Georgia Power officials on Wednesday defended the company’s request to increase the amount of profit its shareholders are allowed to make as part of its request to collect $482 million from customers through 2016.
Collecting the additional money would keep the company financially strong, said Ron Hinson, Georgia Power’s chief financial officer. This would include increasing the amount of profit the utility is allowed to make to 11.5 percent, up from 11.15 percent. That, in turn, would increase shareholders’ rate of return.
The rest would go to pay for pollution equipment on its coal-burning power plants, as well as to add transmission lines and install smart grid technologies.
For the company, an increased profit means a stellar credit rating, a lower cost of debt and the ability to borrow billions of dollars at a low interest rate to build power plants, transmission lines and substations, Hinson said. Without these factors, customers actually would be paying more than what the company is asking to help Georgia Power shore up financial gaps, he said.
“When you put all that together, that benefits our customers,” Hinson testified before the Georgia Public Service Commission.
The utility’s sales also have been down because of the sluggish economy and mild weather, Hinson said. This has affected Georgia Power’s bottom line.
Georgia Power’s profit margin already is higher than the industry average of 10 percent, according to industry data. Regulators allow Georgia Power a profit margin of between 10.25 and 12.25 percent.
The company’s profit margin is also higher than other large utilities, prompting questions from utility regulators and consumer advocates as to why it needs to be so high.
“How does the company justify asking 11.5 percent?” Commissioner Stan Wise asked.
“It’s true that our request … may be somewhat higher, but we believe that in order to benefit our customers, we have to take the whole overall cost of capital into consideration,” Hinson said.
Bobby Baker, an attorney representing the consumer-rights group Georgia Watch, pointed out during the hearing that the sluggish economy hurt everyone in Georgia.
“Everybody had to make cuts. The government had to make cuts,” Baker said. “Your customers had to make cuts.”
“And we did as well,” Hinson said twice.
“So Georgia Power is not alone in having to make adjustments for the recession,” Baker asked.
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