Appalachian Power on Thursday said it plans to save customers money by using a newly allowed method of financing to recover costs associated with recent storms and balances on two coal power plants.
This method, called securitization, packages large expenses into bonds that are sold to investors. By using favorable interest rates and a longer payoff period, securitization costs less than traditional methods of recovering expenses from customers, such as by raising base rates, while avoiding sharp rate increases, the utility said.
Specifically, Appalachian’s proposal would save the company an estimated $176 million and decrease the average residential monthly bill by $6.66, according to the utility. That average bill has risen by about $50 since July 2022 to about $174 today.
“With costs continuing to rise across many industries, we understand the immediate need to find creative solutions that lessen the impacts on our customers while still allowing us to invest in sustainable energy solutions for our communities,” Aaron Walker, Appalachian’s president and COO, said in a news release.
“Today, we’re building off the relationships created with our Virginia legislative partners to offer solutions that provide immediate financial relief to our customers in Virginia.”
Under its proposal, Appalachian plans to issue 20-year bonds totaling nearly $1.38 billion, according to a petition filed with the State Corporation Commission.
That total includes a $1.2 billion share of the balance on two coal-fired power plants in West Virginia, the 2,900-megawatt plant and the 1,300-megawatt Mountaineer plant.
Customers are already paying toward that balance through rates on their bills. If regulators allow the securitization plan to proceed, Appalachian would lower its rates accordingly, and the cost associated with the bonds would appear as a new line item on customers’ bills, the utility said.
The roughly $1.38 billion figure also includes $141 million that Appalachian said it spent recovering from eight storms between Jan. 1, 2024, and March 31, 2025.
Among those storms was Hurricane Helene, which struck Virginia in September, cut power to more than a quarter-million Appalachian Power customers and cost the utility nearly $68 million by itself, according to Appalachian’s proposal.
Finally, the $1.38 billion includes about $11 million in anticipated up-front financing charges. Appalachian said it also anticipates incurring about $1.6 million annually in ongoing financing costs.
Under traditional cost-recovery methods, Appalachian would charge customers for the storm-related expenses over a length of time determined by the State Corporation Commission but which the utility said likely would be four years.
Having to recover that much money in such a relatively short period of time would raise the average residential customer’s bill by $4.78 a month, William Castle, Appalachian’s director of regulatory services, said in written testimony filed with the utility’s proposal.
Instead, by securitizing the storm costs and the coal plants’ balances over the 20-year bond period, the average customer’s bill will decrease by $6.66 a month, Castle said.
For that first four years during which storm costs would otherwise be recovered in the traditional manner, that represents a monthly savings of $11.44 for the average residential customer.
Appalachian’s proposal is possible thanks to legislation passed during this past General Assembly session that allowed the utility to securitize these costs and included other provisions such as new restrictions on when rate increases can take effect and a prohibition on Appalachian charging reconnection fees until March 2026.
Del. Jason Ballard, R-Giles County, who was the chief patron of the legislation in the House of Delegates, said in a statement that he is “very pleased” that Appalachian filed its application for securitization.
“Residents of the 42nd House District and across APCo’s service territory made their voices heard loud and clear when members of the General Assembly went to Richmond this January: out of control electric bills were unacceptable and unsustainable. I am thankful to see my legislation begin to work as intended,” Ballard said.
Sen. Mark Peake, R-Lynchburg, who was the chief patron of the bill in the state Senate, said he had “fully expected” Appalachian Power to make this move and it’s why he carried the legislation in the General Assembly.
“It went into effect July 1, and they got it filed immediately. So I’m pleased they’re following through with what they said they would do,” Peake said.
The State Corporation Commission is expected to issue a decision on Appalachian’s proposal within four months.
