Despite PSC vote, Ala. Power rates to remain flat

Alabama Power Sign (WIAT)
Alabama Power Sign (WIAT)

MONTGOMERY, Ala. (AP) – Alabama Power Co. predicts its rates will remain level through 2014 despite the forecast of consumer savings when the state’s utility regulatory board approved a new rate plan.

The Public Service Commission voted 2-1 Aug. 13 to revise a rate plan that had been used for Alabama Power for about 30 years. Commission President Twinkle Andress Cavanaugh said consumers could expect savings of $30 to $110 each year on their bills, with those using the same amount of electricity realizing savings close to the midpoint.

Alabama Power spokesman Michael Sznajderman said those projections didn’t come from the power company. Instead, the state’s largest electric utility said in a statement, “The modification will not result in any immediate reduction in customer bills, but it is expected to put downward pressure on rates over the long run.”

Sznajderman said the new rate structure could reduce the company’s revenue by $40 million, which is less than 1 percent of annual operating revenue, but it’s too early to say when consumers might see an impact on their rates.

“The bottom line is this does mean over the long term real savings for customers,” he said.

The basic part of Alabama Power’s rates come from a rate stabilization formula used by the PSC. For many years, the formula provided for Alabama Power to get a return on equity of 13.0 percent to 14.5 percent. Commissioners Cavanaugh and Jeremy Oden voted to change that to a weighted cost of equity between 5.75 percent and 6.21 percent.

Immediately after the vote, Cavanaugh said, “While Alabama Power Company felt their current rate structure was justifiable, our job as commissioners is to do what’s fair for all, and our hearings showed that consumers deserve some relief in the bills they pay.”

Commissioner Terry Dunn voted against it, saying it wouldn’t have any impact on the rates paid by consumers.

AARP has asked the PSC to reconsider its decision. AARP attorney John Coffman said the new rate structure “does not actually lower electric rates or lower electric bills, but rather affirms a rate structure that would force consumers to continue paying to Alabama Power the highest level of profit currently allowed to any regulated electric company in the entire United States.” He also said the weighted cost of equity method used by the Alabama’s PSC has not been used by any other utility regulatory board in the nation.

Cavanaugh and Oden declined comment. Aides said they are waiting to see what response Alabama Power and others involved in the rate case might file in opposition to AARP’s request.

Dunn said Thursday he supports AARP’s request. “I was confident the truth would come out eventually. I just hope the people who were fooled initially are still listening,” he said.

Dunn has drawn criticism from some of his fellow Republicans for siding with AARP, and he has attracted three opponents in the Republican primary in June – more than any other incumbent Republican holding a statewide office. Dunn said regardless of what AARP is doing elsewhere, “the only thing they did during the Alabama Power hearings was argue that senior citizens deserve fair utility rates, and I agree wholeheartedly.”

Sznajderman said Alabama Power considers AARP’s request without merit and will ask the PSC to reject it. That could come at the PSC’s Oct. 1 meeting. If the PSC sides with Alabama Power, the new rate structure will take effect with the new year.

Alabama Power is forecasting that its base rate will remain stable through 2014. In addition, the company’s rates include compensation for its cost of buying fuel and meeting environmental regulations. Sznajderman said the company does not anticipate any significant changes in those portions of the rates in the near future.

The Alabama Power spokesman said the company’s flat rates contrast with increases enacted by some other utilities. That includes the Tennessee Valley Authority board voting in August to raise its base rate 1.5 percent. TVA serves parts of north Alabama.

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