Fact Sheet

Public Utility Regulation Without the Public

There has not been a public rate case for the Alabama Power Company (“Alabama Power” or “the Company”) in 30 years. Instead, the Alabama Public Service Commission (“PSC” or “the Commission”) has a regulatory process that allows Alabama Power to adjust its charges each year without any public evidentiary hearings and, indeed, without any participation by ratepaying consumers whatsoever other than off the-record and after-the-fact comments at an informal hearing that completely lacks public transparency.

In fact, the evidence is clear that the PSC specifically adopted this extreme rate-making process in the ’80s in order to protect Alabama Power from having to file for rate increases (as utilities in other states do) and to shield the process from public involvement and scrutiny. Moreover, the Alabama PSC allows Alabama Power to earn a rate of return of between 13.0 percent and 14.5 percent on the common stock investment made by its sole owner, the Southern Company.

This return on equity range is significantly higher than other commissions around the nation allow their utilities to earn. For example, the average return on equity earned by utility operating companies like Alabama Power during the years 2008-2011 was only 9.40 percent or nearly 30 percent below the 13.27 percent return on equity earned by Alabama Power under the formula rate process followed by the Alabama Public Service Commission.

Only two other states with privately owned utilities have similar regulatory processes for electric utilities, Louisiana and Mississippi. However, in these states, unlike Alabama, there are meaningful opportunities for public involvement and ratepayer participation before major rate increases are approved.

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