Stories, Editorials About Alabama Power Misleading
Recently, some news articles and editorials around the state have painted a distorted or incomplete picture about our business, our prices and the way we are regulated.
Please allow us the opportunity to provide you, our customers, with a thoughtful response.
But first, here are some things you should know about Alabama Power:
- For decades, the price we charge for electricity has been – and remains today – below the national average.
- We expect our base rates to remain flat in 2013, and we are working now, under the direction of the Alabama Public Service Commission (PSC), to try to keep those rates flat through 2014. In contrast, at least eight utilities across the Southeast have requested rate increases totaling hundreds of millions of dollars.
- The reliability of our electric service is among the best in the industry, as well as our reputation for getting your lights back on after major storms or natural disasters. Reliability is important for all our customers, but it’s also vital for the global industries that have located here and brought quality jobs to our state. Those companies have cited high reliability and competitive electricity prices as factors in choosing Alabama for new manufacturing facilities.
There are many reasons why it’s difficult to compare one utility’s prices to another’s, or compare what one utility charges its residential, commercial or industrial customers vs. another utility. Everything from the type of generating plants a utility uses, to the distance to fuel sources, to the population density of its customer base, to the weather can affect costs.
The differences in state tax structures and the cost to comply with government environmental mandates can also play a role. Indeed, over the last decade Alabama Power has had to invest nearly $3 billion in our existing plants to comply with new U.S. Environmental Protection Agency (EPA) regulations.
Return on Equity isn’t “profit”
As for the regulatory process in Alabama, some recent stories have tried to sensationalize what’s known as our “return on equity” (ROE). This is essentially what we’re allowed to earn on the portion of our business financed through the issue of the common stock of our parent company, Southern Company. Under our state regulatory process, we’re given – not guaranteed – the opportunity to earn between 13 percent and 14.5 percent ROE. But equity (from stockholders) represents less than half the money invested in our company.
As a matter of fact, Alabama Power uses less equity than most utilities to fund our business. A larger part of our capital comes from lower-cost debt, which is borrowed from financial institutions and other sources. When you look at our total return on all our invested capital – a much better measure of what we truly earn – it is less than 8 percent, which is comparable to utilities in the Southeast and around the country that are similar to Alabama Power.
The PSC process has been reviewed
As a customer, you may not realize, and perhaps we haven’t explained it well, how much scrutiny our business and our operations receive as an investor-owned utility.
We are one of the most regulated companies in the state, and we have to justify our business decisions to the PSC. Every month the PSC staff reports in a public meeting about our rates and our fuel expenditures. But that’s just the beginning. Day in and day out, our employees are preparing and providing information for the PSC and its staff, whenever they request it.
Recent news reports have been misleading about whether the PSC has ever re-examined the regulatory process that we must answer to every day. In fact, the PSC has made more than 20 modifications or policy changes to that system since it was put in place 30 years ago.
Alabama Power and Transparency
In addition to the PSC’s monthly public reporting about us, every year we must present to the PSC, in another public meeting, our estimates for future expenditures related to our base rates. Our staff is questioned at the meeting about our figures, and the public can participate as well. This same process takes place every year in connection with our projected environmental expenditures.
Beyond the PSC, Alabama Power has many more requirements to report information to government agencies and the public. We report multiple times a year to the federal Securities and Exchange Commission (SEC) about our finances, sales and fuel mix, and about environmental compliance, legal and other issues that may affect us in the future. All these reports are available online for public view. And we report information regularly to a host of state and federal agencies, including EPA, the Federal Energy Regulatory Commission and the Alabama Department of Environmental Management.
For more than 107 years, our employees – your neighbors – have worked hard every day to provide you with reliable, affordable electricity and award-winning customer service. We are committed to you, our customers, and to the communities we serve. And we want to hear from you if you have any concerns about us. For more information, please visit www.alabamapower.com. Or call us anytime at 1-800-245-2244.