When state utility regulators take up Georgia Power’s request for a $1 billion-plus rate increase three weeks from now most attention will be on the proposal’s size.
But something more important to both the utility and its customers also is on the table.
The company wants to do here what its Southern Co. affiliates in Alabama and Mississippi have done for years: Put rate increases on a kind of autopilot.
It would mean electric bills could go up once or even twice a year from now on if the utility isn’t making its guaranteed profit margin. The company has asked for a margin of just under 12 percent.
It also would guarantee the company that profit for the first time.
The classic electric rate battle, with its months of testimony, rebuttal and arguing in public, largely would become a thing of the past. Instead, Georgia electric bills would slide up gradually, with about one-third of the scrutiny increases get now.
Bills also could go down more easily, but no one pretends that’s likely to happen anytime soon.
Georgia Power says it sees its proposal as a way of avoiding the kind of whopper rate hike request it filed this summer, by allowing smaller increases more often.
Electric utilities around the country have been proposing faster nontraditional ways of getting paid because their costs are going up, not down, said Ken Costello, a utility expert with the National Regulatory Research Institute. He was in town this week to brief Public Service Commission staff on the proposed process.
Georgia Power says the change would make rates more stable.
Critics say it would remove a major incentive for Georgia Power to control costs and would shift business risks to consumers.
"Consumer advocates hate these things," said John Coffman, an attorney representing AARP in the current rate case. "It's perfect for the utility. They shift the risk and still get their double-digit profit."
Jim Clarkson, a consultant for commercial energy users, agreed the proposal shifts risk but said Wall Street will love it.
"It's certainly a Southern Company modus operandi," he said. "They've been trying to get something like this for years, off and on."
He said Southern Co. regularly cites its automatic rate increases in Alabama and Mississippi when talking up its financial health to investors.
Roy Bowen, head of Georgia Traditional Manufacturers, said his members -- the state's large industrial power users -- haven't taken a position yet on the proposal.
One small power user, meanwhile, has made up her mind. "I don't understand why anyone would even think of approving that," said Merle Evans, a senior citizen from Doraville. "What kind of monopoly is this anyway?"
Under state law, Georgia Power can file a rate increase at any time. For years, though, the company has agreed to settlement deals that require it to wait three years before filing again.
The PSC sets an allowed profit band and the company is supposed to keep its profits within it.
For more than a decade, the company has had to split the spoils with customers if it exceeds its profits by too much. The company has rebated money to customers three times, in 1999, 2000 and 2005.
The new proposal would allow the company to also charge more if its profits drop too low, as they did when the economy bottomed out last year.
Georgia Power proposes making a rate filing every November, based on an estimate of what the next year's costs would do to its profit margin.
The PSC staff would have 60 days to get their arms around the company's numbers -- instead of the six months allowed now when Georgia Power asks to increase rates. The five-member commission itself would then approve the change and it would go into effect in January.
Three months later, the company would make a second filing, based on its actual costs for the previous year. If its costs were higher than expected, and its profit margin less than expected, the company could again raise rates after a truncated review by the PSC and its staff.
A similar program has worked well for years in Alabama, said John Free, a spokesman for that state's Public Service Commission. He said Alabama Power's rates compare well with the nation, despite the more automatic rate increases there. Bobby Waite of the Mississippi Public Service Commission also said Georgians shouldn't fear the more automatic rate-making process.
Both states' rates rank in about the middle nationally. Both are also higher than Georgia's, according to the most recent data available from the U.S. Department of Energy.
Costello, the national utility expert, said most states still use traditional rate cases, and that Georgia's PSC should look carefully at whether the proposed revision is needed.
He said regulators must have enough time to really look at a utility's numbers, "to avoid the risk that rate increases just get rubber-stamped."
The PSC will rule on the proposal in December, when it rules on Georgia Power's rate case. It's unclear where commissioners stand: They're not allowed to talk about it.
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