For Release: May 18, 2010
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Allegheny Power’s Service Territory Sale to Electric Cooperatives Approved
- Approval incorporates terms that mitigate rate impacts to customers -
RICHMOND (May 18, 2010) -- Attorney General Ken Cuccinelli announced today the approval of the transfer and sale of Allegheny Power’s Virginia service territory to Rappahannock Electric Cooperative and Shenandoah Valley Electric Cooperative, along with an agreement that will protect customers from sharp rate increases.
The State Corporation Commission (SCC) approved the transaction and imposed conditions to protect customers that the attorney general’s office and Frederick County negotiated with Allegheny Power and the cooperatives.
The attorney general’s office was concerned that the transaction as originally proposed could result in sharply higher rates for Allegheny’s 102,000 customers and place undue financial burden on the two cooperatives’ 145,000 existing customers. To address these issues, the utilities agreed to the following concessions:
Allegheny will contribute $27.5 million to the cooperatives to reduce power supply costs for former Allegheny customers through June 2015.
The cooperatives will defer for one year the collection of $5 million in power costs from former Allegheny customers from July 2012 through June 2013.
Allegheny will contribute to the cooperatives an additional $35 million to reduce the purchase price of the service territory, which will reduce rates for all customers.
The cooperatives agree there will be no base rate increase for former Allegheny customers before July 2014, and distribution rate increases for former Allegheny customers in 2014, 2015, and 2016 are capped at 5% of the total bill.
The cooperatives will amend their bylaws to provide representation for the former Allegheny customers on their respective boards of directors.
The SCC further ordered that the cooperatives not modify base rates before 2020 for either former Allegheny customers or existing cooperative customers without first obtaining commission approval.
Mr. Cuccinelli commented on the SCC’s order: “I am pleased that the State Corporation Commission has approved the transfer of the Allegheny Power service territory to the cooperatives with these important ratepayer protections. We worked closely with Frederick County in negotiating concessions from the utilities to ensure that rate impacts on Allegheny customers would be mitigated. We also took care to avoid undue financial burden on the cooperatives’ existing customers.”
Cuccinelli added, “While Allegheny Power made a business decision that it no longer wished to provide service to its customers in Virginia, I think that Rappahannock Electric Cooperative and Shenandoah Valley Electric Cooperative are enthusiastic about serving these customers. I want to commend Allegheny, the cooperatives, and Frederick County for working with my office to provide the SCC with the framework for a solution that makes sense for all parties and, most importantly, benefits consumers.”
The commission noted in its order that even with the reduced purchase price and mitigation of power supply costs, former Allegheny customers are likely to see rate increases in the future, just as they would have if they remained with Allegheny. However, the SCC also noted that Allegheny customers will benefit by service from the cooperatives because they will get power at prices that are not “subject solely to the vagaries of the wholesale market.” Instead they will be served from a more diverse portfolio of assets via the cooperatives.
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