Next week, when Georgia Power begins defending its bid for a $1 billion rate hike as well as a new streamlined way to raise rates in the future, the company will face unusually unified opposition from major retailers.
That opposition is coming from retailers who haven’t agreed with each other in years on utility issues, including Macy's, Walmart and Target. The united front wouldn't be unusual in most states when utility rate hikes are on the table.
But it is unusual here.
"You don't normally see so many of them united together on a single issue like this," state Public Service Commissioner Chuck Eaton said.
The new-found unity isn't only about the Georgia Power request.
Georgia Power's current rate case is the first since 2007, when the commission allowed older retailers to take advantage of a pricing offering that had previously been available only to newer ones. That healed a rift that had divided them since the 1990s.
But retailers have serious concerns about the current request, as they struggle in the down economy, said John Heavener, lobbyist for the Georgia Retail Association.
Concerns include the request's size -- Georgia Power wants to phase in more than $1 billion in new charges over 26 months -- and the amount of return, or profit margin, Georgia Power wants to be allowed to earn, he said.
The company wants a rate of return of 11.95 percent.
"We think that's unwarranted," Heavener said.
Retailers particularly don't like the utility's proposal to change the way it raises rates in the future.
Georgia Power wants the PSC to institute semi-annual reviews that would allow it to raise and lower rates based on whether it's hitting its set profit margin, instead of employing traditional rate cases.
The process could allow rates to drop, but Georgia Power isn't pretending that's likely to happen anytime soon. The company says its costs are rising and that the new process will phase in inevitable rate increases more gradually and let customers to absorb them with less pain.
The proposed reviews would be shorter than the full-blown rate cases they would replace. The PSC would have two months to review requests, instead of six.
More importantly for retailers, the process would guarantee Georgia Power its set rate of return and keep that rate untouched, potentially for years.
The size of a utility's return is typically one of the biggest battles of a traditional rate case, where a one percent change is worth $110 million.
"We don't have locked in margins in retail," said Heavener, adding that retailers are struggling to eke out even small profits now.
Retailers also said the proposed process would lock in the formula that decides which customers pay what for a rate increase. Commercial customers have complained for years that they carry too much of the burden.
The pricing system that had divided retailers in the past is called "real time" pricing. Older retailers like Macy's had long complained that it allowed market newcomers to pay less for power than companies with older stores.
The price offering helped Walmart every time it opened a new store and pitted older Macy's against newer Dillards.
"We could be at different ends of the same mall, using the same amount of power," said Shaun Willie, a lawyer representing Macy's. "But Dillards would pay less."
Because of that, retailers fought each other as much as the utility in past rate cases. Since the PSC's 2007 decision, "We've been able to come together," Willie said.
Georgia Power doesn't break out rate impact figures for commercial customers. For residential customers, the proposed increase would raise a typical household’s monthly bill by about $10.88 and push that up to nearly $18 by February 2012.
The first hearing on Georgia Power’s request begins Monday at 9 a.m. at the state Public Service Commission’s offices in downtown Atlanta. The public will have an opportunity to speak as the hearings begin.
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