RICHMOND — The State Corporation Commission (SCC) is allowing Allegheny Power an adjustment to rates that provides the company limited recovery of purchased power costs. The rate adjustment will allow the company to collect an additional $9.48 million on an annualized basis.

The 5.6 percent increase approved by the Commission is approximately $33 million less than the 25 percent increase sought by Allegheny Power. The impact on a monthly bill is $3.06 for each 1,000 kilowatt-hours of electricity (.306 cents/kwh).

The Commission majority determined that amendments to Virginia's Electric Utility Restructuring Act in 2004 permit certain adjustments to Allegheny Power's rates for recovery of purchased power costs. The SCC also found that the rate adjustment must comply with the provisions of an agreement reached in 2000 when the company voluntarily transferred its generation units to an affiliate.

In that 2000 agreement, the company agreed to abolish its fuel factor recovery mechanism. Instead, fuel and purchased power costs were rolled into the company's base rates which are capped under existing Virginia law through the end of 2008. However, the 2004 amendments allow Allegheny Power specific adjustments to its capped rate for purchased power costs.

The rate adjustment approved by the Commission represents Allegheny Power's cost of purchasing electricity to serve Virginia load above a specified amount contained in the 2000 agreement (367 megawatts). The adjustment becomes effective upon the Commission's final order in this case.

SCC Commissioner Mark C. Christie dissented, expressing an opinion that Allegheny Power is not due a rate increase at this time.

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Case Number PUE-2007-00085