Behind closed doors: Ala. PSC decisions are out of public sight and mind

Guest Blog | December 11, 2014 | Energy Efficiency, Energy Policy, Utilities

The following op-ed piece ran in the The Cruthirds Report on Dec. 5th and was authored by SACE staff and Michael Churchman of Alabama Environmental Council. On the day of the Public Service Commission meeting referenced in this piece, John Archibald of published an editorial that parallels many of the concerns we point out below. Please also refer to coverage of the December 9 PSC meeting from the Anniston Star,, Gadsden Times, and the Montgomery Advertiser.

As it does every December, the Alabama Public Service Commission is in the process of bestowing upon Alabama families and businesses the annual holiday gift of new electricity rates for the coming year. More than ever, citizens, the media, and watchdogs must cast a highly critical eye on December 9th on an issue that has a direct and substantial impact on the wallets of two-thirds of the people in our state.

There are several reasons such strong scrutiny is needed.

First and foremost is the Public Service Commission’s transparency. Or more precisely, its complete lack thereof.

On Dec. 1st, Alabama Power formally filed its calculations for revenue requirements with the Commission. At the PSC meeting the very next day (Dec. 2), President Twinkle Cavanaugh announced rate increases that will be instituted to meet the company’s margins. It is absurd to think that just one week later (on Dec. 9 in Montgomery) there is a brief proceeding to tell what has already been predetermined with absolutely no public scrutiny and only minimal after-the-fact chance for public comment.

The decisions made by the PSC happen entirely behind closed doors. Customers and the public have no clue why the Commissioners decide what they do. There’s no review of the calculations that are used to determine rates. There’s no paper trail, accounting or logical explanation for why customers should be burdened with covering what Alabama Power claims are increasing costs of doing business – or at least none that the PSC will allow anyone to see. Nobody gets to scour the numbers to make sure they’re right. The public doesn’t get a look behind the curtain to see if there might be alternatives to retrofitting and converting old power plants with pollution controls.

When asked, even representatives of the Attorney General’s office who attended the Dec. 2nd meeting told us they were not informed of the rate increases, were not involved in any behind-the-scenes discussions and had no knowledge of any hearings in which they could be included. Instead, Alabama families and businesses are simply asked to swallow, without any input, an increase in power bills that are already some of the highest in the country.

Meanwhile, we know there are viable alternatives, and they are far more affordable than Alabama Power’s plan to sink $4 billion into patching up dinosaur plants that use last century’s technology or converting them to burn natural gas. Look right next door. Bids for solar projects from Alabama Power’s sister company, Georgia Power, have hit record lows and will make solar one of that utility’s most cost-effective energy sources. The same is true for wind. The Georgia Public Service Commission has approved a deal for Georgia Power to buy 250 megawatts of low-cost wind power from Oklahoma, which the utility said will be cheaper than other forms of electricity and put downward pressure on rates.

To be fair, Alabama Power also has acquired some low-cost wind power that will benefit customers, and at least that decision occurred after hearings in which the public could intervene.

But what Georgia has that Alabama doesn’t is a Public Service Commission that actually evaluates, through a public hearing process, whether the costs it allows utilities to pass on to customers are prudent and justified. Most utility regulators around the country operate with far more transparency in order to ensure fairness for customers. In Alabama, the Commissioners carry out their responsibilities in ways that seem much more supportive of the coal and utility industries.

The only way to determine if a rate hike is justified is through careful scrutiny. If the PSC is going to saddle Alabamians with hundreds of millions of dollars in expenses and higher rates, ratepayers should have a say in whether those costs are justified in the context of rate reviews and long-term planning, as well as whether they have benefits that will improve air and water quality – as they do in almost every other state.

Instituting a higher level of public accountability by the Public Service Commission is the second important reason the public should pay attention to these meetings and want to see changes in the way it operates.

If you recall, PSC President Twinkle Cavanaugh and Commissioner Jerry Oden both promised in August 2013 – after revamping the calculations used to determine Alabama Power’s profits and rates – that electricity bills would go down as a result. To great fanfare, Cavanaugh declared that “consumers deserve some relief in the bills they pay” and assured customers that the PSC’s ‘new math’ used to calculate Alabama Power’s returns would lead to annual savings of between $30 and $110 on their power bills. Oden estimated that bills would drop $30-$45 each year for families and small businesses.

With their previous public relations grandstanding in the rearview mirror, Cavanaugh and Oden then proceeded to rubber-stamp rates using the new formula … and they did NOT go down.

And they clearly won’t this year either since the PSC has already approved a rate increase that will add $6.78 to the monthly bills of residential customers starting Jan. 1. Two-thirds of that increase, says the company, is to cover increased costs of doing business, while only a third is to pay for pollution-control upgrades and converting some of the utility’s aging coal fleet to natural gas.

One would think the Dec. 2nd PSC meeting, when that request was unveiled, would be the appropriate time for a ‘public service’ commissioner to inquire whether the hike was justified. Instead, Cavanaugh and the other Commissioners were right on cue, using their pulpit to trot out the usual bogeymen, blaming the rate hike on President Obama, the Environmental Protection Agency, liberal extremists and environmental protections that keep our air and water clean and protect our health.

The Commissioners need a scapegoat to hide the fact that they failed Alabamians last year when they promised lower bills they knew were never going to happen. It was unfortunate that the PSC’s tinkering served to benefit Alabama Power and hurt customers. Even outside observers knew it would. One reason that credit rating agency Fitch said Alabama Power’s credit metrics were so strong was precisely because the PSC’s actions would lead to “rate increases” that bump up revenue.

The Commissioners also said last year that their new formula would help keep Alabama Power profits in check. That hasn’t happened either. In fact, the new formula the PSC created for Alabama Power actually allows the company a higher rate of return than it had before. With the PSC’s blessing, that rate has actually been climbing.

The bottom line is that, without any involvement from the public or third-party experts, exactly the opposite of what the PSC promised has transpired. Rates are going up, they are being used to fuel increased profits, and all of this happened without independent scrutiny.

Alabamians deserve transparency, accountability and a say in decisions that affect them, particularly when the impacts result in higher electricity bills. They deserve decision-making that lets them see what the Public Service Commission is up to and why. Indeed, Alabama Power’s spokesman recently said that Alabamians “generally don’t understand the complexity of generating power. … [I]t’s a very complicated, huge capital investment to generate power every day.”

Exactly. Which is why such decisions should never be made in secret. They need sunlight, and and a full explanation and consideration of alternatives. The PSC should be held accountable. Making its decisions transparent is one important way they can help put Alabama on the path toward more affordable electricity.


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