PSC may scale back Alabama Power’s rate proposal

Published 3:50 pm Tuesday, September 9, 2008

MONTGOMERY – Utility regulators said Tuesday they hope to scale back Alabama Power Co.’s request for a record rate hike of more than 14 percent for homes and nearly 25 percent for industries.

“I’m not going to let it go in without every opportunity to try to decrease it or eliminate it, if possible,” state Public Service Commission President Jim Sullivan said after the board meeting.

Commissioners Jan Cook and Susan Parker said the three-member panel must be fair to the state’s largest electricity utility, but the goal is to keep rates as low as possible for consumers.

PSC rules say a portion of Alabama Power’s rates can be used by the company to recover what it spends on fuel to produce electric. Rising prices for natural gas and particularly for coal, which generates 70 percent of the utility’s electricity, have kept the company from covering its fuel costs in recent months.

Through July, Alabama Power was $239 million short of recovering its costs, including interest on its debt from the fuel costs.

Alabama Power, which is operated by the Atlanta-based Southern Co., serves the southern two-thirds of the state. It filed a proposal with the commission last month to raise rates 14.6 percent for residential customers, 16 percent for commercial customers, and 24.8 percent for industrial customers. That would allow the power company to recoup its shortfall in one year.

For residential customers, the cost of 1,000 kilowatt hours would rise $16.45 – from $112.90 to $129.35.

The PSC’s staff said the proposed increase would be the largest for Alabama Power since the commission went to its current system of setting electric rates in 1982. The record was in 2006, when residential rates increased 12.8 percent.

Alabama Power’s rate request follows a trend by Southern utilities to hike prices due to fuel costs. For instance, the Tennessee Valley Authority, which serves the northern third of the state, approved a 20 percent hike last month. It’s the utility’s largest increase in 30 years.

The Public Service Commission will hold a hearing on Alabama Power’s rate proposal Sept. 23, and then will have the issue on its agenda for action on Oct. 7.

The state’s largest natural gas distributor, Alabama Gas Corp. said it will not request a rate hike.

“That’s good news that comes at a great time,” Sullivan said.

Attorneys representing some of the state’s largest industries plan to speak out at the hearing, as does the state attorney general’s office, which represents residential consumers.

Attorney General Troy King’s staff is still reviewing Alabama Power’s proposal and formulating a response, said spokesman Chris Bence.

James McLemore, attorney for the Alabama Industrial Energy Consumers, said his members, including U.S. Steel, ThyssenKrupp, Occidental Chemical and Dow Corning, are concerned. He uses one word to describe the potential impact: “enormous.”

McLemore said the PSC has the authority to scale back a rate request and let Alabama Power recover its money over a longer period than one year.

Alabama Power spokesman Michael Sznadjerman said the PSC can stretch the recovery over 18 months or two years, which would reduce the size of the increase, but the price of fuel is expected to keep increasing in the long run due to greater global demand.

Damon Xenopoulos, a Washington attorney representing CMC Steel in Birmingham and Nucor Steel in Birmingham and Tuscaloosa, said the proposed hike would put the companies “at a competitive disadvantage nationally and internationally.”

The companies have filed paperwork with the PSC, asking it to delay Alabama Power’s request for at least 90 days and review whether the company has tried to keep fuel costs as low as possible.

Alabama Power’s Sznajderman said, “We’re always looking to get the best deal.”