A new report from the Arise Citizens’ Policy Project released March 1, “Public Utility Regulation Without the Public: The Alabama Public Service Commission and Alabama Power” [PDF] details ways Alabama’s utility regulatory system leaves customers paying some of the highest bills in the country and Alabama Power profiting far more than other utilities nationwide.
According to the report, the utility’s annual rate adjustment lacks any significant input from the Public Service Commission (PSC) or the public. Alabama’s system stands out among the states for its lack of transparency and how inequitably it tips the scales in favor of the utility’s profits over affordability for customers.
SACE routinely participates in public PSC proceedings in other southeastern states along with other environmental, consumer, and industry groups. For example, we intervene in Georgia Power and Duke Energy’s Integrated Resource Planning (IRP) processes and other related proceedings as necessary. Such proceedings are designed to balance the consumer’s need for reliable services at affordable rates with the utilities’ need to earn a profit, but Alabama’s PSC doesn’t conduct any on-the-record public proceedings to review Alabama Power’s rates or its resource planning.
Arise Citizens’ Policy Project, a consumer organization of 150 congregations and community groups that advocate for policy to improve the lives of low-income Alabamians, commissioned the report from the Institute for Energy Economics & Financial Analysis to better understand how the Alabama PSC’s oversight, or lack thereof, affects those who struggle the most to pay their bills. It found that Alabama residents pay the second-highest bills in the nation relative to median income.
“The outdated way that Alabama sets electricity rates is hurting families and businesses,” said Kimble Forrister, Arise’s executive director. “It’s not just numbers on paper. When people are living paycheck to paycheck, having to put so much of their income into paying for electricity really hurts.”
SACE has been watching the highly contentious discussion of accountability at the Alabama Public Service Commission since January 2013, when Commissioner Terry Dunn (R) called for a formal review of the rate-setting process. He was immediately and emphatically rebuffed by Commission President Twinkle Cavanaugh (R), who said his call to look more closely at the rate-setting system “camouflages dangerous ulterior motives by hidden special interests” – clarifying that by special interests she means “environmental extremists.” Ms. Cavanaugh went so far as to tell John Archibald, editor at AL.com, “I want to exclude the environmentalists from taking part in the process.”
Unfortunately for Commissioner Cavanaugh, Arise is not an environmental group. It is a consumer group representing low income families who are being harmed economically by her steadfast defense of the status quo. So let’s be clear about what her statement was: an attempt to change the subject and deflect attention from the real issue — Alabamians paying far more than they should for their electricity and their utility getting rich off the scheme.
Putting aside Ms. Cavanaugh’s smoke-and-mirrors bluster, the IEEFA report shows how the lack of accountability at the PSC continues to hit Alabama families and businesses where it hurts most, in the wallet. For example, from 2008-2011, the cozy relationship between the PSC and Alabama Power allowed the company to walk away with a 13.32% return on equity – 40% higher than the average of 76 other utilities nationwide.
Report author David Schlissel, a utility analyst with nearly 40 years of experience, said he has never seen anything like the set-up in Alabama. He told AL.com’s Ben Raines:
“They told me about the regulatory process in Alabama and I was astounded. All we’re advocating is public regulatory hearings. We’re not arguing one way or the other. We’re just saying that like all the others states, there should be a public process in Alabama where the public can participate.”
Without a balancing force, monopolies like Alabama Power can hold their customers captive and steamroll over their rights. It’s the PSC’s job to act as the counterweight to that power. IEEFA’s report sheds important light on the roadblocks to citizen engagement at the Alabama PSC, and the resulting harm to people struggling to pay their bills. Alabamians should not let their elected commissioners off the hook. The current system unfairly rewards Alabama Power at the expense of its customers. Don’t let them change the subject.