In the fall of 2019, Alabama Power filed a petition with the Public Service Commission (PSC), seeking permission to charge its customers well over a billion dollars over a 40-year period for an unprecedented expansion. The company says it needs to be able to generate a lot more electricity, even though the state’s electricity demand is generally stable. The proposed expansion would increase Alabama Power’s capacity by nearly 20%.
In March, Sierra Club and other intervenors challenged Alabama Power’s expansion at a hearing before the Public Service Commission. The company’s proposal, which is mostly made up of fossil fuels, is a bad financial deal for customers.
In the coming months, the PSC will review the record and decide whether to grant, partly grant, or deny the company’s plan.
This blog series will explain Alabama Power’s proposed expansion and clarify the stakes of one of the biggest energy cases ever to be decided in Alabama history. Missed our previous posts? Blog one is here and blog two is here!
By Sari Amiel, Legal Fellow with the Sierra Club's Environmental Law Program
What happens if you buy the wrong kind of light bulbs? If you saved the receipt, you might be able to get a refund, or swap them for the right kind. But what happens if you buy the wrong kind of power plant? If you buy a gas-fired power plant, there are no “take backs.” If you build a power plant, it will remain on the electric grid for 40 years.
That’s why it’s important to get it right the first time.
Alabama Power’s plan to increase its power by about 20%, mostly by adding three large gas-fired plants, is a bad investment, and one that customers will have to fully fund. And Alabama Power is drastically underestimating its costs. As if the shocking $1.1 billion price tag wasn’t enough, Alabama Power admitted that that figure does not include the costs of buying fuel—which will likely be dirty fracked gas—for the next four decades.
100% of Alabama Power’s expansion costs will be passed onto customers, who will soon experience the first of many rate hikes. But the company is flat-out ignoring the severe financial burden it will place on its customers. Even though Alabama has lower electricity rates than some other states, a more relevant measure is Alabama customers’ energy burden, or the fraction of household income spent on energy. A recent study revealed that Alabama customers face the highest energy burden across all 50 states.
Alabama Power has downplayed not only the cost of its investments, but also the risks. According to the U.S. Department of Energy, renewable energy and storage are plummeting in cost, rendering fossil fuels uneconomic. Additionally, gas prices are always at risk of changing suddenly and unpredictably, including during the current economic downturn. These economic factors mean Alabama Power’s proposed commitments to build a new 40-year gas plant, and buy power from two other gas plants for around 20 years, pose great risks.
If the company shuts down its gas plants for economic reasons, customers will still have to fork over their hard-earned money to keep paying for those useless plants. Alabama Power knows that this “stranded asset risk” is possible, yet refuses to bear this risk itself.
Put simply, customers could pay for Alabama Power’s mistake for an entire generation. Alabama Power should stop and reevaluate whether its expansion is actually in its customers’ best interests. Unfortunately, Alabama Power’s top priority is not protecting its customers, but continuing to profit at their expense.