Alabama PSC keeps Alabama Power rate plan

Alabama PSC keeps Alabama Power rate plan

October 1st, 2013 by Associated Press in Local - Breaking News

By PHILLIP RAWLS

Associated Press

MONTGOMERY, Ala. - The state's utility regulatory board stood by its new rate structure for Alabama Power Co. today despite claims by AARP that the plan does nothing to lessen what consumers pay.

The Public Service Commission voted 2-1 to reject AARP's request to reconsider the rate plan. The vote was the same as the PSC's 2-1 vote in August to approve the rate plan, with Commissioners Twinkle Andress Cavanaugh and Jeremy Oden supporting it and Commissioner Terry Dunn favoring reconsideration. All three are Republicans.

AARP attorney John Coffman said Alabama Power's rates are out of line with regulated electric utilities elsewhere. He said the PSC should have reduced the company's profits by $287 million annually, which would have provided the average residential customers with $90 to $100 in annual savings.

Alabama Power spokesman Michael Sznajderman said AARP's claims "were without merit and full of political rhetoric."

The PSC's legal staff recommended the commission reject AARP's request, saying the organization for older citizens didn't raise any new legal or factual issues warranting reconsideration.

The PSC voted in August to base Alabama Power's rates on weighted cost of equity rather than return on equity, which has been used for the last 31 years. Cavanaugh and Oden voted to set the weighted cost of equity between 5.75 percent and 6.21 percent. The range had been a return on equity of 13 percent to 14.5 percent.

After the vote, Alabama Power said its basic rates would remain the same through 2014, but the new plan would mean rates could go down over the long run.

Today Cavanaugh said she believes customers will see lower rates during the rate structure's six-year life span. Oden said the plan will keep rates stable at a time when other utilities not regulated by the PSC, such as the Tennessee Valley Authority, are raising costs.

The PSC's August vote came after public meetings where the commission got input from a variety of groups.

"Anyone who looks with an unbiased eye will agree that this has been the most open and transparent review in the history of the Alabama Public Service Commission," Cavanaugh said today.

Oden said PSC's decision to use weighted cost of equity gives a broader look at Alabama Power's financial structure than using return on equity.

Coffman said the hearings were superficial compared to what other utility regulatory boards do, and the weighted cost of equity is not used by any other utility regulatory board in the United States.

Dunn said, "Allowing the public to attend the informal hearings didn't make the process transparent; it just gave them a front-row seat for the creation of a smokescreen."