PSC begins review of Alabama Power rates

MONTGOMERY, Ala. (AP) -- A state board started a review of Alabama Power's rates Wednesday after completing one for Mobile Gas that could lead to lower rates.

The Public Service Commission's review of Alabama Power rates began with a discussion of the origin of its rate stabilization plan. The review is scheduled to end in July. Then, the commission will decide whether to adjust rates for customers. Alabama Power is a subsidiary of Southern Co.

The PSC recently completed a review of rates for Mobile Gas, a natural gas provider that serves the southwest corner of the state. The company, a unit of Sempra Energy, operates under a rate stabilization plan that provides it with a return on equity of 13.35 percent to 13.85 percent. Commission President Twinkle Cavanaugh said the company suggested during the review that the top end could be reduced to about 12 percent, but other parties in the public proceedings suggested a lower figure.

"I do believe there will be a decrease," she said. She said it's too early to predict where the figure will end up, but the PSC should decide by September.

Commissioner Terry Dunn predicted there will be a decrease for both Mobile Gas and Alabama Power, which supplies electricity to much of the southern two-thirds of the state.

The PSC started the Rate Stabilization and Equalization plan for Alabama Power 31 years ago to provide small, periodic changes in rates rather than big swings. The rate plan provides a range of 13 percent to 14.5 percent, and rates are adjusted when the return falls outside the range.

Christine Baker, Alabama Power's manager of regulatory pricing, said the process has worked well, with 17 years of no adjustments, 11 years of increases and three years of decreases.

Alabama Power's vice president for external affairs, Zeke Smith, said the rate stabilization plan replaced a politically charged system where Alabama Power would apply for a rate increase, the PSC would reject it, and the two sides would fight it out in court. "We were teetering on bankruptcy at the time," he said. But financial conditions are stable now, he said.

Cavanagh said the commission won't scrap the rate stabilization plan because it has worked well, but may make modifications. She said the review won't include environmental issues, including on the use of coal.

Some environmental groups had wanted the company's use of coal-burning plants included in the review, while some business and union groups said that could led to plant closings, job losses and higher rates.

About a dozen groups ranging from AARP to large industries and the NAACP of Birmingham are participating in the public proceedings.

The PSC will review the rates of Alabama Gas after finishing with Alabama Power.

The reviews came after Dunn pushed the PSC to review rates for the three utilities in formal hearings, which are court-like proceedings with lawyers and the sharing of company documents. But the other two commissioners favored the more informal process, where people and groups can participate without attorneys and can ask questions with everyone seated at tables like a business conference.

"It's not the process I wanted, but it did work in getting them to the bargaining table," Dunn said.