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Public Service Commission decision could mean savings for some Ala. Power customers

Published 11:49am Thursday, August 15, 2013

A recent decision from the Alabama Public Service Commission could lead to decreased power bills for Alabama Power customers.
The PSC voted 2-1 to implement what is being called the largest reduction in allowed rate of return for Alabama Power in 25 years. Commissioner Tony Dunn voted against the reduction.
PSC Commissioner Twinkle Andress Cavanaugh said in a release that customers could see savings between $30 to $110 per year. Actual amount of savings could depend on factors such as amount of electricity used, weather trends and rate classification.
Most consumers who continue to use the same amount of electricity, Cavanaugh said, should expect savings close to the middle of the range.
“While Alabama Power Company felt their current rate structure was justifiable, our job as commissioners is to do what’s fair for all, and our hearings showed that consumers deserve some relief in the bills they pay,” Cavanaugh said.
The Commission adjusted the RSE formula to reflect a weighted rate of return on equity with a range of 5.75 percent to 6.21 percent with a reset point of 5.98 percent. The weighted numbers represent a range of 10.27 percent to 11.09 percent with an adjusting point of 10.68 percent when compared to the newly allowed capital structure of Mobile Gas Company.
The previous allowed rate of return was guaranteed at 13 percent but not to exceed 14.5 percent. By capping the allowed rate of return, Alabama Power would be forced to cut rates once the return on investor equity hits the 11.09 percent high threshold.
The reduction comes following a series of public rate review hearings conducted across the state. Cavanaugh praised the openness of the procedure.
“In addition to testimony from Alabama Power officials, the commission heard from groups as diverse as the Tea Party, labor unions, public policy think tanks, and even environmental groups supporting Obama’s War on Coal with whom I vehemently disagree,” Cavanaugh said. “Anyone who looks with an unbiased eye will agree that this has been the most open and transparent process in the history of the Alabama Public Service Commission.”
The reduction is set to go into effect in January.
“We believe we made a strong case that the system as it stands is fair and has worked well for customers,” said Alyson Tucker, a spokesperson with Alabama Power. “So for that reason, we’re disappointed they’ve recommended lowering our allowed range. We will be reviewing the recommendation in its entirety.”
Tucker said that Alabama Power will be working in the coming weeks to determine how the decision will affect their business and our customers.