Alabama Power pressed for answers on two-year freeze on rates

Alabama Power gave an annual report on its costs, projects, environmental compliance, and other factors the utility says helps determine the price of electricity Tuesday at an Alabama Public Service Commission meeting.

Power company officials answered questions from the PSC staff, the attorney general’s office, and representatives of two non-profit organizations during a four-hour session in Montgomery.

Much of the discussion was about the company’s decision to freeze rates in 2026 and 2027, a plan approved by the PSC, which regulates the utility.

Brian George, assistant treasurer for Alabama Power, said the company started out early this year with a goal of freezing rates for 2026.

George said meetings and discussions with PSC staff led to a conclusion that it could keep the freeze in place through 2027.

“Rate stability, to me, is a huge win for customers, when you look at what is going on around the country,” George said, referring to inflation and rate increases pending for dozens of utilities in other states.

Daniel Tait, executive director of Energy Alabama, which advocates for more renewable energy sources and more transparency in rate-setting, pressed George for details about where the company is cutting costs.

“I think everything is on the table,“ George said. ”We’ll be contemplating a variety of things.”

“Do cost containment measures include a reduction in executive compensation, incentive bonuses or stock-based awards?” Tait asked.

“I think everything is on the table,” George said. “We’ll be looking at labor costs.”

“Do reductions include any marketing, political spending, payments to public relations groups, things of that nature?”

“Yeah,” George said. “I may have stuttered. Everything is on the table.”

The annual informational session is part of the PSC’s regulation format for Alabama Power, called rate stabilization and equalization, or RSE.

Under RSE, the PSC sets rates at a level to allow Alabama Power to earn a rate of return that falls within a specific range.

The session was considered informal and was not an official meeting of the elected three-member PSC.

George said Alabama Power’s efforts to cut costs and absorb inflation have helped consumers.

“We manage to offset potential rate increases as a result of our cost management,” George said.

Tait said he wanted to know whether there was potential for a rate cut, instead of a freeze.

He said it was important to know details about costs because they will eventually be passed on to customers because of company’s guaranteed profits under the RSE system.

“We were trying to ask questions to make sure that people could understand that the company’s not really taking a hit here,” Tait said.

“They’re going to get theirs and customers are going to end up paying probably more in the long run.”

Tait said a more meaningful move than a rate freeze would be a downward adjustment in the range of return that Alabama Power receives under the PSC’s rate stabilization and equalization system.

George said Alabama Power has reduced its labor force and held operational costs steady despite increased costs for some of its basic supplies and equipment.

For example, the company said since 2020 the cost is up for transformers by up to 85%, cables by up to 50%, wooden poles by up to 40%, and light-duty trucks and bucket trucks by up to 50%.

The company said the long-term impact of tariffs on its costs is unclear.

George said Alabama Power considers two key factors when it makes investments.

“We’ve got to make the best possible decision that supports both reliability and affordability,“ George said.

“The utility industry is a capital-intensive business and requires a considerable amount of investment to be able to reliably serve our customers.”

Among those who have expressed concerns about power rates in Alabama is U.S. Sen. Katie Britt.

“I’m concerned that Alabama has the highest power rates in the Southeast,”1819 News quoted Britt as saying last week.

According to the U.S. Energy Information Administration, Alabama’s residential rate of 16.43 cents per kilowatt-hour was higher than neighboring states as of September.

Alabama’s rate was below the national average of 18.07 cents.

That rate is for the entire state, not just Alabama Power, which serves 1.5 million customers in the southern two-thirds of the state.

Christina Tidwell, senior attorney for the Southern Environmental Law Center, said a key concern about the rate freeze was the lack of public notice and input.

Tidwell said Alabama Power proposed it on Nov. 21 and the PSC approved it on Dec. 2.

“While this two-year rate freeze might offer some stability to customers, it’s not a long term solution to these high bills,” Tidwell said. “It locks in the status quo.

“One thing they could do is a thorough, transparent review of the rates to determine whether they should be held steady or whether there’s room to decrease the rates.

“As it currently stands, this rate freeze does not change the profit margin that Alabama Power is allowed to get from the Public Service Commission.”

This story was edited after publication to change the headline and to clarify that the Energy Information Administration ratings are for the entire state, not just Alabama Power.