Ward Armstrong says Appalachian Power wants a 10 percent rate hike

House Minority Leader Ward Armstrong has been fighting Appalachian Power Company for two years.

Apco won the last round in January, when Republicans in the House of Delegates squashed two Armstrong bills aimed at returning Virginia to its old system of electric utility regulation. Energy lobbyists and the company, alongside Dominion Virginia Power, argued that most of Apco’s price increases in recent years would still have been permitted under the old system and that no change was needed.

Armstrong’s latest salvo came March 31, the same day Apco announced it was seeking a series of rate increases in Virginia. He took to Twitter to vent his frustration.

"Apco wants another 10% rate increase. The compensation package for CEO Mike Morris rose 22% to $8.7 million in 2010," Armstrong wrote.

Armstrong has botched up the facts in past attacks on Apco, so we took a look at his latest claims.

Apco announced in a March 31 press release it was seeking to raise rates by "about 10 percent" for 2012 through a series of rate filings. The actual increase, if granted in full by the State Corporation Commission, which oversees utility regulation in Virginia, would be 9.6 percent. Under the new rate, Apco says, customers would pay $104.99 per 1,000 kilowatt-hours.

The company has discussed its proposed rate hikes with Armstrong and other politicians representing Apco customers.  Del. Anne Crockett-Stark, R-Wytheville, told The Roanoke Times that she and other lawmakers on both sides of the aisle will oppose the company’s rate request when the SCC holds its hearings.   

Under Virginia’s utility regulations, companies can adjust the "base rate" they charge customers every two years. But they also can can also file separate "rate adjustment cases," or "RACs" at any time. RACs are designed to cover certain changes in costs, such as a sudden increase in fuel prices -- primarily coal in Apco’s case -- or changes in the cost of meeting environmental regulations.

The company requested and received a hefty rate increase for environmental costs about two years ago. In January hearings on Armstrong’s bill, Apco executives said the money was needed to meet stricter air pollution mandates from the Environmental Protection Agency. The utility was adding new air "scrubbers" that reduced the amount of pollution, especially sulfur dioxide, released by its coal-fired plants.

Apco customers complained that between the biennial base rate increases and RAC changes, they never knew what they would be charged month to month. The company said it has decided to bundle the base rate case and three RACs together this year to avoid that problem, with the aim of altering rates once and then leaving them in place for an extended period of time.

In the current request, the firm wants to boost its base rate by about 6.3 percent, then tack on a 3.2 percent increase for environmental costs and a 0.5 percent increase to meet voluntary standards on renewable energy investments. After a slight decrease in generation rates, the requested increase comes to 9.6 percent.

So Armstrong’s right about the size of Apco’s requested increase, but what about the CEO’s salary?

First, we should note that Michael Morris is not the CEO of Apco, as Armstrong implies. Morris is the CEO of American Electric Power, Apco’s parent company. AEP serves about 5.3 million customers in 11 states, including Virginia, West Virginia and Tennessee. The company operates through several different subsidiaries; Apco serves AEP’s customers in Virginia and West Virginia.

Armstrong took the salary information from an article by The Associated Press, which reported that Morris received total compensation of $8.7 million in 2010. The AP said that was a 22 percent increase from 2009.

The AP’s salary calculations are based on a company’s annual proxy filings with the Securities and Exchange Commission. The calculation includes any salary, bonuses and perks, as well as the estimated value of stock options given to the executive in a given year. The AP does not include the change in value of an executive’s pension. That figure is usually included in an executive’s reported salary.

According to AEP’s 2010 proxy, Morris was paid $9 million in 2010, up from $7.5 million in 2009. That’s an increase of 20 percent. Morris made $10 million in 2008.

AEP does not disclose the salary for Charles Patton, Apco’s CEO.

Let’s review our findings.

Armstrong’s right that Apco has requested a roughly 10 percent rate increase. The actual request is for a 9.6 percent jump, but even the utility said "about 10 percent" in its press release.  

Readers could easily conclude from his message that Mike Morris is Apco’s CEO. That’s not the case; Morris is actually CEO of American Electric Power, Apco’s parent company. But Armstrong does cite Morris’s 2010 salary, and the increase from 2009, accurately. The salary figures for Apco CEO Charles Patton are not available.

We rate this statement True.

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Robert Hurt

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