Behind Closed Doors: The Story of Alabama Power’s New Solar Tax

Did you know that Alabama Power is now home to two solar taxes? You may be familiar with Alabama Power’s long-standing solar tax for homes and small businesses but the power company is back at it, now trying to block almost any potential competitors from providing lower cost energy. 

Effective April 1 of 2024, Alabama Power significantly reduced the rates it pays to independent power producers (like solar farms) and introduced a $0.00193 per kilowatt hour (kWh) fee on large-scale energy projects not owned by Alabama Power.

That tax may not sound like much but consider an example 80 megawatt (MW) solar farm in Montgomery. The new tax amounts to about a $250,000 charge annually for such a project. The new tax is, and perhaps was designed to be, a deal breaker for most projects and a significant threat to economic development and job growth, especially as companies like Meta are investing in Montgomery County. Meta has pledged to operate its new Alabama data center with clean energy but could Alabama Power’s new solar tax derail the new jobs? 

Energy Alabama and the Southern Renewable Energy Association (SREA), a partner renewable energy group, are seeking to become parties to the docket to represent our members’ interest. 

The Alabama Public Service Commission (PSC), led by Republican Commissioners Twinkle Cavanaugh, Jeremy Oden, and Chip Beeker, unanimously approved the new tax in March without any public hearing or public comment.

Alabama Power claims the tax is needed to cover costs associated with integrating variable energy sources into the grid, but unfortunately neither data or common sense backs up that assertion. First, Alabama Power has almost no solar or wind on its grid to deal with. Second, even assuming Alabama Power is telling the truth about why it needs the tax, the power company is 20 years too early considering its own plans do not call for renewable energy until 2041.

Alabama Power might not care to build much renewable energy, but many other job creators do. A new tax could help Alabama Power block any potential competitive supplier and further cement its monopoly position, even if it might scrap an economic development project in the process. Many other states around the country with significantly more renewable energy do not charge these types of integration taxes. It’s no wonder that Alabama’s competitors in Florida, South Carolina, Georgia, and Tennessee are building more clean energy and nabbing more job growth than we are.

The new fee joins Alabama Power’s already contentious solar tax on residential and small commercial solar users. This existing tax charges $5.41 per kilowatt (kW) per month, which is about 50% of what someone could expect to make from selling their energy to the grid. GASP, represented by the Southern Environmental Law Center (SELC), is challenging this tax in federal court, which significantly increases costs for residences and small businesses with solar panels and reduces most financial benefit. 

Let’s imagine if the Alabama Legislature imposed a new grocery tax without a single hearing or comment period. Can you imagine the outrage? But this is precisely what Alabama Power and the PSC have done.

The PSC’s decision to bypass any public involvement has drawn significant criticism. SREA asserted that the PSC’s actions violated the 14th Amendment’s due process clause, arguing that Alabama Power provided insufficient evidence for its rate changes, relying only on a cover letter without detailed supporting data. The organization states that a 50% reduction in purchase rates with less than 30 days’ notice and no opportunity for public participation does not meet basic due process standards.

Alabama is unfortunately lagging behind other Southern states in solar generation, missing out on the associated job growth, bill savings, and other benefits. But Energy Alabama is advocating to get Alabama back on track. We will continue in our pursuit to intervene on behalf of our members who support clean energy.

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