Roanoke, Va., July 15, 2010 – Today the Virginia State Corporation Commission (SCC) approved a $61.5 million annual increase in Appalachian Power’s base rates. The increase addresses some of the growing expenses in the company’s day-to-day operations, but stops short of restoring it to financial stability. The company requested a $154 million annual increase, driven primarily by costs associated with generating and purchasing higher cost electricity.

"We’re disappointed in the outcome of the case, but we recognize that raising rates right now is difficult," said Charles Patton, Appalachian Power president and COO. "Appalachian’s request was based on real costs of providing safe and reliable electric service to our customers.

"We are fully aware of the economic pressures that our customers in Virginia face. Fortunately the Commission is allowing us to pass along a $100 million annual reduction in fuel expenses that, when combined with today’s increase, will result in a net decrease in rates of about 3 percent."

This is Appalachian Power’s first base case reviewed under new laws that re-regulated Virginia electric utilities in 2007.

"The new law has been the subject of some debate," Patton said. "As demonstrated by the order, the SCC retains its rate-setting authority and discretion. Regrettably, the outcome of this case continues to put Appalachian at a disadvantage as it tries to attract the investors needed to build and improve our electrical infrastructure and comply with environmental mandates. Despite our disappointment, Appalachian Power is committed to working with our regulators and key stakeholders to provide safe, reliable power at a reasonable cost and which supports the financial health of the company."

In recent years Appalachian earned average returns on equity of less than 5 percent while companies that it competes with for investors often earn 11 to 13 percent for their shareholders. Today’s order does not guarantee a profit level for Appalachian, but instead gives the company the opportunity to earn up to a 10.5 percent return on equity.

Today’s increase, along with the $100 million decrease in fuel and the expiration of a $90 million environmental and reliability rider in December will result in lower electric prices in the short term. However, stricter environmental controls and increasing costs to purchase power will result in a long-term upward trend in electric rates. Customers should take care to use electricity wisely.

Customers interested in learning ways to reduce their electricity usage can find useful information at www.WattWhyandHow.com.

Appalachian Power provides electricity to 1 million customers in Virginia, West Virginia and Tennessee (as AEP Appalachian Power). It is a unit of American Electric Power (NYSE: AEP), one of the largest electric utilities in the United States, with more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.