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To accommodate retail choice of electricity generation supply in Virginia, AP proposes to separate its generation facilities from its transmission and distribution facilities, by transferring most of its generating assets, certain utility securities and contractual entitlements to generation to an affiliate called “GENCO.” This entity would operate the generation facilities and AP would continue to own the transmission and distribution plant in Virginia and proposes to read meters and bill customers as an energy delivery company.
AP’s Plan includes the imminent transfer of its interests n virtually all of its generating facilities, and the transfer of its shares of Allegheny Generating Company, which own a 40% interest in the Bath County Pump Storage Project in Bath County, Virginia, to GENCO. The Company proposes to make these transfers effective July 1, 2000, at book value. Coincident with these transactions, AP would assign to GENCO its rights and responsibilities in the operating agreements for the generating facilities it owns in common with its other affiliates, Monongahela Power and West Penn Power. The Company will retain, for now, ownership in certain small hydroelectric facilities in Virginia.
AP further proposes to transfer to GENCO its rights and responsibilities in an Inter-Company Power Agreement with the Ohio Valley Electric Cooperative (“OVEC”). Under this Agreement, AP makes certain sales of power to, and purchases of power from, OVEC. As the final part of the Plan, AP would assign to GENCO its rights and interests in certain incidental interconnection, access and easement agreements necessary for GENCO's operation of the generating plants.
As part of its application, AP has filed a Memorandum of Understanding (“MOU”) negotiated with the Staff of the State Corporation Commission (“Staff). In the MOU, the Company has made certain representations and undertakings for purpose of compliance with the requirements of the Act. The Company proposes to reduce its base rates to its Virginia customers by $1 million, effective July 1, 2000, and thereafter not to file for a base rate application, as otherwise permitted by the Act, prior to January 1, 2001. The effect of this undertaking is to freeze the Company’s base rates through the period in which it provides default service in its Virginia service territory. Concurrent with the base rate reduction, the Company proposes to eliminate separate recovery of fuel expenses through the fuel factor, and to recover fuel costs at the level of 1.181 cents/kWh, in its base rates. This represents an increase from the Company’s currently effective interim fuel factor of 1.013 cents/kWh. Further, the Company will forego any rate increases associated with fuel costs that would otherwise be permitted under the Act during the rate cap period established by the Act. Additionally, the Company will neither collect any prior under-recovery of fuel costs or refund any prior over-collection of such costs.
The result of the elimination of the separate fuel cost recovery mechanism and the re-calculation of the amount of expense to be included in base rates at a level of 1.181 cents/kWh will increase the Company’s regulated operating revenues by approximately $4.2 million on an annual basis before consideration of the $1 million base rate reduction. A residential customer using 1000 kWh of electricity per month will see a monthly increase in his bill of $1.68 without the base rate reduction.
Pursuant to § 56-249.6 of the Code of Virginia, the Commission has scheduled a public hearing to commence at 10:30 a.m. on July 20, 2000, in the Commission’s courtroom, second floor, Tyler Building, 1300 East Main Street, Richmond, Virginia, to receive evidence related to the issue of the Company's fuel factor.
A copy of AP’s application is available for public inspection during regular business hours (8:15 a.m. to 5:00 p m.) in the Commission’s Document Control Center located on the first floor of the Tyler Building, 1300 East Main Street, Richmond, Virginia, and may be obtained, by written request directed to AP’s counsel, Philip J. Bray, Esquire, Allegheny Power, 10435 Downsville Pike, Hagerstown, Maryland 21740-1766.
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