Alabama Power gets green light to pay for new gas plant with utility bill increase

Alabama Power just got the green light to buy a gas power plant and pay for it with an increase to utility bills.

The Alabama Public Service Commission on Tuesday unanimously voted to clear the way for Alabama Power to purchase a power generation station in rural Autauga County.

“The Lindsay Hill facility is a cost-effective, proven resource that will help us continue delivering the reliable service our customers count on, especially during periods of high demand,” said Alyson Tucker, a spokesperson for Alabama Power. “This project is part of our long-term planning to ensure reliability and resilience as our state grows.”

An Alabama Power official last October told the public service commission that customers will pay about $3.80 more on their bills beginning in 2027. Tucker said Tuesday the increase will be a little less than that for some customers.

“While we’re always working to keep bills as low as possible, this change – about $3.32 for the typical residential customer using 1,000 kWh a month – will help ensure we can meet growing electricity needs,” Tucker said.

Alabama Power says it needs the plant to increase power generating capacity. In a report to the PSC, the company said it will need to add 1,200 megawatts of capacity by 2029 to keep up with demand during the winter months. That year, Alabama Power’s reserve energy capacity is projected to be lower than the amount of energy needed when electricity demand is at its highest.

The Lindsay Hill plant has a winter capacity of nearly 900 megawatts.

The Federal Energy Regulatory Commission approved the sale in June.

In applications to the state public service commission and the federal energy commission, Alabama Power did not say how much the Lindsay Hill Generating Station will cost. The power company on Tuesday declined to tell AL.com how much it will cost. The news outlet Utility Dive reported in February the plant is expected to sell for $622 million.

Alabama Power said it will recoup those costs through various “rate riders.” In testimony submitted to the PSC, Adam Ricks, a power company official, estimated that the typical residential bill will increase by $3.80 per month.

However, even if the sale goes through, those increased costs will not hit customers until 2027, Alabama Power said.

Currently, a company called Mercuria Energy America purchases the power generated by the Lindsay Hill plant, under an agreement with Tenaska. Alabama Power told regulators it intends to honor that agreement until it expires in April 2027.

Environmental advocates objected to the sale. The Southern Environmental Law Center, representing environmental nonprofits Energy Alabama and the Greater-Birmingham Alliance to Stop Pollution, argued in April that Alabama Power did not sufficiently prove that it needed more energy capacity. They also said that the company had not shown that purchasing Lindsay Hill was the most cost-effective way to add capacity.

“Once again, Alabama Power did not consider clean, low-cost options like solar, batteries, and energy efficiency programs and opted to double down on methane gas,” said Christina Tidwell, a senior attorney in SELC’s Alabama office, in a news release. “Alabama will continue to lag behind other states in cost effective, renewable energy, like solar, if our leaders approve investment in harmful energy sources instead of clean, renewable options.”

In Alabama Power’s 2023 request for proposals to increase its capacity, the company told possible vendors not to submit solar energy plans.

“This capacity RFP is soliciting only reliable, dependable supply resources with firm fuel availability,” it said. “Intermittent renewable resources such as solar may be bid into the Company’s next Renewable RFP.”

Alabama Power argued that there are benefits to purchasing the Lindsay Hill plant, which was commissioned in 2002. The company estimates that it has about 17 years of life remaining. And, in 2020, the company purchased its sister plant, the Central Alabama Generating Station.

“This creates opportunities for efficiencies in terms of inventory, labor force, supervision and other actions and activities involving the operation and maintenance of those largely identical units,” said Christopher Habig, resource planning manager for Alabama Power, in testimony to the PSC.