In a state where utility bills significantly impact residents, Alabama’s Public Service Commission (PSC) has recently rejected calls for greater public participation in determining electricity fuel cost rates. Despite Alabama law granting citizens the right to intervene in any commission proceeding, the PSC has ruled that its actions regarding fuel rates do not qualify as a formal “proceeding,” which would require public involvement.
The Role of the Alabama Public Service Commission
The Alabama Public Service Commission (PSC) serves as the primary regulatory body overseeing utilities such as Alabama Power. This commission determines utility rates and how much residents must pay for electricity. In the past, the PSC’s decisions on utility rate changes were often subject to public hearings and active community engagement. However, the process has evolved over the years, and public involvement is becoming increasingly scarce.
The Fuel Cost Dispute
One of the most significant decisions made by the PSC involves how electricity fuel costs are passed on to customers. Every month, Alabama Power submits a report to the PSC detailing its costs for coal, natural gas, and nuclear fuel used to generate electricity. Based on this, the PSC adjusts rates periodically to reflect changes in fuel prices. These rate adjustments directly impact consumer bills, often resulting in higher charges for residential customers.
However, Energy Alabama, a clean energy advocacy group, has raised concerns over the lack of transparency in the rate-setting process. In May 2024, the organization petitioned the PSC to allow public intervention in the docket that determines these fuel charges. They argued that this process should be open to the public, as it directly affects how much consumers pay for electricity.
PSC Denies Public Participation
On November 23, 2024, the PSC rejected Energy Alabama’s request for public participation, stating that the determination of fuel costs is not an official “proceeding” under Alabama law. According to the commission, only formal hearings that involve rate increases or regulatory changes are considered “proceedings” in which the public has a right to intervene.
Energy Alabama disagreed with this stance, pointing out that any action affecting consumer electricity bills should be classified as a proceeding, regardless of whether it involves a formal rate increase or not. “Rates are changing based on what happens in here,” said Daniel Tait, Executive Director of Energy Alabama. “This is something that anybody has a right to intervene in under the law.”
The Legal Backdrop: Alabama’s Utility Regulation Laws
Alabama state law allows any person or organization affected by utility rates to petition the commission and become a party to proceedings before the PSC. Specifically, it states that anyone impacted by rates can intervene in any commission proceeding. The PSC, however, argues that because fuel cost adjustments are based on routine status reports and consent orders, they do not constitute a formal proceeding.
The last time the PSC held an official proceeding on Alabama Power’s fuel costs was in 2008. Since then, the process has shifted to more informal adjustments made through routine reports submitted by Alabama Power. These reports detail the company’s fuel costs and electricity generation, but they do not involve public hearings or formal discussions. As a result, the public has not had an opportunity to weigh in on the matter for over a decade.
Energy Alabama’s Challenge
Energy Alabama’s motion to intervene was rejected multiple times by the PSC, citing the lack of an active proceeding. Energy Alabama first filed a petition to intervene in May 2024, which was initially denied in August. When they requested reconsideration in September, the commission once again ruled against their request in November.
Daniel Tait, Executive Director of Energy Alabama, expressed frustration with the process. “For the power company and the Public Service Commission to say with a straight face that no one deserves to have a say or even be in the room when one of the biggest factors in a utility bill is decided, that’s crazy to me,” he said.
Alabama Power’s Position
Alabama Power, which serves approximately two-thirds of the state’s residents, maintains that it does not profit from the fuel costs it collects from customers. Instead, the utility collects only the necessary amount to cover its actual fuel expenses. If too much money is collected for fuel costs, the company adjusts future rates to make up for the excess. On the other hand, if too little is collected, the company adjusts rates upward in the future to make up for the shortfall.
Spokeswoman Alyson Tucker emphasized that these rate changes are not intended to generate profit for Alabama Power, but to ensure that fuel costs are accurately passed on to customers. However, critics like Energy Alabama argue that the lack of public oversight raises questions about the fairness and transparency of the process.
Transparency and Accountability
The controversy surrounding Alabama’s utility rate process highlights a broader concern about transparency in the state’s regulatory system. Critics argue that the PSC’s reliance on informal rate hearings, as opposed to formal proceedings, makes it difficult for the public to fully understand how rates are determined.
Unlike other states, such as Georgia, where formal rate hearings include public testimony and cross-examination of company witnesses, Alabama’s system is far less transparent. In Georgia, for instance, special staff dedicated to public interest advocacy review rate increase requests and even challenge utility companies in public hearings. In Alabama, however, rate increases are often negotiated behind closed doors and announced at informal hearings with little public input.
As a result, critics argue that Alabama residents have little insight into how their rates are set and whether the fuel costs passed on to them are fair. Daniel Tait of Energy Alabama further expressed concern about the state’s reliance on fossil fuels like natural gas, which are prone to price volatility. He suggested that less costly and less risky alternatives, like solar or wind, should be considered to stabilize rates and provide more predictable pricing for consumers.
The Bigger Picture: Energy Transition and Consumer Costs
Alabama Power’s reliance on fossil fuels has been a point of contention for years, especially as the state seeks to transition to cleaner, more sustainable energy sources. The volatility of fossil fuel prices, particularly natural gas, has led to fluctuating energy costs for consumers. Energy Alabama has long advocated for a shift toward renewable energy sources that could help stabilize rates and reduce the state’s dependence on fossil fuels.
“Alabama Power customers are paying for Alabama Power’s decisions to invest in fossil fuels like methane gas, which are prone to price volatility, and then the costs associated with those fuels are passed down to customers,” said Christina Tidwell, senior attorney for the Southern Environmental Law Center, which represents Energy Alabama. She added that solar and wind energy are less prone to price volatility, making them a more reliable and affordable long-term solution for Alabama residents.
What’s Next for Alabama’s PSC?
As Alabama Power prepares for its annual informal rate hearings this week, the PSC’s decision to limit public participation will continue to be a point of contention. With the state already having the highest electricity rates in the Southeast, many residents are left wondering whether they are truly getting the best deal on their utility bills.
As Energy Alabama and other advocates continue to call for more transparency and public involvement in the rate-setting process, the PSC’s approach to utility regulation in Alabama will remain under scrutiny. Until meaningful reforms are made, it seems that Alabama residents will have to “trust” that the decisions made behind closed doors are in their best interest.
Conclusion: A Call for Greater Transparency
The ongoing dispute over Alabama Power’s fuel cost rates underscores the growing concern about transparency and public participation in utility regulation. As the state grapples with rising electricity costs, the need for a more open and accountable process has never been clearer. Residents deserve a say in how their utility bills are determined, and it’s time for the Alabama Public Service Commission to embrace greater public oversight. Only through transparency can we ensure that Alabama Power’s fuel costs are fair and that consumers are not left in the dark about how much they are paying for their electricity.
