Ala. PSC rejects call for formal review of rates

MONTGOMERY, Ala. (AP) -- Commissioner Terry Dunn's fellow Republicans on the Alabama Public Service Commission blocked his effort Thursday to have a formal review to determine if consumers are paying too much for services by Alabama Power, Alabama Gas and Mobile Gas.

At Thursday's meeting, Dunn proposed a formal review of the rate structures for Alabama's three largest investor-owned utilities. Neither Commission President Twinkle Andress Cavanaugh nor Commissioner Jeremy Oden would second his proposal to bring it to a vote. They said informal informational meetings are the best way to look at the rates for Alabama Power, Alabama Gas and Mobile Gas.

The PSC's decision drew praise from a leader for coal miners in the South.

"Commissioner Terry Dun's efforts to call for formal hearings on utility ratemaking is nothing more than a ploy of radical environmental groups to create a stage where they can argue for the end of coal as a fuel and to fight for the end of coal mining in Alabama and across America," said Daryl Dewberry, the southeastern vice president for the United Mineworkers of America.

Dunn said the rate structures have been in place for many years without a formal review, and it's time to see if they are still fair, particularly in light of a recent report from an independent research group, Regulatory Research Associates, that they are above the national average.

"I have always been committed to the necessity of balancing our nation's ongoing efforts to reduce pollution against the cost of accomplishing that goal. But first, let's review these utilities' rates," he said.

The three utilities' rates have been steady lately due, in part, to lower natural gas prices. Officials of Alabama Gas and Alabama Power said during the meeting that they will work with the commission to try to come up with a plan to keep rates steady through 2014.

Rate plans approved years ago by the PSC adjust the utilities' rates so their return on common equity falls within a range. The PSC has provided Alabama Power with a rate of return on common equity of 13 percent to 14.5 percent since 1982. The range for Alabama Gas has been 13.15 percent to 13.65 percent since 1983. The range for Mobile Gas has been 13.35 percent to 13.85 percent since 2002. If a utility's return goes above that range, the PSC can lower consumers' rates. If its returns drop below the rate for long, the PSC can raise consumers' rates.

Alabama Power spokesman Michael Sznajderman said, "We feel the current system has worked well." He said when all factors are considered, Alabama Power's overall return is less than 8 percent, which is in line with similar utilities.

He said a formal review would send a signal of uncertainty to Wall Street, which might damage the utility's credit rating and raise the cost of borrowing money.

Dunn proposed a formal review because it would be a court-like proceeding with everything recorded and one side able to question the other. Kathryn Byrd, president of the League of Women Voters of Alabama, said Dunn's plan would end "the 30-year exclusion of interested parties from access to and involvement in decisions about our electricity and natural gas prices and rates."

Oden said informational meetings are like people talking around the kitchen table and provide more opportunity for individuals and groups to participate without having lawyers represent them.

Under a plan first discussed in December, the PSC will hold informational meetings to discuss rates and other issues for each utility. The meetings will begin with three concerning Mobile Gas at 10 a.m. on Jan. 30, Feb. 21 and March 13. Cavanaugh said Alabama Gas and Alabama Power will follow, with the dates to be determined.

Dunn said he will keep trying to generate public sentiment for a formal review because "It is so obviously in the public interest and so obviously overdue."