Statement: Alabama Power needs more transparent regulation

The Alabama Public Service Commission‘s third “Public proceeding regarding the operation and utilization of Rate RSE (Rate Stabilization and Equalization) of Alabama Power Company” on July 17, 2013 lasted for nearly 12 hours. No schedule was provided to indicate what time the floor would be opened to the public; I was unable to deliver my prepared comments in person and a proxy was not allowed to read it due to the late hour, so I am posting it here.

The purpose of the hearing was to informally review Alabama’s forumula-based rate-setting system, which has been in place for 30 years and does not include rate cases or a public review of an Integrated Resource Plan; SACE and our allies’ joint statement on the proceedings was published by AL.com on July 22.

Good afternoon, and thank you for this opportunity to address the Commission. My name is Amelia Shenstone and I’m the Southeast Energy Organizer for the Southern Alliance for Clean Energy (SACE), a southern organization that promotes safe, healthy energy choices. I work in both Alabama and Georgia, two states that are similar in their values, their energy mix, and the fact that their largest energy providers are both Southern Company utilities.

Alabama’s Rate RSE mechanism has been in place for 30 years, allowing the company to set its rates within a given range without full public hearings. We believe the RSE system is not adequately transparent to assure ratepayers that Alabama Power is making the most cost-effective decisions about how to provide reliable electricity. There is a direct connection between operational decisions such as pollution controls, fuel and generation resources, and rates. And the more transparent and inclusive the decision-making process is, the better the result for all sides.

PSC meeting runs over. Photo: @gaspgroup

As a case in point, over the past several months, the Georgia PSC reviewed Georgia Power’s long-term plan, known as the Integrated Resource Plan or IRP. Many groups like SACE, industry groups, businesses, and citizens all had an opportunity to weigh in. One of the Republican commissioners introduced a motion to include more solar energy in the plan. Notably, Georgia Power itself said that it did not consider this move a “mandate” and that bringing online enough solar to provide roughly 1% of its energy mix would not put upward pressure on rates. The Commission ensured as much in its final approval – they only have to use solar if it’s cost effective, and indeed, solar is becoming more and more cost-effective every day.

Could solar energy provide viable alternatives and options to Alabama’s energy mix, without putting upward pressure on rates?  Under Rate RSE, customers have no way to see whether Alabama Power has considered this option and what assumptions it used in its calculations. Nor do they have any idea about how much the company is investing in energy efficiency programs, which are by far the most cost-effective energy resource, benefitting both customer and company.

Typically, Public Service Commissions weigh information provided by all parties in their regulatory decisions. As Georgia Commissioner Bubba McDonald pointed out after the solar controversy, this process is healthy for consumers and utilities. This is the same type of analysis that we would like to see in Alabama.

I hope this commission will consider not just the total profit margin Alabama Power earns on what it spends, but, in the future, the process by which its spending choices are reviewed by the commission and by the public. Thank you very much for your consideration.

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