...Predictable Utility Earnings: The ratings on Appalachian Power Co. (APCO) consider the predictable earnings and cash flows from its mostly regulated activities. The regulatory construct includes mechanisms to limit commodity price exposure, thus reducing cash flow volatility. Constrained by Regulatory Environment: Fitch Ratings considers the regulatory environment in West Virginia to be somewhat restrictive. The West Virginia Public Service Commission (WPSC) approved in May 2015 a base rate increase of $79 million based on a 9.75% return on equity (ROE), which is in line with Fitch's expectations. The regulatory environment in Virginia is generally more constructive, with various riders partly offsetting the freezing of base retail rates until 2020. Resilient Credit Metrics: APCO's credit protection measures are in line with its rating level. Fitch expects adjusted debt/EBITDAR, which improved in recent years, to remain around 3.9x through 2017, while FFO-adjusted leverage could slip modestly...
