RICHMOND — The State Corporation Commission (SCC) has determined that an agreement to settle a rate increase request by Allegheny Power in Virginia is a “fair and reasonable” resolution of the issues, consistent with the laws and facts governing the case, and therefore should be accepted.

The agreement was negotiated by Allegheny Power, industrial customers within the company’s Virginia service territory, the Office of Attorney General’s Division of Consumer Counsel, and the staff of the SCC.

Under the agreement, the interim rate authorized by the SCC on July 1, 2008, remains in effect. The rate of 2.351 cents per kilowatt-hour (kWh) to recover purchased power costs will continue through June 30, 2009. As compared to the previously effective rate, the approved rate increases Allegheny’s annual revenue by $63.4 million. When placed into effect in July, the monthly bill of a residential customer using 1,200 kWh increased by $24.54, or 29.7 percent.

Among other things, the accepted agreement establishes a methodology for recovering purchased power costs from retail customers from July 1, 2009 through June 30, 2011. The methodology affords a reasonable degree of protection for residential and small commercial customers from the effects of significant increases in the cost of purchased power during this two-year period. The adopted agreement also includes a provision that ensures that residential and small commercial customers will not experience a rate increase of more than 15 percent for the period of July 1, 2009 through June 30, 2010.

Allegheny Power is the only investor-owned electric utility in Virginia with no self-owned power plants. To meet customer demand, the company is completely dependent on purchases of power from the regional wholesale market. In this proceeding, the Commission expressed its concern that Allegheny’s total dependence on purchased power may not be in the best long-term interests of its Virginia ratepayers.

A new law requires utilities to file integrated resource plans (IRP) with the Commission beginning in 2009. These plans forecast a utility’s load obligations and how it will meet those obligations by supply side and demand side resources over the ensuing 15 years to promote reasonable prices, reliable service, energy independence, and environmental responsibility.

In its order, the Commission said, “We expect the IRP that Allegheny will file in 2009 to examine rigorously all reasonable alternatives to meet its supply obligations, including (among other things), wholesale purchases of varying term lengths, and ‘electricity generated from generation facilities that it may construct or purchase.’”

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PUE-2008-00033

Note: Commissioner James C. Dimitri did not participate in this case.

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