Why We’re at the Table: Utility Rate Hearings, Our Natural Resources and Our Economy

Today, the Alabama Public Service Commission (PSC) is holding the first of three informal hearings on Alabama Power Co.’s rate of return on equity, a measure of the utility’s guaranteed profit. Southern Environmental Law Center is representing GASP and Southern Alliance for Clean Energy at the hearings to voice these groups’ concerns about the lack of transparency in the process and the resulting effects on residents and businesses, their health, the environment, and energy choices in the state.

In Alabama, rate of return on equity is determined through a formula called RSE, which has been in place since 1982. This mechanism forgoes the public hearing process that occurs in most other states. The lack of a formal public process means that critical decisions involving energy resource planning, environmental compliance, and the rates Alabama Power charges are made without meaningful participation by the rate-paying public. Under this opaque process, Alabama residential ratepayers pay some of the highest utility bills in the nation.

Transparency in the way Alabama Power spends money to produce energy is critical to ensuring that customer rates reflect the most economical options. Some of those options have the benefit of reducing air and water pollution as well as being less expensive. Continuing to invest in older, uneconomic and inefficient coal-burning power plants, rather than beginning the transition to cleaner fuels or investing in energy efficiency measures, costs Alabama ratepayers in numerous ways, from our pocketbooks to our natural resources.

In states with more transparent planning and rate-setting processes, utilities are moving away from an over-reliance on older coal-burning plants, which are usually not the most economic option for customers due to their age and the costly upgrades required to meet pollution standards – standards designed to protect public health. Georgia Power, Alabama Power’s sister company, recently announced plans to move away from older coal plants, stating that continued operation of the facilities is no longer economically beneficial to customers. The costs the utility referenced don’t even include other economic burdens the state and people bear as a result of pollution from aging plants, such as increased health-care costs.

Currently, Alabama ranks in the bottom 10 states for energy efficiency measures – a proven, cost-effective way to lower monthly energy bills. Alabama Power also falls far behind peer utilities in the Southeast in renewable energy investments such as solar, wind, and biomass – strategies that would wisely diversify the state’s energy portfolio, provide new energy choices for consumers, benefit our environment, create jobs, and safeguard Alabama’s energy security.

Establishing better accountability of Alabama Power to the PSC and the public through a transparent regulatory process would generate better investments and cleaner energy. Robust formal proceedings would allow experts to testify on the economic and environmental impacts of different energy options, would require the utilities to share data about their operational decisions and rate structures, and would give the public a chance to weigh in on choices that affect us all. It’s the only way for the Public Service Commission to receive the information and analysis necessary to effectively regulate Alabama Power and other utilities.

While the state’s utilities and the Public Service Commission are resisting calls for a formal process, they did agree to hold a series of informal meetings. Today’s informal hearing marks a critical opportunity to begin raising these issues. We can achieve a less expensive rate structure and cleaner energy options if we stand together to call for fairness and transparency at the PSC.

What’s at stake is millions of dollars of ratepayer money, an opportunity to clean up the most polluting plants in the state and move towards a cleaner energy future, and the chance to open the door on a process that has excluded the public for far too long.