Key Findings
The PSC does not require Alabama Power to make public any economic analyses justifying the billions of dollars that the Company has spent in just the past ten years to upgrade its existing, mostly coal, power plants.
Alabama Power has a direct financial incentive to make expensive upgrades, even at power plants that are aging and/or that don’t generate much electricity, because the Alabama Public Service Commission’s regulatory policies allow the Company to add the investments to its rate base on which it earns a return.
Executive Summary
Utility companies across the U.S. conduct Integrated Resource Plan (IRP) analyses to determine the optimal mix of supply-side (generation) and demand-side (energy efficiency and conservation) investments in energy production and consumption. These analyses are used to plan energy decisions decades into the future and are typically reviewed every few years. As part of an IRP analysis, utilities regularly evaluate economic decisions affecting customers. These include switching fuels at existing plants, spending money on energy efficiency and renewable resources, purchasing power from and selling power to other providers and the cost effectiveness and risks of retiring older power plants versus keeping them in operation.
In many states, including a majority of those in the South, these IRP analyses are typically reviewed in regulatory processes that offer affected ratepayers access to critical information, as well as an opportunity to participate in evidentiary hearings or to submit detailed comments before the utilities’ resource plans are approved.
The Alabama Public Service Commission (PSC) is the exception.
The Alabama PSC regulates Alabama Power Company’s IRP and its related resource-planning decisions in an opaque process that has allowed the Company to invest over $3 billion in environmental upgrades at its existing power plants in just the past 10 years. Alabama Power has been allowed to make these investments without having to offer any public evidence that these expenditures represent the most cost-effective and least economically risky alternatives for its customers. In fact, the only opportunity that affected ratepayers have to question the Company’s resource plans is in an annual informal off-the-record meeting that lasts less than one day. Even though there is no opportunity for meaningful public participation in the decision-making process, Alabama Power’s customers will pay for the Company’s billions of dollars of investments for decades to come.
In contrast to Alabama, the regulatory processes in other Southern states require investor-owned utilities to publicly demonstrate that expenditures for upgrades are more cost-effective and lower economic and financial risk alternatives.
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