CullmanTimes.com - Cullman, Alabama

December 15, 2012

PSC member: Utilities' returns may be set too high

BY PHILLIP RAWLS
Associated Press

MONTGOMERY, Ala. — A member of the Alabama Public Service Commission said he's concerned double-digit financial returns provided for three large utilities may be too high, and he wants the commission to consider changing them.

Commissioner Terry Dunn said he wants the three-member commission to vote at its next meeting Jan. 8 to conduct a formal review of the rate of return on equity that the PSC has set for Alabama Power, Alabama Gas and Mobile Gas. If approved, it could have an impact beyond customers' bills.

Dunn said in a statement that if he is successful, he will enter the process with an open mind.

"But let's be plain," he said. "My concern is that the ranges are too high, not that they're too low."

However, other commissioners indicated Dunn isn't likely to get a formal review.

Commission President Twinkle Andress Cavanaugh called Dunn's proposal "half-baked" and said the commission is not set up to conduct three formal reviews simultaneously.

At Cavanaugh's request, the commission voted unanimously earlier this month to conduct "informational meetings" with Mobile Gas to discuss rates and to post meeting notices on its website so the public can attend. She said she wants the PSC to proceed to other companies one at a time after Mobile Gas is finished.

She said Friday taking one company at a time "offers the best method for accountability and transparency for consumers."

Commissioner Jeremy Oden said focusing PSC staff and its limited resources on one company at a time will yield better results.

"Being right is more important than finishing first," he said.

Dunn's spokesman, David Rountree, said the PSC reviews natural gas companies every few years, and meetings about Mobile Gas would have occurred in 2013 with or without Cavanaugh's request. He said informational meetings amount to representatives of a utility negotiating with PSC staff.

Dunn said a formal review is like a court proceeding with due process rights. It involves public hearings, the sharing of documents filed by all sides, and the opportunity for input from consumers.

Spokesmen for the utilities say the current system is fair and is providing reliable service.

Before any of the three current members joined the PSC, the utility regulatory board enacted rate plans for the three large utilities that provide ranges for their return on equity. If their return drops below the range, the PSC can raise rates to get the return back within in the range. If the return goes above the range, the PSC can reduce rates.

A report issued in October by an independent research group, Regulatory Research Associates, said AlabamaPower's range of 13 percent to 14.5 percent hasn't been changed since 1982. The range for Alabama Gas has been 13.15 percent to 13.65 percent since 1983, and the range for Mobile Gas has been 13.35 percent to 13.85 percent since 2002.

The report found the ranges of return for the three Alabama utilities were "well above" the average returns approved for energy utilities nationwide.

A recent analysis of Alabama Gas and Mobile Gas rates by the Press-Register newspaper found utility customers would have saved about $260 million in 2010 if they had been charged rates paid by natural gas customers in Mississippi and Georgia. The utilities said variables between the states made the comparison invalid.

Representatives for the utilities say current regulations are fair for both the utilities and for consumers.

All three PSC members are Republican. Dunn and Cavanaugh have been members since 2010, and Oden since Dec. 1.