AEP to Get Another Rate Hike?

On Wednesday, July 15, Appalachian Power asked for a rate hike aggregating $193 million from the Virginia State Corporation Commission to recover its transmission costs.

Appalachian Power is the utility subsidiary of Columbus, Ohio-based public utility holding company, American Electric Power Company, Inc. (AEP). The utility provides power to Virginia and West Virginia.

The rate hike if approved would raise residential customers' bills by about 19%. As per company estimates, the monthly bill for a customer consuming 1,000 kilowatt hours would jump from $92.97 to $109.89. Overall, combining its residential, commercial and industrial accounts, the company is asking for an average hike of 16%.

Appalachian Power had last asked for a rate hike in May 2008. The case concluded in November 2008, resulting in a $168 million rate increase, and that rate was applied in December 2008.

The company also has another couple of applications pending for approval. Primary among them is the request for a fuel factor increase of $141.7 million for Virginia. Although Appalachian Power has cried foul over its under-recovery of fuel costs in the request, the Virginia Attorney General have asked the company to reflect the recent fall in fuel prices in the request.

With a mildly bullish outlook, modest earnings growth expectations and an attractive dividend yield, we maintain our market-neutral HOLD rating on AEP.

Read the full analyst report on AEP