Aug. 1--Rate increases in Virginia, Indiana and Oklahoma and cost-cutting measures in the midst of a tough economy helped boost second-quarter profits by about 12 percent for American Electric Power, parent company of Appalachian Power Co., when compared with the same period last year.

Ohio-based AEP is one of the nation's largest electric utilities and, according to the company, delivers electricity to more than 5 million customers in 11 states.

AEP's second quarter ended June 30. Profits were $316 million, or 67 cents per share, compared with $281 million, or 70 cents per share, during the second quarter of 2008. Earnings per share decreased because the company issued new stock in the first quarter.

Michael Morris, AEP's chairman, president and chief executive officer, attributed the increase in earnings primarily to "improved rate structures in a number of our states and to our successful efforts to control costs."

Last year, subsidiary Appalachian, which has about 500,000 customers in Virginia, received approval from the Virginia State Corporation Commission for increases in its base rate, fuel factor and an environmental and reliability surcharge. State law allows Appalachian, as a regulated monopoly, to recover reasonable costs of doing business and a reasonable rate of return.

Another increase sought

Appalachian is seeking SCC approval for additional increases this year.

By some estimates, if current rate requests are granted on top of last year's increases, the monthly bill for a residential customer in Appalachian's Virginia territory who consumes 1,000 kilowatt-hours per month has the potential to jump approximately 76 percent over a period of 17 months, according to the SCC. That period could be longer, depending on the timing of SCC rulings.

Appalachian officials report that even though the SCC allowed the utility a return on common equity in its Virginia territory of 10.2 percent in calendar 2008, the actual return was only 2 percent.

During a recent interview, Barry Thomas, director of regulatory services for Appalachian, said a reasonable return on common equity offers AEP shareholders the rewards necessary "to entice them to stay invested in AEP common stock."

And the utility emphasizes that its electric rates in Virginia have historically been low when compared with many other providers in Virginia and elsewhere. But those rates are catching up.

Appalachian also serves customers in parts of West Virginia and Tennessee.

Revenues drop for AEP

AEP's second-quarter profits increased even though revenues for the period dropped.