Alabama Power’s rate hike may be lowered

Published 11:19 pm Wednesday, September 10, 2008

Utility regulators said Tuesday they hope to scale back Alabama Power’s request for a more than 14 percent rate increase 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, a native of Andalusia.

The power company made the announcement earlier this month that it is seeking the rate increase to recoup what it spends on fuel to produce electricity.

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 electricity. 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 Company, 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.

There are approximately 1,800 customers in Covington County — primarily in the Lockhart and Florala area — who are serviced by Alabama Power, according to Alabama Power spokesperson Linda Brannon.

“Right now, we’re asking for a 14.6 percent increase for residential accounts,” Brannon said. “The average utility customer uses about 1,000 kilowatt hours, so their bill will increase by $16.45 per month.”

For residential customers, their overall monthly bill would increase 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.

“It’s basically a pass through cost,” Brannon said. “It’s not anything that will add profit to our bottom line. We’ve seen over the last year the price of coal go up from 27 percent to 227 percent and natural gas as much as 50 percent. Like everyone else, it’s just costing us more to do business.”

The PSC 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 group has the option to approve it, deny it or come back with a modified agreement, Brannon said.

If approved, it will be the second utility rate increase the county has seen within the last two months.

Covington Electric Cooperative (CEC) implemented a power cost adjustment (PCA) of $8.21 per 1,000 kilowatt hours of electricity consumed. It is projected that an additional 5.5 mills per kilowatt hour increase will occur in January 2009 and an additional 5.5 mill increase in July of next year.

For the typical CEC residential customer, the increase meant about a $10 per month increase to their power bill.