PSC approves rate freeze: How will this impact your power bill?

BIRMINGHAM, Ala. (WBRC) - The Alabama Public Service Commission voted Tuesday to freeze some rates aimed at stabilizing power bills for the next two years. What this means for ratepayers long-term is unknown.

Alabama Power hand filed the proposal one day after WBRC’s investigation, Price of Power, revealed Alabamians pay some of the highest electric bills in the country.

Commissioners and elected officials applauded Tuesday’s action, calling it a win for ratepayers, but consumer advocates have concerns.

What rates will be frozen?

• The PSC uses adjustable formula rates to allow Alabama Power to recover operating costs and a determined profit. This action freezes multiple rates tied to new state and/or federal regulations, fuel recovery costs, compliance expenses and costs associated with the Lindsay Hill power plant acquisition.
• In exchange for the rate freeze, the PSC greenlighted Alabama Power to use customer refunds or rebates for 2025. While the dollar amount is unclear, these funds will be applied to the National Disaster Reserve to offset the current negative balance. Alabama Power’s proposal said using these funds could avoid a future increase for this rate, which will not be frozen.
• The measure also allows Alabama Power to use nuclear tax credits to offset under recovered costs that occur during this freeze.

Neither Alabama Power’s filing nor the PSC’s action included dollar amounts or projections for whether these rate factors are expected to over or under recover during this freeze and how much the tax credits are worth that will be used to blunt any under recovered costs. Without that information, it’s difficult to fully assess who ultimately bears the cost when the freeze ends.

WBRC submitted detailed questions to the PSC Tuesday following the meeting, which they committed to answer in writing. This story will reflect that information as soon it’s made available.

Alabama Power declined to answer WBRC’s questions about what this means for ratepayers after the filing last week, requiring a meeting with station leadership first.

Cynthia Almond, President of the Public Service Commission, told the media after Tuesday’s vote that barring any catastrophic event, rates should not change over the next two years.

“We are going to apply some of the tax credits to the negative balance to shore that up and some of the surplus from this year,” Almond explained. “If we don’t, that can be charged back to the consumers and we need to address that. There’s no guarantees for what happens after 2027.”

It’s important to point out, fuel prices can be volatile. Tuesday, Alabama Power reported more than $19 million of under recovered fuel costs. That’s a cost that’s passed onto consumers through power bills, but will be frozen at the current rate. If that rate continues to fall short of fuel prices during the freeze and isn’t fully covered by the tax credits, Almond says the PSC can take further action.

“We do have discretion over where to apply some future tax credits,” Almond responded. “That’s something we keep a close eye on is the fuel balance, if you get too far behind, it impacts the ratepayer.”

Energy Alabama, who advocates for the PSC to move away from formula rates and restore rate hearings, which haven’t happened in the state in more than 40 years, criticized this action and the lack of transparency.

“Today’s decision may sound like stability, but it’s the opposite,” Energy Alabama’s Executive Director Daniel Tait said in a statement, in part. “Alabama Power’s own filing shows this isn’t a freeze at all. It’s a delay tactic that shifts costs, shields corporate profits, and leaves customers footing the bill later. Nothing meaningful changes for the families already paying some of the highest electric bills in the country.”

When Almond was asked about a process that improves transparency and allows more people at the table during considerations like the one passed Tuesday, she pointed to doing the most to help ratepayers with the framework in place now.

“As you know I’m new, I started in June,” Almond acknowledged. “This is the process we have in place. This is what we have to work with. Who’s to say what the future may hold, but right now, this is where we are and this is the law we have to work with.”

Shortly following the PSC’s vote, elected officials issued statements to WBRC praising the action.

All of these elected officials have received campaign donations from Alabama Power’s PAC, or political action committee.

Attorney General Steve Marshall, who represents ratepayers before the PSC, applauded the PSC’s decision.

Governor Ivey, who appointed Almond earlier this year, also offered her support.

Senator Tommy Tuberville issued a video statement, affirming the need for lower energy costs.

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