West Virginia Commission Revises AEP Rate Case Decision

Concurrent with the February 2026 update of FactSet’s Utility Jurisdiction Rankings, this Insight examines a recent ruling from the West Virginia Public Service Commission (WVPSC).

In February 2026, the WVPSC agreed to reconsider and revise key components of its original August 2025 decision in the general rate case involving AEP subsidiaries Appalachian Power and Wheeling Power (Docket 24-0854-E-42T). While the revised terms approved by the Commission are still significantly less favorable than those sought by AEP in its initial application (approved revenue increase is just 36% of the initial request), they represent a substantial improvement from those in the original decision.

While motions for reconsideration after final orders in rate case proceedings are common, Commissions across the nation rarely alter decisions except to correct minor technical issues or to provide clarifications. The WVPSC’s decision to revisit key financial components of this ruling is rarer still in that the Commission did so over the objections of its own staff.

Reconsideration Timeline and Commission Reasoning

After the August 2025 ruling, AEP filed a petition for reconsideration, describing the approved ROE of 9.25% (a 50 bp reduction from the 9.75% ROE approved in the previous case) as punitive, arbitrary, improper, and seriously detrimental to its financial strength. In this petition for reconsideration, AEP asserted its approved ROE should at least remain at 9.75%, as interest rates are higher today than they were during its last rate case in 2019, and the increases over the last several years have negatively impacted the company’s cost of capital.

Commission Staff recommended denying AEP’s petition since the original order “…was well reasoned and fully supported by the record.” Staff also noted that in September 2025 the Federal Reserve lowered its key interest rate by 0.25 percentage points, a cut that argues against a higher ROE.

In its revised opinion, the WVPSC highlighted divergent assumptions in the parties’ financial models. For example, AEP used a higher stock dividend yield (4.1%) to calculate its ROE than did Commission Staff (3.68%) and the Consumer Advocate Division (3.4%). The difference in assumed yields resulted from stock prices chosen over periods of varying lengths and time frames:

• AEP used 30 trading days from 2024.
• The Consumer Advocate Division used 30 trading days ending April 2025.
• Commission Staff also used 2025 data but over a longer period, from January 2025 to April 2025.

The WVPSC pointedly set these variables on the backburner, stating in the August 2025 decision that reliance on model data “…in a rapidly changing financial environment—when stock prices and bond interest rates can vary significantly based on nothing more than rumors of a Federal Reserve interest rate reduction or increase—requires more nuanced evaluation by the Commission. While limited stock price data helps form a range of indicated returns, in a volatile market Commission judgement is more important than ever.”

Simply put, the PSC’s judgement, “upon reconsideration,” changed from August 2025 to February 2026. Prompted by AEP’s petition, it took another look at all the information presented to it and reached a different determination on a just and reasonable ROE. AEP did not present new information. It explained the consequences of the PSC’s original order: “significantly” increased regulatory risk, a potentially negative impact on credit ratings, and increased costs of debt and equity.

This is a clear illustration that appropriate approved ROE in any given rate case is not the product of simple calculations based upon mathematical models. Rather it is an exercise in informed judgment, as the Supreme Court advised in its 1944 ruling in FPC v. Hope Natural Gas Co. That case, the WVPSC noted in its order, set the foundational tenets of utility ratemaking, requiring that ROE assures “the financial soundness of a utility so as to maintain its credit and to attract capital.” The Supreme Court told regulators they can apply different theories or methods, or no models; the decision must be based on judgment. The WVPSC mirrored this notion in its order, stating “There is no absolute, correct answer with regard to ROE even though the determination of a reasonable ROE involves calculations on a mass of data presented by expert witnesses. The fair ROE result lies within a zone of reasonableness.”

FactSet ranks West Virginia in the lower tiers of utility regulatory jurisdictions because its investment environment is uncertain, risky, and challenging (due to disallowances, dismissals of rate cases, lengthy proceedings, etc.) Commensurate with that low ranking, the $91MM revenue increase in this case is far afield from AEP’s initial request for a $250MM revenue increase. However, the WVPSC’s reconsideration of its final order could be a harbinger of improvement, with more favorable outcomes potentially lying ahead.

Perhaps equally important, the WVPSC’s willingness to reconsider its orders could preclude lawsuits. Several times in 2025, utilities sued commissions when the latter refused to reconsider rate case rulings that utilities found unlawful, unjust, and unreasonable. For example, Enbridge Gas (Case No. 23-0894) took a case to Ohio’s Supreme Court, and Kentucky Power appealed to a circuit court (Case No. 2023-00159).

In short, the WVPSC’s modifications to its original order reflect a deliberate, measured approach to ensuring West Virginia’s utilities have access to adequate capital investment. This is a step forward for a state that’s had few positive regulatory trends in recent years. Be sure to check back in for more utility & regulatory Insights from FactSet.

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