ROANOKE, Va., July 18, 2008 – Appalachian Power, a subsidiary of American Electric Power (NYSE: AEP), today made a filing at the Virginia State Corporation Commission (SCC) seeking an increase in the fuel factor component of its Virginia customer bills. The proposal reflects dramatic increases in the costs of coal caused by a growing global coal market and a relatively weak dollar leading to higher costs to fuel the company’s power plants.
 
The fuel factor comprises approximately one-third of a Virginia customer bill. It is approved by the SCC and increases or decreases with the costs of fuel used for the generation of electricity. It includes no company profit or mark-up. 
 
Appalachian has asked to implement the new factor on bills beginning Sept. 1.
 
If approved, the factor itself will increase to 2.255-cents /kilowatt-hour (KWH) from the current 1.418-cents /KWH. A residential customer using 1000 KWH in a month would see an increase from the current bill of $71.48 to $79.85—or 11.7 percent. 
  
As a whole, the revised fuel factor will increase by an average of 15 percent or a total of $132.5 million annually compared to current rates. Impact on individual customers is based on the amount of energy used. Higher-usage customers—including commercial and industrial customers—may see percentage increases that exceed the average. (Additional residential bill estimates may be found below.) 
 
  “Conditions in coal markets are dramatically different from those just a year ago when we filed for our current factor,” said Dana Waldo, Appalachian Power president and chief operating officer. “International demand for U.S coal and sustained domestic demand have outpaced supply resulting in a steep escalation of prices.”
 
According to Waldo, the company’s proximity to major coal supplies has not necessarily tempered increases in coal costs. “Appalachian Power plants use mainly Central (CAPP) and Northern Appalachian (NAPP) coals. The coal from suppliers in these regions is in greater demand from overseas and existing domestic markets.   Production from mines in these nearby areas has not geared up to meet growth in demand from both markets. As a result, we have seen a significant increase in the cost of these coals for our plants. For example, the price for a ton of CAPP coal has increased from $60 to about $140—or approximately133 percent—in just the last six months,” Waldo said. “However, the company has been able to use long-term contracts to mitigate the huge increases.”
 
While the fuel factor is generally set for 12 months, the company’s cost projections in this application cover the 16-month period Sept. 1, 2008 through Dec. 31, 2009.  Appalachian is requesting that the SCC set the new fuel factor for the entire period to ease the monthly impact on customers by collecting previously unrecovered fuel costs over a longer period of time. Appalachian expects to return to a calendar-year cycle beginning in January 2010. 
 
If approved, the proposed Appalachian Power fuel factor will remain the lowest for any investor-owned utility in Virginia.
 
An effective way to manage rising energy costs is to become a knowledgeable consumer and use energy wisely. Appalachian Power customers are urged to visit the company’s Web site at www.wattwhyandhow.com   to learn about energy saving ideas. Included on the site is an interactive Energy Calculator that allows customers to see how easy changes made to homes and businesses can help control energy usage and lower total costs.
 
The SCC will assign and publish case numbers and schedules for the application filed today. Documents relating to the case will be found on the Commission’s Web site at www.scc.virginia.gov. This proposed increase is separate from other Appalachian Power cases pending before the SCC seeking recovery of substantial environmental expenses and increased operating costs.
 
Appalachian Power provides electricity to 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power). It is a unit of American Electric Power (NYSE: AEP), one of the largest electric utilities in the United States, with more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.
 
Estimated Virginia residential customer bill impact