...Solid Credit Metrics: Satisfactory outcome to general rate cases (GRC) in West Virginia, effective rate adjustment mechanisms in Virginia and cost-reduction programs have led to an increase in Appalachian Power Co. (APCO) earned return on equity (ROE) by 200bps to 9.4% in 2015, compared with 2014. Fitch Ratings expects earned ROE to further improve slightly in 2016 driven by the full effect of authorized rate increases. Fitch expects the improved financial performance to result in adjusted debt/EBITDAR remaining around 3.5x until 2018. Restrictive Regulatory Environment: Fitch considers the regulatory environment in West Virginia to be somewhat restrictive and the settlement to the expanded net energy cost (ENEC) proceedings adopted in July 2016 was below Fitch's expectations. The regulatory environment in Virginia is generally more constructive, with various riders compensating for the freezing of base retail rates until 2020. Modernization of Generation Fleet: APCO is gradually transitioning...
