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A Project of The Annenberg Public Policy Center

Dueling Ads in Virginia Race

A TV ad from Virginia state Sen. Creigh Deeds, who’s running on the Democratic ticket in one of the nation’s two gubernatorial races this year, misleadingly describes his opponent’s role in utility rate increases over the last several years.

The Deeds campaign’s ad, "Power," asks viewers, "In tough times, what kind of politician sides with Appalachian Power?" The answer is "Bob McDonnell," according to the ad’s narrator. According to the narrator, McDonnell, the former state attorney general and GOP candidate, "recommended $180 million dollars in rate increases that would cost $360 dollars for each of us." He adds, "McDonnell even said the utility companies were entitled to it."

It’s true that during McDonnell’s tenure, from 2006 until earlier this year, the Virginia attorney general’s office recommended rate increases totaling nearly that much in three specific cases involving requests by Appalachian Power, a unit of American Electric Power. The ad’s reference to McDonnell saying that the company was "entitled to it" came from a debate sponsored by the Virginia Bar Association on July 25. McDonnell said during the debate that "utilities are entitled to rate increases under the law." And he’s right. Under state law, regulated electric utilities are able to recover operating expenses through "reasonable" rate increases as determined by the State Corporation Committee.

The ad also doesn’t mention that the Office of Attorney General’s Division of Consumer Counsel’s recommendations are not volunteered, but are required by state law. The division represents consumers in such cases to assure that the rate hikes sought by a company are fair. After reviewing a company’s request, the division decides what it thinks is reasonable and presents that information to the SCC. The SCC makes the final decision on rate increases, not the attorney general’s office.

It’s also worth noting that the recommendations offered by the Division of Consumer Counsel cited in the ad were significantly less than what the company originally requested. In two of the three cases mentioned, they were also lower than the amount the company was eventually awarded by the SCC. For instance, in one case cited in the ad (PUE-2008-00046), Appalachian Power requested a 23.9 percent base rate increase representing nearly $208 million in operating revenue. After reviewing the request, consumer counsel recommended that the company receive just over $133 million. The SCC, however, eventually approved a 19.3 percent base rate increase, or about $168 million in revenue.

The ad suggests that the increases would have been felt by everyone in Virginia. That’s misleading. According to the SCC, Appalachian Power "serves approximately 500,000 customers in all or parts of 31 counties in southwest Virginia." That’s about 6 percent of Virginia’s nearly 7.8 million residents.

McDonnell has responded with his own ad. We’ll analyze that one next week. Watch this space.

Correction: We originally said that, in the cases cited in Deeds’ ad, the rate increase recommendations made by the Attorney General’s office were lower than the increases eventually allowed by the State Corporation Committee. However, we have learned that that was the case in only two of the three cases mentioned. We have corrected the story accordingly.