Allegheny Power can impose a rate increase July 1, subject to refund, that will raise typical residential bills by 29 percent, state regulators said yesterday.

Typical residential customers using 1,000 kilowatt hours per month will see their monthly bill increase $20.45. Allegheny serves 101,000 customers in northwestern Virginia.

The State Corporation Commission said it will hold a hearing Oct. 21 on the company's request to raise its rates that cover fuel costs.

The interim rate increase will generate $73 million annually. It will result in a fuel rate on customers' bills of 2.351 cents per kilowatt hour, compared with the current 0.306 cents.

The utility asked for a $73 million rate increase -- which is based on calculations by the SCC staff -- at the minimum, but says it really needs a $108 million increase to fully cover its fuel costs in 2008.

Allegheny Power, a trade name for the Potomac Edison Co., has most of its customers in Maryland and West Virginia, with just under a fifth of its operations in Virginia. Its territory consists of Winchester and all of Frederick, Warren and Page counties, as well as parts of Albemarle, Clarke, Madison, Greene, Shenandoah, Rappahannock and Highland counties.

Without a rate increase, the company says the return on equity for its Virginia operations is expected to be a negative 64 percent this year, rising to a negative 99 percent in 2009.

-- Greg Edwards