Georgia Power pushes for rate hike
But the utility may be disappointed
Poor old Georgia Power. If you believe what company executives say, we should all add another buck or two to our power bills to help the company struggle through these difficult times.
Over the next six months, Georgia Power will try to convince the state's Public Service Commission to approve a rate increase that would do just that.
The irony is that Georgia Power is so flush with cash, a rate hike is doubtful; indeed, some commissioners say the company should be reducing its rates, not raising them. Despite the economic downturn, energy companies and public utilities are among the few companies whose profits are rising. Southern Co., Georgia Power's parent company, stock is up 22 percent since September of last year, while the Standard & Poor's 500 is down 16 percent for the same time period.
One commissioner points out that, in the last two years, Georgia Power refunded $286 million for making more money than the PSC allows.
Rate increase cases have always turned into down and dirty fights between the PSC and the utilities the commission regulates. That's only natural. The commission is there to keep rates as low as possible and companies want rates to be as high as possible.
Because Georgia Power hasn't gotten a rate increase since 1991, and because the company is requesting a hike worth hundreds of millions of dollars — a 2.3 percent rate increase — this case is expected to get especially nasty.
"We're looking at a very bitter and contested rate case," one commissioner says. "We're not anticipating this is going to be a happy, friendly exercise — and it's not supposed to be. We're not supposed to be an affiliate of Southern Co. to help them make money."
During the rate increase hearings, each side will present its case — Georgia Power will show why it needs to charge more money, and the PSC will show why consumers should pay less. After each round of testimony, the other side will have the chance to cross-examine and present more evidence. In the end, the final decision will be made by the five commissioners. It would take only three votes to approve Georgia Power's rate increase. Two commissioners say they think a reduction in rates is probable.
Georgia Power argues that the company is entitled to charge its customers 2.3 percent more than it does now because it's building new power plants, spending $1.4 billion for 300 miles of new transmission lines and another $875 million on environmental controls.
"For the first time in many years, we're in a situation where we have rising costs in our industry," says Georgia Power spokesman John Sell. "We're in a period of expansion where we have to build a lot of power plants to meet the demands for electricity since we really haven't built much in the last 10, 15 years.
"We're going to go in there [the PSC] with the best proposal we can make and negotiate from there," Sell says.
The company is also asking to increase the cap on its return on equity — the profit it can make off customers — from 12.5 percent to 13.5 percent.
The PSC, using its own in-house experts and outside economists for hire, will pore over Georgia Power's financials and try to prove to the commissioners that the company is making more than enough money and should decrease its rates.
PSC staffers will testify that the utility industry average rate of return on equity is 11 percent, 2.5 percent lower than Georgia Power's request.
PSC staffers say they will try to reduce Georgia Power's rate of return to 11 percent. Atlanta Gas Light has an 11 percent rate of return, and BellSouth's is 11.3 percent.
PSC staffers estimate that each percentage point represents $70 million for Georgia Power. That means that if the cap goes up to 13.5 percent, the company could net $70 million. And if the commission votes to lower the cap to 11 percent, Georgia Power would lose $105 million.
Now add to this to the fact that public service commissioners run for office just like state lawmakers. Their campaigns are financed by companies like Georgia Power, making them susceptible to the kind of loyalties that only campaign contributions from special interests can generate.
And, boy, do these commissioners rake it in. Commissioner David Burgess raised $436,115 during the 2000 election cycle. That's more than double what Speaker of the House Tom Murphy raised. Only problem is, it's impossible to tell how much money of that money came from Georgia Power, or BellSouth or Atlanta Gas Light for that matter, because the campaign disclosure reports filed in the Secretary of State's office don't list what company the donors work for — they only say "Corporate Executive," or "Energy Executive" by the donor's name.
Commissioners aren't shy about admitting that behind-the-scenes lobbying is as much a part of the process as the public debates.
"Oh, the wining and dining has already begun and [the case] has barely even started," a commissioner says. "Actually, most of it is whining though, you know, with an 'h.' "??