New ‘Clean Virginia’ report examines increased electric costs for APCo customers
A new report from Clean Virginia, titled “The Path to Affordable Power: Lowering Bills for Appalachian Power Customers,” states that outdated regulatory rules that incentivize overspending and shift risk from shareholders to customers.
Appalachian Power Company (APCo) customers are paying some of the highest electric bills in Virginia, and they’ve risen dramatically faster than inflation and the cost of living.
A new report from Clean Virginia, titled “The Path to Affordable Power: Lowering Bills for Appalachian Power Customers,” states that outdated regulatory rules that incentivize overspending and shift risk from shareholders to customers, as well as an over reliance on fossil fuels, are driving unnecessary costs for families and small businesses across southwestern Virginia. The report includes targeted solutions for addressing APCo’s cost drivers.
Since 2007, Appalachian Power’s residential rates have increased 158%, more than three times higher than inflation and far above the 28% average rate increase among Virginia’s electric cooperatives. The company’s reliance on fossil fuels, which make up roughly 80% of its power generation, has left customers exposed to global fuel price shocks. Between 2020 and 2022 alone, methane gas prices spiked 540%, doubling monthly fuel charges for many Virginians.
Mark J. Harris
Floyd County Farm Bureau
(540) 745-2021
335 E. Oxford St.
Floyd VA 24091
"As of mid-2024, the main components of APCo customer rates are: i) The base rate (48%) that recovers costs of legacy generation facilities including coal and hydropower plants, storm costs, and other operation and maintenance costs, ii) the fuel charge (24%) that primarily recovers coal and methane gas expenses, and iii) the transmission charge (22%) that recovers costs for PJM transmission services and local transmission projects."
— From the Executive Summary of "The Path to Affordable Power" report by Clean Virginia
“Families across southwestern Virginia are being crushed by bills that rise faster than everything else,” said Brennan Gilmore, executive director of Clean Virginia. “Appalachian Power’s business model guarantees profits for shareholders while forcing customers to absorb the utility’s financial risks. This report gives Virginia’s leaders a roadmap to fix a broken system and deliver real relief.”
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Key findings
- Guaranteed profits, not performance: Under Virginia’s cost-of-service model, utilities earn more by spending more, not by operating efficiently or keeping rates low. This system rewards overspending and overbuilding.
- Fossil fuel volatility: Heavy dependence on coal and methane gas has resulted in customers paying the full cost of global price swings, while utilities face no financial risk or incentives for responsible management.
- Excessive allowed profits: Appalachian Power’s authorized profit levels remain far higher than what’s justified for a low-risk monopoly with a captive customer base. In 2024, regulated utilities earned an average 9.6% return on equity, compared with a 6.7% average across the market. Aligning utility profit levels with market standards could save customers up to 10% annually, approximately $206 per year for the average customer.
- Unbalanced cost recovery: A growing share of APCo’s revenue now comes through riders and rate adjustment clauses, which allow the company to automatically pass new costs to customers. This structure shifts financial risk away from shareholders and onto customers, creating little incentive for the utility to contain costs.
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Policy solutions
The report calls on Virginia lawmakers to modernize the state’s utility regulation framework to protect consumers and promote long-term affordability by:
- Modernizing utility regulation — Replace the outdated cost-of-service model with performance-based regulation that ties utility profits to customer outcomes like affordability, reliability, and pollution reduction, not to how much a monopoly spends.
- Strengthening consumer protections — Allow the State Corporation Commission to set fair, market-based profit levels, review all major spending, and prevent utilities from overcharging customers.
- Investing in affordable, fuel-free power — Accelerate investment in fuel-free resources such as solar, wind, and battery storage, which eliminate exposure to volatile fuel markets and reduce long-term costs. APCo’s own forecasts show these technologies could deliver $50 million in annual fuel savings by 2030, growing to $150 million by 2035 and more than $200 million by 2040, translating to monthly bill savings of about $5, $16, and $21, respectively.
- Expanding energy efficiency — Fully meet energy efficiency targets that would save roughly $32 million per year, or about $3.40 per month for the average residential customer.
- Ensuring fair cost allocation — Require large energy users, like data centers, to pay their fair share for the infrastructure costs and grid upgrades that their high energy demand creates.
“These are solvable problems,” Gilmore said. “If lawmakers prioritize affordability over monopoly profits, Appalachian Power customers can finally see real relief.”
The full report is available here.
Clean Virginia is a nonpartisan advocacy nonprofit with an affiliated political action committee, the Clean Virginia Fund. Clean Virginia works to end utility monopoly corruption in politics to promote clean, affordable energy and a government that works for all Virginians.
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