How do ratepayers usually know whether or not the electricity bills they pay are fair?
In many states with monopoly investor-owned electric utilities, ratepayers typically have access to and can participate in the utility’s process for deciding what sources of energy to invest in. State regulators publicly review and approve a key utility document called an Integrated Resource Plan (IRP), which is used to build a road map of how ratepayer dollars will be most efficiently spent to maintain infrastructure and to generate and distribute electricity.
But Alabama ratepayers aren’t so lucky, and it’s hitting them where it hurts: in the wallet.
A new report released on February 26 from the Institute for Energy Economics and Financial Analysis (IEEFA) examines the Alabama Public Service Commission’s (PSC) “cursory and opaque” process for reviewing Alabama Power’s IRP. The report finds Alabama’s process severely lacking compared to peer Southern states in terms of public hearings, and ratepayer access to critical information supporting Commission claims of thorough and cost-effective internal review. It also finds that ratepayers are on the hook for nearly $3 billion of upgrades to outdated coal-fired power plants. The PSC approved these expenses without any public evidence that the upgrades represent the most cost-effective and least economically risky alternative to ratepayers. The report makes the case that these upgrades have, in fact, a high level of economic risk warranting detailed scrutiny.
The report, called Left in the Dark: How the Alabama Public Service Commission Makes Customers Pay Billions of Dollars for Alabama Power Investments without Any Meaningful Public Review or Involvement, was prepared by IEEFA’s David Schlissel on behalf of the Southern Environmental Law Center, SACE, and GASP, all of which are groups that have been denied access to documents detailing the utility’s resource planning.
IRP review processes vary by state and have various strengths and weaknesses, but are a fundamentally important opportunity for the public and public interest groups to advocate for utilities to fairly consider what is in the best interest of customers, air and water quality, and the bottom line. For example, Georgia Power’s most recent IRP review in 2013 resulted in a plan to add over 500MW of cost-effective solar power to the utility’s system, boosting Georgia into the top states nationally for solar development. In other Southeastern states and at the federally regulated Tennessee Valley Authority, SACE staff are usually able to review assumptions the utilities use to model energy needs and choices, and testify about improvements that would more accurately reflect the true cost of operating older coal plants and opportunities for economically competitive clean, renewable energy. The report includes a detailed section comparing each of the Southern state PSC processes to Alabama to illustrate the dramatic distinctions that are denying customers of Alabama Power their rightful democratic engagement opportunities.
SACE and our allies have pointed out the PSC’s lack of transparency before, most recently around its December 2014 announcement of new approved rates for Alabama Power customers. Those rates were approved with – you guessed it – no public review process. And the rates went up, despite PSC President Twinkle Cavanaugh’s promise that they would go down following the 2013 informal rate hearings. Those rate hearings themselves were conducted without a formal record and did not include any testimony under oath, unlike other states’ regulatory proceedings examined by the report.
Pres. Cavanaugh is on the record saying other things she can’t back up, including misleading statements about the proposed Clean Power Plan’s expected health benefits from reduced air pollution. The PSC generally seems to have strayed far from its charge to balance ratepayer interests with those of the utilities: blaming President Obama for a mercury pollution limit that’s been in the works since the early ’90s, asking Alabamians to pray away the EPA, making statements about gay marriage during a PSC meeting, and inviting a controversial preacher to open a meeting with a prayer against abortion.
For too long, the Alabama PSC has gotten away without accountability for its activities. Its emphasis on political grandstanding over conducting a fair, transparent process to review Alabama Power’s IRP hurts ratepayers, and may well be squashing the advancement of clean energy in the state as continued investment in coal goes without public scrutiny. Alabama is getting left behind its Southeastern peers, none of which have PSC processes as lax as Alabama’s.
To regain public trust, we encourage the Commission to take this report to heart, and implement its recommendation to modernize the Alabama Public Service Commission’s outdated back-room procedures by creating a formal IRP process that includes:
- Involvement by public stakeholders;
- On-the-record public evidentiary hearings;
- Pre-filed testimony, with witnesses testifying under oath; and
- Allowing interested parties to access IRP documents, input assumptions, and raw data and economic analyses underlying Alabama Power’s resource decisions.