Generated Title: Alabama Power's Rate Freeze: A Two-Year Stay of Execution, Not a Pardon
Alabama Power is proposing a rate freeze through 2027. Sounds good, right? Predictability is a virtue, especially when it comes to household expenses. But let's dig into the details, because as anyone who's spent time in the markets knows, "stability" can be a very loaded word.
The Devil's in the Rate Details
The company filed a notification with the Alabama Public Service Commission (PSC) outlining its intent to hold rates steady. Specifically, they're proposing to keep the current Rate CNP, Part C factors (environmental compliance costs) in place, and delay the Rate CNP, Part A adjustment (new power plant costs) until January 2028. They'll also keep the Rate CNP, Part B factor steady through March 2028.
The stated reason? Helping customers manage their power bills during a time when "many other costs are rising." A noble sentiment, to be sure. But is it a genuine effort to ease the burden on Alabamians, or simply a way to avoid bad press in the short term?
Energy Alabama, a nonprofit advocating for lower electricity costs, is calling it an "election year ploy." Strong words. Their argument is that Alabama Power could simply lower rates now, rather than deferring increases. John Dodd, their policy director, argues that this is less a rate reduction and more of a deferral.
Alabama Power counters that the PSC sets the rates according to formulas, and they aren't asking for pre-approval of any increases. They claim the filing "proposes a package aimed at bill stability," and dismiss the "election-year ploy" accusation as "one advocacy group's speculation about motives, not what is actually in the filing."
Who's right? Well, let's look at the numbers.
The Natural Disaster Reserve Shell Game
One key component of Alabama Power's proposal is to apply any customer refund due from the 2025 Rate RSE calculation to the Natural Disaster Reserve, which currently carries a negative balance. Rate RSE adjusts rates based on projected vs. actual profit. Higher-than-expected profit? Rates go down. Lower? Rates go up.
Here's where it gets interesting. They're essentially asking to use a potential refund – money that would otherwise go back to customers – to shore up a reserve that’s already in the red. Why is the Natural Disaster Reserve in a negative balance? Details on that are surprisingly scarce. Did previous storm seasons drain the fund, or were there other contributing factors (perhaps related to investment decisions)? The company isn’t volunteering that information.
I've looked at hundreds of these filings, and this particular request is unusual. The justification is to prepare for "future storm events." Which, given the recent power outages affecting over 50,000 customers due to severe storms, sounds reasonable. But it also conveniently allows Alabama Power to avoid issuing refunds now, while simultaneously building up a rainy-day fund (pun intended) for future needs.
It’s like taking money from your left pocket and putting it in your right, while telling everyone you're just trying to keep your pants from falling down.
The Lindsay Hill Question
Then there's the Lindsay Hill Generating Station. Alabama Power wants to delay the rate adjustment related to its acquisition of this 895-megawatt gas-fired plant until January 2028. The acquisition cost was substantial (reported at $2.1 billion). Delaying the rate adjustment means customers won't see those costs reflected in their bills until after the proposed freeze.
Is this a good deal for consumers? Maybe. But it also postpones the inevitable. Those costs aren't going away; they're just being pushed down the road. And, as Energy Alabama points out, the company may even earn interest on those deferred balances.
What happens in 2028 when all these deferred costs hit customer bills simultaneously? Will we see a sudden, sharp increase in rates? Alabama Power insists that weather, fuel markets, natural disasters, and other unforeseen events could affect these commitments, and they'll work with the Commission on appropriate adjustments if needed. In other words, all bets are off if things get rough.
This Isn't Charity, It's Business
Alabama Power's rate freeze proposal isn't an act of altruism. It's a calculated move designed to provide short-term stability while kicking the can down the road on some potentially significant cost increases. It's a two-year reprieve, not a long-term solution. Customers might appreciate the temporary relief, but they should also be prepared for what comes next. The fundamental question is: what's the plan after the freeze? Because winter is always coming.
