HB2621: Promises of Savings for APCo Customers Won’t Bring Needed Immediate Relief

By Carmen Bingham, VPLC Affordable Clean Energy (ACE) Project Coordinator

HB2621, as amended by the House of Delegates, will be before the Senate Commerce & Labor Committee Monday, February 10, 2025 in the afternoon. It is not the savior bill for APCo customers as it is being touted to be. There are no “immediate” savings to any bills in the original bill, nor in the version that was passed.

The original bill was an expansion of current law to allow securitization of storm costs the utility would normally recover through base rates (typically a two year time period). However, APCo wanted a different vehicle that provides for a longer payback period in order to reduce the impact to customers’ monthly bills. However, this longer payback time (10-20 years) comes with the additional costs of financing and other expenses to securitize those costs into a tangible asset, or bond.

Think about this way: you buy a $15,000 car and you pay cash (oh, to be so lucky, right?). You simply hand over the $15,000 and VOILA! you own a car (let’s ignore the title, taxing, and registration costs for the simplicity of the math).

But let’s say, instead, you finance the $15,000 with a loan from your bank at 8% interest, per annum (fancy way of saying “each year”) over the course of 5 years (aka, 60 months). Your monthly payment is $304/month, and after the first year, you still owe $12,678. While you paid $2,322 to the bank only $1,214 of that paid off the original loan. The remaining $1,108 paid interest to the bank. At the end of five years, you end up paying $18,249 when you only borrowed $15,000.

Securitizing costs works the same way: instead of the company collecting the fixed cash amount from their customers to pay for those costs, they instead securitize those costs and create a bond that they can then sell on the market. Investors buy those asset bonds that are guaranteed to provide a specific return on the investment, so when the bond “comes to term” in 10-20 years, the investor has recouped their initial investment, plus interest. Again, all money that has been collected from ratepayers to pay the bond investors.

The only benefit to securitization is when the costs are significantly higher than normal that recovering them from customers within the shorter time period creates such a significant hike in monthly bills – think $23-28 a month increase on your monthly utility bill, then securitization of those costs can reduce that monthly increase to pennies on the dollar – more like $3-5 a month increase. Again, though, customers do end up paying more in the end.

All this being said, VPLC is opposing HB2621 in its current form. However, a Senate companion bill SB1076 was amended to be far better for APCo customers as it provides assurance for APCo’s customers that they won’t be disconnected for non-payment while the company redesigns its repayment program and investigates the available bill assistance programs available to its customers.