Alabama PSC Should Release Analysis on Alabama Power’s Excessive Profit Formula

Today, Energy Alabama sent a letter to the Alabama Public Service Commission (PSC) asking it to commit fully to transparency and fairness by allowing regular Alabamians to review and submit questions about an overdue report examining Alabama Power’s Rate Stabilization and Equalization (RSE), a key factor in how the utility’s excessive profits are determined.

Read the letter here

Alabama Power’s RSE utilizes a formula that over-rewards the company at the expense of its customers. Hard-working Alabama Power customers deserve to know why they pay some of the highest electric bills in the country. The Alabama PSC owes an explanation to the people of Alabama and should find a way to virtually open this meeting to the general public.

There are major questions about the workings and results of the RSE formula which should be answered by a report required by a 2013 PSC order authorizing the rate. Publicly available data shows that Alabama customers are overburdened by the PSC’s formula, which hides the usual measure of return on equity (ROE) used by other utility regulators.

However, the “hidden” ROE can still be calculated from other sources. Such a comparison from 2014 through 2018 shows that Alabama Power customers paid more than $1 billion in excess profits than they would have if the PSC had instead awarded Alabama Power the national average ROE.

COVID-19, and the economic hardships it created, have further exacerbated the excess profit Alabama Power has pocketed. Instead, the PSC continues to over-reward Alabama Power at the expense of its customers.

Allowing a monopoly utility to retain profits that are far above those necessary to provide mandated services is not equitable nor economical for customers. The long overdue RSE report should provide the important information necessary for all stakeholders to discuss the unique formula and the profits it supports­­.

“If this Commission cares about creating jobs, it should put Alabama Power’s excessive profits back into the hands of regular folks and small businesses,” said Daniel Tait, Energy Alabama’s Chief Operating Officer. “The time for monopoly handouts is over.”

By any objective standard, the case is clear. The Alabama PSC must support transparency and #ReleaseTheRSE.

Groups Ask PSC to Reconsider Alabama Power’s Unprecedented Gas Expansion

Gasp and Energy Alabama have formally asked the Alabama Public Service Commission to reconsider its June decision to approve the single largest capacity increase ever proposed by Alabama Power, including including almost 1,900 MW of gas generation. We requested a rehearing to consider updated testimony in light of economic forecasts showing lessened electric demand due to the coronavirus pandemic (COVID-19).

Last year, Alabama Power filed a “Petition for a Certificate of Convenience and Necessity” with the Alabama Public Service Commission. That proposal initially sought to add nearly 2.4 gigawatts of new generating capacity — which would cost customers over $1.1 billion. Energy Alabama and Gasp, represented by the Southern Environmental Law Center, intervened in the docket to question Alabama Power’s lack of evidentiary support to build and buy such a significant amount of new gas resources.

In March, just before COVID-19 brought the world as we know it to a halt, the Alabama Public Service Commission held a series of hearings on the petition. Witnesses for Gasp and Energy Alabama exposed exposed significant flaws in Alabama Power’s planning and justification processes. After those hearings concluded, we made several key points in our proposed order filed with the Commission:

  • Alabama Power failed to produce the evidence necessary to support its request to increase electric generation capacity by almost 20%. The utility had previously asserted it wouldn’t need new generation sources until 2035.
  • Without a showing of need, Alabama Power’s request amounts to an effort to build rate base and enrich shareholders at the expense of its customers, who will pay for expensive, unnecessary generation for decades.
  • Alabama Power’s own analysis showed that the proposed solar plus battery storage projects were the cheapest options for customers.

The pandemic and subsequent economic downtown have cast even more doubt on Alabama Power’s supposed need for new capacity. In early June, we filed additional information regarding anticipated economic effects of COVID-19, arguing that the economic downturn precipitated by the pandemic called into question the magnitude and timing of Alabama Power’s claims about needing additional power sources. Alabama Power relied on outdated projections from more than two years ago, well before the economic devastation wrought by COVID-19. We argue those projections can no longer serve as the basis for a making a $1.1+ billion investment with customer dollars.

Despite all of that, the PSC in June unanimously voted to approve everything in Alabama Power’s proposal, including almost 1,900 MW of gas generation, except Alabama Power’s proposed solar plus battery storage projects. The PSC said they were not well-suited to meet Alabama Power’s reliability needs, despite the overwhelming evidence that supported their approval. However, the Commission refused to ask for supplemental information from Alabama Power as to whether its petition was still warranted.

Alabama customers already pay some of the highest electric bills nationwide. (A recent report found that people in Birmingham have the highest energy burden in the nation.) COVID-19 has only worsened the plight of customers struggling to pay monthly bills. If they want to move forward with these monumental investments, Alabama Power should not be allowed to put the entire financial burden on customers. Utility shareholders should bear the risk that the projects may become stranded assets before the end of their useful lives.

We also hope the Commission will reconsider its denial of the solar-plus-storage projects, which were the most economic options according to Alabama Power’s own analysis. That was just the latest in a long line of anti-solar decisions from the Commission. In September, the Alabama Public Service Commission dismissed our challenge against Alabama Power’s discriminatory solar charge, instead approving an increase in the charge.

By denying Alabama Power’s proposed solar-plus-battery storage projects in this docket and then approving an increase to Alabama Power’s unjust solar fee on rooftop solar customers in another, the PSC continues to deny Alabamians the benefits of clean, renewable energy like solar. Alabama has less solar capacity than other states in the sunny South, and far fewer jobs as a result of the PSC’s decisions.

Alabama Public Service Commission Backs Alabama Power’s Tax on the Sun

2020 has been a bad year, especially if you’re an Alabama Power customer.

The Alabama Public Service Commission (PSC), never content with how many favors it can give Alabama Power, added insult to injury today when it upheld Alabama Power’s sun tax. As many of you know, Alabama Power taxes small scale solar at one of the highest rates in the country; $5/kilowatt/month, or about 50% of the money you could expect to earn from your system. It is currently unclear if the Commission’s vote today actually INCREASED the sun tax.

In other words, the supposed supporters of small government at the PSC chose to institute an approximate 50% tax on solar for homes and small businesses in order to protect the monopoly of one the largest and most profitable companies in the state.

How the PSC Fails Alabamians

This is not the first questionable decision the PSC has made this year. Here are a few lowlights:

  1. The Commission failed to take any action to protect customers from disconnections or late fees amid COVID-19. Advocates like Energy Alabama had to force Alabama Power to protect consumers, but the PSC claimed its closed doors talks with utility executives were good enough and no action was needed.
    • By the way, Alabama Power is restarting disconnections soon, despite its parent company earning almost $5 billion in net income last year alone.
  2. The Commission ruled in favor of Alabama Power, allowing it build expensive and unneeded gas, and punted on solar and energy storage projects despite them being the most cost effective.
  3. The Commission allowed Alabama Power to overcharge customers for fuel by more than $100 million until a group of advocates, including Energy Alabama, called them out on it. Under fire, the Commission finally did the right thing and refunded customers most of the money.
  4. The Commission, in an attempt to legislate from the bench, is actively blocking the recording of hearings and the use of electronic devices.
  5. And then today, the Commission backed Alabama Power’s tax on the sun. Alabamians of all political stripes want more low-cost renewable energy but the PSC has decided it knows better than the people.

Again, this is just 2020.

The Cost of Being a Puppet

The Alabama PSC has proven itself to be not much more than a puppet for Alabama Power. For instance, the solar tax complaint was first filed back in April 2018, yet it took the PSC more than two years to decide the case. However, Alabama Power was able to file for one of its largest expansions in history and get it approved, all before the solar tax case was decided. If Alabama Power wants it done, it gets done. If the people want it done, nothing happens.

There are real world consequences to all of this deference to Alabama Power. First off, real economic harm is being done to the people of Alabama and many of our small businesses. Our utility bills are some of the highest in the nation, the proportion of income Alabamians spend on electricity is one of the highest in the nation, and we have the worst energy efficiency in the country. But rather than make any of these problems better, the Commission continues to green light expensive and unneeded construction, allow high taxes on alternatives, and ignore any efficiency. Alabama Power does not want any of these things because it would rather you remain forcibly and 100% dependent on them.

Bluntly, the decisions of the PSC are contributing to poverty in Alabama, rather than alleviating it. Alabama has a history mired in poverty and we need our energy policy to help us break that cycle. Favoring monopolies and Wall St. over low-cost distributed energy perpetuates the struggle of hundreds of thousands of hard-working Alabamians.

Photo credit: Pat Byington

And secondly, Alabama is losing out on tens of thousands of good paying jobs in advanced energy stemming directly from PSC decisions. There are tons of folks who could be employed in the energy efficiency sector, making much needed upgrades to our built environment and infrastructure. Renewable energy, such as solar and wind, are some of the fastest growing sectors of the economy in most states, but not Alabama.

Twinkle Cavanaugh, the PSC President, has often touted jobs in statements to Alabama Power-supported outlets like Yellowhammer News, in campaign materials, and even from the dias during PSC meetings. We’d encourage her to actually take her own words seriously and put Alabamians to work.

Legal Petition Demands Tennessee Valley Authority Halt Electricity Shutoffs, Fund Debt Relief

For Immediate Release, August 25, 2020

Contact:

Howard Crystal, Center for Biological Diversity, (202) 809-6926, hcrystal@biologicaldiversity.org
Brianna Knisley, Appalachian Voices, (937) 725-0645, brianna@appvoices.org
Daniel Tait, Energy Alabama, (256) 812-1431, dtait@alcse.org
Isabella Killius, Sunrise Tennessee, (615) 762-6665, sunrisetennessee@gmail.com

WASHINGTON— Dozens of climate-justice organizations petitioned the Tennessee Valley Authority today to immediately impose a moratorium on electricity shutoffs in the region and fund debt relief for its customers.

The petition also calls on the massive utility company to accelerate the Valley’s clean energy transition to address compounding COVID-19 unemployment, climate and racial injustice crises.

“TVA has the responsibility and the money to prevent people from needless suffering and crushing debt,” said Howard Crystal, legal director for the Center for Biological Diversity’s energy justice program. “The company can seize this opportunity to genuinely serve the public interest and become a model for other utility companies. TVA must acknowledge the environmental damage from its dirty energy choices and chart a new course toward a clean, democratic energy future.”

Congress has yet to impose a federal moratorium on utility shutoffs, leaving thousands of families in TVA’s service territory at risk of losing electricity during a summer of climate-induced, record heatwaves.

“In the face of a public health, environmental and economic crisis not seen since the Great Depression, we are calling on TVA to return to its original mission to improve quality of life here in the Tennessee Valley,” said Brianna Knisley, Tennessee campaign coordinator with Appalachian Voices. “TVA can and should protect vulnerable communities from power shut offs, eliminate unnecessary and harmful coal ash production, and bring new, public jobs to the Valley. At the very least, our public utility should be reaching out to communities to better understand their issues and needs during these critical times.”

The COVID-19 pandemic and related unemployment crisis have brought severe economic strain to the Southeast, a region where low-income communities, Black communities and other communities of color are already disproportionately burdened by pollution, high energy bills and utility shutoffs.

“If TVA wants to get serious about reducing the burden of COVID-19 on residents in the Valley, it is time for TVA to get serious about strong energy efficiency and renewable energy programs, specifically for low-income customers,” said Daniel Tait, chief operating officer of Energy Alabama.

The petition urges TVA to reallocate its vast resources to help customers pay their bills and fund equitable economic recovery through clean energy and efficiency programs. This would require a series of public hearings, which the petition says should begin as soon as possible.

“In the midst of the pandemic, when people are unemployed and without basic needs like power, food, water, and broadband services, TVA has a responsibility to support its customers by instituting a moratorium on utility shut-offs, thus upholding its original mission to serve the people of the Tennessee Valley,” said Isabella Killius with Sunrise Tennessee. “This petition encapsulates the need for institutional change within the TVA such that customers are provided adequate relief and, in addition, necessary actions are taken to mitigate the ongoing climate crisis.”

TVA has the funding and the mandate to provide debt relief to residential customers, rapidly retire its fossil fuel infrastructure, and invest in clean, distributed energy and energy efficiency efforts. These efforts will create local jobs vital to the region’s economic recovery.

The petition is named in honor of S. David Freeman, a former TVA board chair and a tireless advocate for renewable energy. The self-proclaimed “green cowboy,” who died in May, had sought for a long time to free people from polluting, centralized TVA power.

TVA is a federally owned corporation and the nation’s largest public power provider. It generates electricity for more than 9 million customers in Tennessee, northern Alabama, northeastern Mississippi, southwestern Kentucky, and portions of northern Georgia, western North Carolina and southwestern Virginia.

 

The Center for Biological Diversity is a national, nonprofit conservation organization with more than 1.7 million members and online activists dedicated to the protection of endangered species and wild places.

Appalachian Voices works at the nexus of the ongoing shift from fossil fuels to clean, 21st-century energy sources — we fight mountaintop removal coal mining, fracked-gas pipelines and other harms to the people and places of Appalachia, and we advance energy efficiency, solar and wind power, and other economic solutions that create community wealth and sustain Appalachia’s mountains, forests and waters.

Energy Alabama is a membership-based non-profit organization accelerating Alabama’s transition to sustainable energy. We accomplish our mission by educating at all levels, informing smart energy policy, building the next generation workforce, and providing technical assistance to deploy more sustainable energy. We believe in sustainable energy for all.

Sunrise Tennessee is a statewide coalition of Sunrise hubs that represents young organizers from Nashville, Knoxville, and Franklin, Tennessee. We are fighting for a Green New Deal on both state and federal levels, ensuring a just transition away from the fossil fuel economy and the creation of millions of good-paying jobs.

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Alabama Power Puts Wall St. Over Alabamians, Restarts Disconnections and Late Fees

Yesterday, Alabama Power announced it would resume disconnecting customers and charging late fees in late September, despite the company’s massive profits and the ongoing pandemic wreaking economic havoc on our state. Southern Company, the parent company of Alabama Power, made $4.7 billion in profit last year alone. Right now bad debt in Alabama and Georgia is estimated at less than $160 million, or just 4% of Southern Company’s profits from last year.

Let’s put this all in perspective. How much bad debt is there right now?

First, we don’t exactly know. Why? Because the Alabama Public Service Commission (PSC) has refused to collect or ask for data regarding how many Alabama Power customers are behind on their bills.

What we do know is that our next door neighbor, Georgia, can tell us a lot.

Georgia Power, also owned by Southern Company, restarted disconnections on July 15. More than 15,000 Georgia Power customers were disconnected in about two weeks (July 15 through the end of the month), despite all the company’s proclamations about how great it was and all the options it said were open to consumers.

Georgia Power, which is almost double the size of Alabama Power by number of customers, told its Public Service Commission that customers were about $83.4 million behind on bills. Even if Alabama Power held just as much bad debt as Georgia Power, the bad debt among the two companies would total about $160 million.

Southern Company profits handsomely from Alabamians

Last year, Southern Company, the parent company of Alabama Power, earned a net profit of $4.7 billion. You read that right. With a B. The bad debt carried by Georgia Power from COVID-19, and likely Alabama Power, would total just under 4% of Southern Company’s net income from 2019.

Southern Company owns and operates government-backed electric monopolies in Alabama, Mississippi, and Georgia. These are not like other companies, say your local auto mechanic. It has an exclusive license to sell electricity and profit from those sales. Alabama Power has one of the highest profit rates in the country, so much so that over the last few years, it collected $1+ billion more than if its profit rate had been the national average.

To be clear, Energy Alabama is not advocating that people shouldn’t be responsible for the energy they consume. We simply believe that Southern Company and Alabama Power can and should share in the burden during these unprecedented times. Churches, nonprofits, and community groups should not be scrambling to help vulnerable Alabamians pay bills when Southern Company and Alabama Power have enjoyed years of blockbuster profits.

No one asked for COVID-19 and economic crisis we are in. We are all affected. We should all pitch in. That includes Alabama Power and Southern Company shareholders.

But there is something you can do now to help your neighbors!

We’ve joined with our friends at Gasp and hope you’ll contact Senator Doug Jones (D-AL) and Senator Richard Shelby (R-AL) and ask them to support Senate Bill 4362, which would put a federal stop to utility disconnections during COVID-19.