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By Dennis Pillion, Inside Climate News
MONTGOMERY, Ala.—The Alabama Public Service Commission on Tuesday approved a sweeping package of temporary changes they say will keep electric rates steady for the next two years.
The commission voted 3-0 to approve a modified version of several billing changes proposed by Alabama Power, the state’s largest electric utility, on Nov. 21.
“I think it’s a really great thing for the ratepayers to not have increased rates for the next two years,” PSC President Cynthia Lee Almond said after the meeting.
The move comes after a wave of criticism toward Alabama Power over high electric bills in a relatively poor state.
An Inside Climate News analysis found Alabama Power’s residential customers paid the highest total electric bills in the country last year, thanks to a combination of very high electricity usage and above average electric rates compared to the rest of the country.
U.S. Sen. Katie Britt recently said that Alabama Power customers pay the highest rates in the Southeast and called the situation “unacceptable.”
Alabama Power, in a news release, said the company would “hold in place all existing factors in customer rates,” until 2028.
“We know budgets are tight, and power bills are a real concern for many families and businesses,” Moses Feagin, Alabama Power’s executive vice president, chief financial officer and treasurer, said in the news release. “This commitment gives customers more certainty and predictability around electric rates at a time when many other household and business costs are rising.”
When asked if the changes guaranteed Alabama Power customers would not see any rate increases before 2028, Almond said that was the intent of the package.
“I think there’s always something extraordinary that could happen that would cause us to take a look [at increasing rates],” Almond said. “And what I’m thinking of is some catastrophic event, like a hurricane that’s very devastating.
“But beyond that, the expectation is that rates will be frozen for the next two years.”
Nonprofit advocacy group Energy Alabama said in a release that the rate freeze did not change any of the underlying factors that drove bills so high in the first place.
“Today’s decision may sound like stability, but it’s the opposite,” the group said. “Alabama Power’s own filing shows this isn’t a freeze at all. It’s a delay tactic that shifts costs, shields corporate profits, and leaves customers footing the bill later. Nothing meaningful changes for the families already paying some of the highest electric bills in the country.”
The group also criticized the speed with which the changes were adopted, over a shortened holiday week with no opportunity for public input or involvement.
“That kind of speed only happens when transparency and public input are intentionally avoided,” the group said.
Multiple rate changes approved
In order to freeze rates at 2025 levels through 2027, the commission will order Alabama Power to make several adjustments. The company will delay an increase that was slated to begin in 2027 to cover the $622 million purchase of a natural gas plant approved earlier this year.
Alabama Power will also agree to keep its environmental compliance and fuel costs steady through 2027, use nuclear production tax credits to offset revenue lost due to the rate freezes, and rely on “internal cost control measures.”
There is one potential downside for customers. Alabama Power’s projections for its 2025 revenue show the company is on track to earn more profit than its allowed rate of return, which would normally trigger refunds to customers next year.
Now, the amount that would have been refunded will instead be deposited in the company’s Natural Disaster Reserve fund, which the company said has a negative balance.
During the meeting, John Garner, PSC executive director and administrative law judge, said the PSC staff recommended transfer of the excess profits to the disaster fund to avoid another potential rate increase.
“The staff feels that given the current state of the natural disaster reserve, which has a negative balance, there’s actually charges associated with that which we’re trying to avoid,” Garner said.
Commissioner Jeremy Oden proposed amending the PSC’s order extending the Rate RSE factor—the part of Alabama Power bills that includes the company’s profits—for two years, locking all rate factors in place.
“With the Trump energy directives that he’s giving out and all that’s happening right now in the energy world, we really don’t know the extent of those implications and stuff until they really take effect,” Oden said. “And I think today’s order, with this order, gives us a good assurance that we can look at what’s happening in the energy world, pause these rates for two years, and then come back and adjust and look at this, you know, over a period of time.”
The commissioners approved that amendment 3-0.
Almond said that, while there were no guarantees beyond 2027, the changes were a positive for Alabama Power customers.
“To have a rate freeze for two years, while other states’ rates are rapidly increasing 5 percent, 10 percent a year, can only be a good thing for rate payers in the state of Alabama,” Almond said.
Solar projects approved
In addition to the rate structure adjustments, the PSC approved two large-scale solar projects through an agreement with Meta Inc. Meta is currently building a hyperscale data center just outside Montgomery.
The projects are called Stockton I Solar, expected to be 80 megawatts, and Stockton II Solar, expected to be 180 megawatts.
Alabama Power, in a statement, said it will purchase the power from those projects in Baldwin County under the agreement approved Tuesday.
“These efforts reflect Alabama Power’s commitment to connect large customers with large projects to help expand cost-effective, steady and responsible solar growth in Alabama,” a company spokesperson said.
The new solar projects will be constructed, owned and operated by Dotier, LLC, a subsidiary of Meta Platforms, Inc. Dotier will retain the renewable energy credits for the project.
The solar projects are expected to be completed by Dec. 31, 2028.
Meta announced in September that it was increasing the size of the planned Montgomery data center to nearly 1.3 million square feet, and bringing the company’s total investment in the project to more than $1.5 billion.
“The Montgomery Data Center energy use will be matched with 100% clean and renewable energy,” the company said in that announcement.