AARP AARP States Alabama Money

Alabamians will still see high natural gas and electric bills in 2014

In Alabama, electric and gas customers still pay some of the highest bills in the South, while Alabama’s big utilities reap some of the highest allowed profits in the country.  Following nearly a year of informal meetings by the Public Service Commission (PSC) on the rates and profits of Mobile Gas, Alabama Gas, and Alabama Power, the status quo remains with Alabamians seeing little if any relief on their utility bills.

Mobile Gas, Alabama Gas, and Alabama Power are monopoly utilities, meaning they have no competition to keep their prices in check.  It is the job of the PSC to regulate these big utility companies and make sure they are providing reliable service to customers at fair and reasonable rates.  For decades, the PSC has reviewed rates during closed-door meetings.

Every other state in the country – except Alabama – holds formal hearings, often called “rate cases,” where utility companies must testify under oath about their costs and operations – all details are out in the open.  And, in those states a consumer advocate such as the Attorney General’s office handles cross examination. 

While PSC Commissioner Terry Dunn called for formal hearings in Alabama, PSC President Twinkle Cavanaugh and Commissioner Jeremy Oden, opposed such hearings.  Instead, they decided to hold “informal meetings” to review the big utilities’ rates and profits, promising “transparency.”  AARP applauded the PSC for bringing the rate review process into public view, and we actively participated in the proceedings, providing expert testimony and analysis – with the goal of making sure Alabamians only pay what’s fair and reasonable for their utilities, and not a dime more.

From that vantage point, we saw, firsthand, how these informal meetings quickly turned into a PR platform for the big utility companies, where they highlighted corporate citizenship – but fell short on details about costs and operations.  The outcome: Back-room deals between the PSC and monopoly utility companies that continue to put massive profits before people – and leave Alabamians to pay the price.

With their decisions on Mobile Gas in July and on Alabama Gas in November, the PSC took a step in the right direction. The PSC lowered the allowed profit for both utilities, from about 13% to 10.95% for Mobile Gas and 10.8% for Alabama Gas.  This action should have saved customers millions of dollars in annual savings on their gas bills.  But, the PSC made another change to offset these savings, altering the “cost control mechanism” of both utilities to better their profits. This change alone – that was not even mentioned during the informal meetings – will translate to higher bills for gas customers, each and every year.

Here, the PSC gives Alabamians savings with one hand, and takes them back with the other. 

While the PSC’s actions on Mobile Gas and Alabama Gas may have been a step in the right direction, the commission’s decision in August on Alabama Power was the polar opposite. The decision shifted Alabama Power‘s rate review from a system that sets parameters for the company’s allowed profit (“return on equity”) to an unorthodox and unproven system, called “weighted equity.” Again, this controversial option was not discussed in any detail during the informal meetings. 

According to AARP’s financial expert Stephen Hill, this shift allows Alabama Power to earn a 13% to 14% profit, exactly what they earn now – the highest in the nation.  Alabama will now be the only state in the country to 1) not hold formal rate hearings for monopoly utilities, and 2) use the “weighted equity” system, which may allow companies to manipulate profit.

Bottom line: The PSC played a shell game with the profits of Alabama Power, and Alabamians continue to pay the price.

Throughout the informal meetings, AARP members from Alabama raised their voices for fair and affordable utilities.  More than 5,000 Alabamians wrote personal messages to the PSC, asking for lower electric and gas bills.  Many of these messages included the simple yet poignant plea, “please help.”

Yet, the PSC continues to ignore the pleas of Alabamians, and continues to strike back-room deals that keep pumping excessive profits into Alabama’s big monopoly utilities.

It’s clear to us: The informal meetings that the PSC held on the big utilities’ rates and profits were not transparent – and were not enough.   Alabamians deserve to know the facts about how their rates are decided, and have their voices heard.  Therefore, AARP will continue to call for formal hearings to review the rates and profits of Alabama’s big monopoly utilities – like all other states.  Otherwise, the struggles of hardworking Alabamians will continue to be ignored.


Jesse Salinas,

State Director

AARP Alabama

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