Utility to kick in $27.5 million to avoid 'rate shock'

Deal between Frederick and electric co-ops would offset electric rate increases until 2014

By J.R. Williams - jrwilliams@nvdaily.com

WINCHESTER -- An agreement filed Tuesday between Frederick County and electric co-ops poised to take over territory from Allegheny Power would soften rate increases should the sale be approved, officials said.

Under the agreement filed with the State Corporation Commission, Potomac Edison, parent company to Allegheny Power, will provide $27.5 million to offset rate increases through 2014, a joint statement says.

An additional $35 million will be contributed to the co-ops to steady future rates.

Allegheny is prepared to sell its territory and facilities in the Northern Shenandoah Valley to Rappahannock and Shenandoah Valley electric cooperatives. About 102,000 customers would be affected.

The city of Winchester would be served by SVEC. Territory in Clarke, Frederick, Shenandoah, Warren and Page counties would be split between the two cooperatives.

The State Corporation Commission has yet to adopt the agreement or approve the sale, which was to cost about $340 million. Allegheny's contributions through the agreement will reduce that amount, the statement says.

The agreement carries restrictions on when and by how much the cooperatives can increase delivery service rates to their customers.

According to a news release from county officials, rates in Frederick County likely will increase about 5 percent each year through 2013. In 2014, rates would increase about 10 percent, and 5 percent or less in 2015 and 2016.

Those increases likely would have been much higher if the agreement had not been reached, the release says. Virginia Senior Assistant Attorney General C. Meade Browder Jr. has said the sale could have resulted in a 17 to 24 percent rate hike.

"Thanks to the regional effort of the Frederick County IDA and 15 industrial customers in 2008 and today's efforts ... customers in Frederick County and the current Allegheny Virginia service territory have and will benefit from competitive electric rates for a total of eight years," Frederick County Administrator John R. Riley states in the release.

Additionally, new territories will gain representation on the board of directors of each cooperative. In Frederick County, REC and SVEC each would provide service to about half the county.

Frederick officials have been involved in the case since its inception, filing objections with the SCC over rate increases.

Sen. Jill Holtzman Vogel, R-Upperville, also filed a letter to the SCC, urging phased price increases for customers to avoid "rate shock."

The agreement asks the SCC to postpone any other action in the case until state regulators consider the agreement itself.