Board rejects Appalachian bid on wind

The SCC said Appalachian's plan to buy electricity from two wind farms would further increase customers' costs.

The Virginia State Corporation Commission has rejected an alternative energy-related application filed in mid-September by Appalachian Power Co.

Appalachian, a subsidiary of American Electric Power, had requested commission approval for contracts to purchase electricity generated by two separate wind farms -- Beech Ridge in West Virginia and Grand Ridge in Illinois.

Appalachian relies primarily on coal-fired power plants to generate the electricity it sells.

The SCC ruled Wednesday that the wind farm purchase agreements, as negotiated, were too costly for Appalachian customers. Its order noted, "[Appalachian's] rates have increased by more than $500 million, or more than 50 percent for residential customers -- since the beginning of 2007, and this amount does not include the company's currently pending base rate proceeding."

Appalachian had contracts with the wind farms to buy a combined generation capacity of 201 megawatts of electricity. Todd Burns, an Appalachian spokesman, said the utility already has been purchasing power from Grand Ridge and had planned to buy more going forward as part of its voluntary participation in Virginia's "renewable portfolio standard" program.

Beech Ridge is expected to come online this summer, he said.

"We're obviously disappointed that the SCC found that these were not prudent and reasonable costs," Burns said. "We're still looking at what we can do. We certainly felt like this was an economical option."

He said that the Public Service Commission of West Virginia found that the wind power contracts' costs were reasonable and prudent. Appalachian currently has wind power contracts with two other sources.

Burns said AEP's options might include assigning the Beech Ridge and Grand Ridge contracts to another AEP subsidiary or jurisdiction. Appalachian has customers in portions of Virginia, West Virginia and Tennessee.

The Virginia legislature has set a goal of generating about 12 percent of the power Virginia customers consume from renewable sources by calendar year 2022.

Burns said Appalachian already is meeting its voluntary targets for using renewable sources.

The SCC said that the General Assembly "has made it clear that while renewable forms of energy are to be encouraged, the ratepayers of Virginia must be protected from costs that are unreasonably high."

Burns said Appalachian has estimated that purchasing power from the two wind farms would increase the monthly bill of an average residential customer by about 20 cents. The SCC order suggested that Appalachian had "understated" an estimate of the effects on customers.

The SCC said its order in this specific case does not indicate that wind power cannot be part of a portfolio of energy sources and noted that it has approved other wind contracts for Appalachian. But the new contracts submitted by Appalachian "would exacerbate an already difficult rate environment for customers without offsetting benefits," the commission's order said.

And the SCC noted that several rate increases since 2006 have allowed Appalachian to recover environmental-related costs.

Appalachian has about 500,000 customers in its Virginia service territory.