Energy Alabama, GASP Appeal Alabama PSC’s Approval of $1+ Billion Gas Expansion

Groups Appeal Alabama Public Service Commission’s Approval of $1+ Billion Gas Expansion 

For Immediate Release: January 11, 2021

Montgomery, AL—Energy Alabama, GASP, and the Southern Environmental Law Center are appealing the Public Service Commission’s approval of Alabama Power’s petition for its single largest capacity increase ever, with a price tag for customers of over $1.1 billion.

The groups have filed an appeal in state court challenging the Commission’s decision allowing Alabama Power to increase its natural gas capacity by over 1800 megawatts, including building a new gas plant at the Barry Electric Generating Plant in Mobile County, while failing to approve a proposal to add 400 megawatts of solar plus battery energy storage projects.

In September, the groups petitioned the Commission to reconsider its determination that this capacity increase is needed, especially in light of the economic slowdown caused by the pandemic; its decision to saddle customers instead of utility shareholders with the risk that the assets will become stranded; and its denial of the solar plus storage projects, which the utility’s own analysis showed had the most value for customers. The Commission denied the petition.

Starting January 1, Alabama Power’s electric rates are increasing for all 1.48 million residential, commercial, and industrial customers, raising the average residential monthly bill by about $4. As a result of the new natural gas capacity, bills are expected to increase further starting in 2023.

“Alabamians already pay some of the highest energy bills in the country and the pandemic has only worsened the financial hardships many are facing,” said Keith Johnston, Director of SELC’s Birmingham office. “Now the Commission is allowing Alabama Power to go forward with an unjustified, massive amount of new capacity that will further increase electricity rates, putting added strain on customers.”

The Alabama Attorney General’s office raised concerns in the Commission proceedings that the proposed gas plants could become stranded or uneconomic as a result of new emission standards or changes in technology, and recommended that the Commission impose a condition requiring that Alabama Power and its shareholders bear any stranded costs associated with its proposal instead of customers.

In its final order, the Commission ignored the Attorney General’s recommendation and failed to set any conditions on its approval, concluding it would be “inequitable” to burden Alabama Power shareholders with stranded asset risk, even though shareholders reap substantial profits from self-build assets like Barry Unit 8.

“The Commission failed to act in the public interest by approving unnecessary, expensive projects while leaving more affordable options on the table,” said Daniel Tait, Chief Operating Officer of Energy Alabama. “To make matters worse, the Commission has rubberstamped an enormous transfer of risk from utility shareholders to customers.”

Alabama remains the only state in the Southern Company territory, which includes Alabama, Georgia, and Mississippi, that prevents the public from any meaningful participation in the energy planning process.

“Alabamians deserve to have an open and transparent regulatory process, more information around how their energy decisions are being made, and the opportunity to provide input to ensure decisions are made in our state’s best interest,” said Michael Hansen, Executive Director of GASP. “When that transparency is missing from the energy decision-making process, we end up with unjust results where utility profits are given priority over people.”

 

Background:

In early March 2020 the Alabama Public Service Commission heard testimony from 15 witnesses concerning Alabama Power’s request to increase its total power-producing capabilities by almost 20%, despite the utility’s previous assertions that it wouldn’t need new electric generation sources until 2035.

On behalf of Energy Alabama and GASP, the Southern Environmental Law Center intervened in the docket to advocate for responsible, cost-effective investments to meet any need for additional capacity on Alabama Power’s system.

Energy Alabama and GASP’s experts exposed significant flaws in the planning and forecasting methods Alabama Power used to justify its claimed need. In written and oral testimony, the experts pointed to the utility’s long-standing efforts to profit from unnecessary and expensive new generation assets that increase costs for customers.

The groups also made the case that Alabama Power’s plan lacks significant detail about the cheapest, least cost resources, such as solar and energy efficiency.  Alabama Power’s own analysis showed that solar plus battery storage are the least cost resources in its proposal and provide more value to customers.

Energy Alabama and GASP’s proposed order details their position based on the record developed during the hearing.

The groups also filed a motion for permission to file supplemental briefing regarding how the Covid-19 pandemic may impact the need for and timing of the resources proposed in Alabama Power’s petition. These issues were not addressed during the March hearings, which was limited to testimony filed long before the pandemic took hold.

Energy Alabama and GASP filed a supplemental brief arguing that the Commission should not rush forward with a decision without fully assessing the pandemic’s impacts and resulting economic fallout on the utility’s petition.

Following the PSC staff’s recommendations to approve the majority of projects that Alabama Power is seeking to build, buy or contract, the Commission voted unanimously in June 2020 to adopt the staff recommendations in their entirety.

The only resources the Commission refused to approve were the proposals for solar plus battery storage, by far the most economic options according to Alabama Power’s own analysis.  Instead, the Commissioners signed off on the staff’s recommendation to evaluate the solar and battery proposals in another existing docket. The Commission issued a final order in August.

GASP and Energy Alabama filed a petition for reconsideration and rehearing in September, urging the Commission to reconsider Alabama Power’s need determination and to grant a rehearing to consider updated testimony in light of the changed circumstances resulting in lessened electric demand. The Commission denied the groups’ motion for reconsideration and rehearing in December.

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About Energy Alabama:

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. energyalabama.org

 

About GASP: GASP is a nonprofit health advocacy organization based in Birmingham, Ala. Our mission is to advance healthy air and environmental justice in the greater-Birmingham area through education, advocacy, and collaboration. We strive to reduce exposure to air pollution, educate the public on the health risks associated with poor air quality, and encourage community leaders to serve as role models by advocating for clean air and clean energy. GASPgroup.org

 

About Southern Environmental Law Center: For more than 30 years, the Southern Environmental Law Center has used the power of the law to champion the environment of the Southeast. With over 80 attorneys and nine offices across the region, SELC is widely recognized as the Southeast’s foremost environmental organization and regional leader. SELC works on a full range of environmental issues to protect our natural resources and the health and well-being of all the people in our region. www.SouthernEnvironment.org


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Energy Efficiency: Georgia Power vs. Alabama Power

You might think that there isn’t much difference between the utilities within each state’s borders (I know I didn’t). We give them money, and in return they make sure we have working electricity. Seems simple enough, right? How much more could there be?

As you may have guessed since this is an article and not a single paragraph, there’s a lot more to it than that. But, rather than compare every single utility within each state, we’ll focus on the differences between Georgia Power and Alabama Power which are both owned by Southern Company.

Specifically, we want to examine the differences in terms of how much money each company spent on energy efficiency compared to how much energy they are saving through those programs. But first, a little background information.

Each year, most utilities spend money that is supposed to go towards incentive programs that help customers save energy.¹ Most utilities channel a portion of the money that we pay them into energy efficiency programs, often being forced to do so by regulators because they don’t normally like selling less of their product. These programs exist to incentivize consumers to make upgrades on their homes and businesses, which is much cheaper than building a new power plant.

But not all utility energy efficiency is created equal and we have to take a look at the reality on the ground.

As of 2019, Georgia Power spent $16.5 million dollars, through various programs, on residential customers if they invested in cleaner energy efficiency for their homes. For commercial customers, Georgia Power spent $24.8 million dollars on energy efficiency. With that money, residential customers saved 95,124 megawatt hours (MWh), while commercial customers saved 295,968 MWh. That’s a total of 391,092 MWhs saved in 2019 alone! For comparison’s sake, the average Alabama home uses between 1 and 2 MWh per month.

Since Georgia Power and Alabama Power are owned by the same parent company, wouldn’t it make sense for Alabama Power to offer similar opportunities to their customers? Sadly, neither Alabama Power, nor Alabama regulators, seem to think so.

Unlike Georgia Power, Alabama Power only spent about $3.3 million dollars (of which just ~$5,000 were for incentives) on residential energy efficiency, and $84,000 for commercial customers. With that paltry sum, residential customers only saved 5,486 MWh and commercial customers just 192 MWh.

Why does Georgia Power spend so much more than Alabama Power? The price that consumers pay each company is fairly similar. So what’s going on here?

It comes down to monopoly control. Utilities do not want you to save energy, they want you to buy energy from them. It is the job of the regulators at the public service commission to protect consumers from monopoly abuses. Some regulators force utilities to invest in lower-cost energy efficiency since a monopoly would not do so on its own. Some regulators have even gone so far as to change the way utilities are paid in order to give the utilities a financial incentive to promote energy efficiency. Neither of those things happen in Alabama.

Part of it is that Alabama Power wants to build power plants, because they earn profit from how much new construction they do, regardless of if the construction is needed. In order to justify new construction, they need you to use more energy, not less. Don’t forget that Alabama Power customers are now on the hook for more than $1 billion in new gas plants…

I digress. The point is that we are giving utilities an arm and a leg, but we aren’t getting out what we put in. We’re already paying enough on our utilities bills to work towards the future and switch over to clean energy. Georgia, though they’ve just begun, has the right idea, and even they are behind the curve compared to many other areas of the country. So why is Alabama Power falling further behind? And why are we letting them get away with it?

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.