Meet the Current Alabama PSC
The Alabama Public Service Commission—also known as the Alabama PSC or simply the PSC—is probably the state agency that you know the least about. But the PSC is one of the most powerful entities in the entire state.
Depending on where you live and how you get your electricity, natural gas, and certain other utilities—the Alabama PSC probably impacts your household bank account more than any other agency. Decisions of the Alabama PSC determine exactly how much you will pay each month for critical services like electricity, natural gas, and certain other utilities if you\’re served by a regulated utility.
If you get your utilities from non-regulated providers, the Alabama PSC is still relevant to you! The Alabama PSC sets the direction for investments in energy infrastructure, oversees pipeline and railroad safety, and more.
Let\’s take an in-depth look at the Alabama Public Service Commission. We will explain the who, what, why, when, and how of the authority and activities of the Alabama PSC. And we will also help you to understand what YOU can do to bring about change at an agency that is beholden to the main company it regulates—Alabama Power.
Energy Alabama believes that you are more than just a \”rate-payer\” or a piggy bank to be tapped. Understanding the importance of the PSC is the first step to initiate change.
Table of Contents (Click to Jump to Section)
- Why Should I Care About the Alabama PSC?
- FAQ: What is the Alabama Public Service Commission?
- FAQ: What are the \”guaranteed profits\” that benefit Alabama Power Company and Spire?
- FAQ: What about energy efficiency? Does it matter in Alabama and is it good for residential customers?
- FAQ: What is the \”solar tax\” that makes it hard for Alabama residents and businesses to become more energy independent and lower the cost of their electricity bills?
- FAQ: Why is Georgia Power investing in solar and other renewable energy projects in Georgia, while Alabama Power is NOT doing the same in Alabama—even though both are owned by The Southern Company?
- FAQ: What are some of the recent big decisions made by the Alabama PSC?
Why Should I Care About the Alabama PSC?
Short Answer: Folks in Alabama pay some of the highest utility bills in the U.S. Alabamians have the highest percentage of pre-tax income going toward utility bills.
Alabama\’s energy providers (think: Alabama Power) are state-guaranteed monopolies.
In exchange for the enormous amount of market power granted to monopolies like Alabama Power and Spire, regulators at the PSC are supposed to balance the needs of the public against the needs of the utility.
But the lack of meaningful oversight by Alabama\’s PSC commissioners is the main reason we\’re stuck with these high utility bills.
The PSC is supposed to look out for the interests of consumers and ratepayers, not big utilities and energy infrastructure companies. Instead of looking out for average people, the Alabama PSC typically approves whatever Alabama Power and/or Spire ask for.
Sometimes, the Alabama PSC even rejects the modest requests by Alabama Power to develop a small, renewable energy project.
The decisions and policies adopted by the Alabama PSC often become the policies, practices and strategies used by the non-regulated utility cooperatives that provide electricity and gas to non-Alabama Power customers.
Many of the rural utility cooperatives may be purchasing natural gas from the regulated gas producers, like Spire or the smaller ones.
We want you to make informed choices as you vote for one or more PSC Commissioners in Alabama statewide elections every four years.
What is the Alabama Public Service Commission?
The Alabama Public Service Commission, also known as the Alabama PSC, or simply PSC, is a state government agency established by the Alabama legislature to regulate certain utilities in the state of Alabama.
Regulatory authority of the Alabama PSC includes:
- Alabama Power
- Spire (natural gas utility) and certain other gas companies in production and pipeline operations
- Land line telecommunication companies and certain other telephone services (but not cellular/mobile)
- Private wastewater treatment systems for private companies (like some subdivisions, RV campgrounds, some boating facilities and marinas, and similar)
- Trucking and transportation: Intrastate transportation and certain registration aspects of interstate transportation services
- Railway safety
- Gas pipeline safety
Although the Alabama PSC does not regulate electric cooperatives or municipal utilities, some of those municipal utilities and co-ops may purchase electricity or gas from a regulated provider, like Alabama Power, Spire, or other natural gas suppliers. In other words, your utility bills may be affected by the actions and decisions of the Alabama PSC, even if you\’re not a direct customer of Alabama Power or Spire.
Alabama Power is a privately-owned monopoly provider of electricity to 1.4 millions homes and businesses in the southern two-thirds of the state.
As a monopoly, all electricity users in the Alabama Power service area are required to purchase electricity from Alabama Power unless they are entirely self-sufficient and capable of obtaining all their electricity needs \”off-the-grid.\”
As a result of this monopoly structure, Alabama Power customers do not have a choice of electricity providers. Alabama Power has a captured customer base and guaranteed profits (some of the highest profits in the nation)!
The Alabama Public Service Commission is supposed to provide oversight and regulation to ensure that Alabama Power and Spire customers are not paying more than they need to pay in order to ensure the utility is able to provide safe and reliable service.
Some natural gas customers also use residential propane tanks. So while Spire does have a monopoly to supply gas to residential customers in its municipal service areas, rural customers may choose to use propane tanks for home heating and other natural gas needs.
FAQ: What are the \”guaranteed returns\” aka, profits, that benefit Alabama Power Company and Spire?
And how do these guaranteed returns to Alabama\’s utility monopolies compare to the guaranteed returns allowed in other states where monopolies still exist?
Alabama Power and Spire receive guaranteed profits based on capital investment and related expenditures on infrastructure, as provided by Alabama law.
For convenience, we will focus in this section on electric utilities. It\’s important to keep in mind that Alabama Power is the monopoly electricity provider in its service areas and is the only electricity utility regulated by the Alabama PSC.
All states have some form of a public service commission. (In some states, these are called the public utilities commission or similar). As in Alabama, these state commissions are charged with regulatory oversight of the electricity and natural gas utilities. States with monopoly utilities use some type of formula to calculate the allowable \”return on equity\” that the monopoly electric utility is allowed to make as \”profit\” for its private shareholders.
The Alabama PSC uses a one-of-a-kind method to calculate Alabama Power\’s allowable profit. All the other states use a different method to calculate allowable profit, known as ROE (return on equity).
Thanks to the largesse of the Alabama PSC, Alabama Power almost always has one of the highest profit margins, i.e. the highest ROE, of all privately-owned utilities in the U.S.
The average allowed Return on Equity (ROE) for shareholder-owned electric utilities was 9.51% in 2018, according to the Edison Electric Institute, a trade association for investor-owned electric utilities.
Alabama Power generated just over $1 BILLION in extra profits between the years 2014-2018, compared to the industry average ROE, according to an analysis by the Energy and Policy Institute published in 2020.
In other words, if the three Commissioners on Alabama PSC had done their jobs, looked out for the interests of Alabama\’s hard working families, and kept Alabama Power\’s profits in line with the rest of the industry, everyday Alabamians would have kept about $1 BILLION more in their bank accounts.
An extra billion dollars for shareholders may sound great if you are a big shareholder or an executive with a bonus plan tied to corporate profits. But for the regular folks? Not such a great deal.
FAQ: What about energy efficiency? Does it matter in Alabama?
Energy efficiency DOES matter in Alabama. Better insulation and weather-proofing homes is the most cost-effective way to help all Alabamians lower how much they pay for electricity and natural gas. But energy efficiency is especially helpful for lower-income residents.
If we are serious about reducing utility bills for Alabamians, energy efficiency must play a huge part. Guess what? Energy efficiency costs substantially less that the cost to build a new power plant.
Utility companies like Alabama Power and Spire make money based on building new power plants, not helping you save on your energy bill. That\’s where the PSC should come in to force the utilities to do the right thing for you, the consumer.
It\’s probably no shock (pun intended) for you to learn that in 2020, Alabama Power ranked dead last in energy efficiency in a ranking of the 52 largest electricity providers in the U.S., according to an analysis by the American Council for an Energy Efficient Economy.
Other hot and humid Southern states are aggressively pursuing energy efficiency to reduce customer bills.
Alabama? No so much.
The Alabama PSC does nothing to incentivize or reward energy efficiency.
Energy efficiency is a massive job creator.
Do you think we should buy less energy and fewer resources from nations adverse to American interests? Boosting energy efficiency is an awesome way to achieve the goal of energy independence, while also creating jobs.
The U.S. Department of Defense takes energy efficiency seriously —to save money and protect our troops.
FAQ: What is the \”solar tax\” that makes it hard for Alabama residents and businesses to become more energy independent and lower the cost of their utility bills?
In 2013 the Alabama Public Service Commission approved a request by Alabama Power to impose a $5 per kilowatt (kW) tax on its customers who install solar panels to generate a portion of their electricity needs. That\’s \”technical speak\” for a tax that confiscates about half of all the money someone could expect to earn from their solar panel installation.
Here\’s a good example…It is like having a tomato garden at home, but your local grocery store started charging you a tax for not buying your tomatoes from them.
Even more unjust is how Alabama Power calculates its solar tax, justifying it almost entirely on \”lost revenues.\” In other words, because solar customers may buy less power, Alabama Power believes it has the authority to charge solar customers for what they would have otherwise paid the utility.
What\’s next? Charging customers for the energy they no longer use for upgrading to LED lights?
To add insult to injury, in 2020, the Alabama PSC approved an INCREASE in this solar tax to $5.41 per kilowatt (kW) hour.
The Alabama PSC dares to defend the power of utilities to penalize clean energy!
In contrast, Georgia\’s Public Service Commission (all Republican members) has adopted practices to encourage and reward clean energy initiatives. See the next section for details.
If you want to install solar panels on your home or business and you are in Alabama, it may take a long time to recoup your investment if you\’re paying a big tax on the energy you can generate from the sun. If enough customers stand up to the Alabama PSC and insist on change, we might eventually get change.
The fastest path to change is to do your homework before voting for PSC commissioners. Ask them specifically:
- \”What is your stance on taxing the sun?\”
- \”How will you, if elected (or reelected), work to eliminate the current solar tax that Alabama Power customers who install solar panels must pay for that simple right?\”
This lawsuit is discussed briefly in the FAQ: Recent Big Decisions of the Alabama PSC.
FAQ: Why is Georgia Power investing in solar and other renewable energy projects in Georgia, while Alabama Power is not in Alabama—even though both are owned by The Southern Company?
Let\’s start with a few fun facts:
Georgia’s Public Service Commission has 5 elected commissioners—all five are Republicans.
Alabama’s Public Service Commission has 3 elected commissioners—all three are Republicans.
Georgia PSC regulates Georgia Power, which is the largest electric utility in Georgia.
Alabama PSC regulates Alabama Power, which is the largest producer of electric power in Alabama.
Georgia Power and Alabama Power are both owned by the Southern Company (their “parent” corporation).
That’s where the similarities end.
Georgia ranks 7th in the United States (5th in 2021) based on installed solar capacity capable of generating 4,268 megawatts. Georgia’s pro-solar policies have allowed the solar industry to create 4,466 jobs for Georgia residents. Source: Solar Energies Industries Association (SEIA Georgia Data.
Alabama ranks 28th in the U.S. for installed solar capacity capable of generating 577 megawatts. The solar industry has, thus far, created 481 jobs in Alabama. Source: Solar Energies Industries Association (SEIA) Alabama Data.
Let\’s explore this unfortunate but intentional disparity between Georgia and Alabama.
We all know that weather and climate are not the reasons for the massive difference for solar power generating capacity. Georgia is sunny and hot. So is Alabama.
So, what explains this difference between Georgia and Alabama?
The Georgia Public Service Commission—all Republicans—and the Georgia Legislature encouraged, and incentivized renewable energy production, including solar. The Alabama Public Service Commission expressly does NOT encourage any renewable energy production and has acted at every opportunity to penalize all forms of renewable energy, but especially solar.
In fact, the Alabama PSC has adopted regulations and policies that allow Alabama Power to impose a TAX on any consumer or business that installs solar panels and connects to the electric grid.
Ultimately, this tax removes almost any economic incentive for a customer to install solar panels on the customer’s property.
The Alabama Legislature also does nothing to incentivize solar or any other renewable energy production in the state.
A case is currently pending in federal court in Alabama to review whether the policies and regulations of the Alabama PSC penalizing and taxing solar energy production are discriminatory under the federal Public Utility Regulatory Policies Act of 1978. The details of the case are beyond the scope of this FAQ on the Alabama Public Service Commission. The Southern Environmental Law Center is representing the plaintiffs in this case.
FAQ: What are some of the recent big decisions made by the Alabama PSC?
Alabama PSC Raised the Solar Tax that Alabama Power can collect, Sparking Lawsuit
In 2020 the Alabama Public Service Commission unanimously voted to raise Alabama Power’s solar tax from $5.00 per kilowatt to $5.41 per kilowatt.
A federal lawsuit is pending in the U.S. District Court for the Middle District of Alabama to address whether the Alabama PSC-approved solar tax violates certain provisions of the federal Public Utility Regulatory Policies Act of 1978 (PURPA) that prohibit rate plans that discriminate based on the type or source of energy a facility might generate. The complaint was filed in federal court after the Federal Energy Regulatory Commission declined to bring an enforcement action on the matter. Despite this negative decision on an enforcement action, two of the FERC Commissioners issued a separate concurring opinion expressing their concerns that the Alabama solar tax may indeed violate PURPA.
The negative impact of the Alabama Power solar tax tax—and how it works in Alabama—are explained well in the linked Southern Science article by Sydney Cromwell.
Approved Alabama Power\’s Natural Gas Power Plants, Denied Solar Projects
In 2020, the Alabama PSC approved a request by Alabama Power to build a 720 megawatt natural gas unit at Alabama Power’s James M. Barry Electric Generating Plant in Mobile County.
In the same proceeding, the Alabama PSC approved a request for Alabama Power to purchase the Central Alabama Generating Facility (another natural gas plant) and to buy all the rights to energy produced at the Hogs Bayou Energy Center in Mobile County. The PSC rejected, however, the most cost-effective options of all—the renewable energy and battery storage projects.
Data submitted by Alabama Power proved that the renewable energy projects would save customers more money than the projects would cost. The PSC chose not to pursue cleaner, lower-cost energy but to instead burden customers with more expensive power for 40 years or more. Even the Alabama Attorney General argued that Alabama Power should take on some of the risk of its construction plans but the PSC was unmoved.
Alabama PSC \”Media Plan\”
In March 2020, the Alabama PSC adopted an “interim” Media Plan, effective immediately, that, for practical purposes made it impossible to record, broadcast, or even “cover” a public hearing by the PSC using any type of electronic device. The plan probably violates Alabama’s open meeting law, as well as the freedom of press and speech protected by the First Amendment.
The purpose of the PSC Media Plan is to make it easier for the PSC to conduct its business in private and make it harder for Alabama voters and citizens to know what the Commissioners are doing.
Why hide the meetings?
Lagniappe Mobile recently published an in-depth feature, Throwing Shade, that provides excellent coverage of why it\’s so hard to bring renewable energy to Alabama.