expert testimony on Appalachian Power Company’s pending rate increase request, prepared on behalf of Attorney General Jay Jones (D), has concluded that the utility’s 3.3 percent increase in requested revenues is not justified.
Accountant Ralph C. Smith told the State Corporation Commission (SCC) in testimony filed Wednesday that only about $1.4 million of the $61.4 million revenue increase request is justified. His largest proposed adjustment is based on setting a lower allowed profit margin than the utility requested for 2026 and 2027.
Should the SCC agree, the proposed 5.4 percent increase in the bill of a residential customer using 1,000 kilowatt hours per month could go away. This case is just getting underway, however, and Appalachian will certainly disagree.
Appalachian Power Company is part of the Ohio-based American Electric Power Company, Inc., and serves about 540,000 residential and commercial customers in Western Virginia, with most of its generation assets located in other states. It is also part of the PJM Interconnection regional transmission organization, which coordinates the movement of electricity through all or parts of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia.
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Smith was one of three witnesses hired by the Office of Attorney General, which is designated by statute as the consumer counsel in matters before the SCC. Witnesses for other companies or interest groups challenging Appalachian’s application also posted testimony on the case file in recent days.
The SCC’s professional staff will file its own analysis of the rate hike next month and a hearing is set for October 19. Much of the testimony so far has focused on Appalachian’s request that its allowed return on equity rise from the current 9.75 percent to 10.5 percent. The company asserts that it earned only 4.7 percent during the 2024 and 2025 test years. The SCC last set its rates and profit margin two years ago.
As is the case with these reviews, the company’s entire operation is examined and multiple past or planned expenses are challenged.
The Attorney General’s experts also challenged the utility’s request for more money to remove troublesome vegetation growth along its powerlines, the amortization it is claiming on storm damage, and even executive compensation. The AG office’s proposed adjustments eliminated about $60 million of the company’s requested revenue increase.
The issue of how the largest load customers, including data centers, pay for their service has been raised by the Attorney General and other case participants. And a witness retained by the Sierra Club, Devi Glick, asserted in testimony that Appalachian Power paid another division of AEP too much for the purchase and transfer of electricity from Ohio.
Glick states the cost of power from the affiliate was higher than Appalachian would have paid it just for power off the PJM’s general marketplace. He cites capacity charges Appalachian paid to the Ohio Valley Electric Cooperative of $582 per megawatt-day in 2024 and $443 per megawatt-day in 2025, with the comparable cost of capacity and energy purchased through PJM being far lower.
Both the dollar amounts and the percentage of the alleged overpayments are redacted from the public version of Glick’s affidavit, however, another common practice in SCC cases. The SCC commissioners and staff and other case participants are allowed to see the details but are prohibited from disclosing them.
The close accounting of the utility’s cost of service also includes expenses that the company is seeking to reduce, changes which work in customer’s favor, and which are seldom challenged.
The SCC has the final task of deciding which added or reduced costs to allow or disallow, and what the profit cap will be. Whatever decision is made goes into effect March 1, 2027.
