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Alabama Power Rates To Drop By More Than 2 Percent

The Associated Press

MONTGOMERY, Ala. (AP) — Alabama Power Co. customers are going to see a slight reduction in rates, starting next week, thanks to declining prices that the utility pays for coal and natural gas.

The state Public Service Commission decided Tuesday to decrease the cost of 1,000 kilowatt-hours for homes and apartments by $2.72, starting June 9. The reduction from $130.29 to $127.57 represents a drop of 2.1 percent.

According to the U.S. Department of Energy, the typical American home used 936 kilowatt hours per month in 2007.

The PSC's decision rolls back part of the 13.35 percent increase that the state's utility regulatory commission approved for Alabama Power in October.

"This is a decrease in the increase," PSC President Lucy Baxley said.

The three members of the PSC approved the decrease in a brief meeting with little discussion. It was sweltering in the commission's meeting room because the air conditioning was not working.

Alabama Power, a subsidiary of Southern Co., serves the southern two-thirds of the state. The Tennessee Valley Authority, which serves the northern third, raised rates 20 percent last year due to higher fuel costs. But it has now rolled back most of that increase due to declining fuel prices.

When the PSC raised Alabama Power's rates in October, the prices for coal and natural gas had been climbing. Coal and natural gas generate 80 percent of Alabama Power's electricity, and fuel expenses account for half of the cost of electricity, company spokesman Pat Wylie said.

At the time, the power company had spent $307 million more on fuel for its power plants than it had recovered through its utility rates.

After the increase, the prices for coal and natural gas started declining due to the recession, Wylie said. Also, heavy rainfall in Alabama this year increased hydroelectric production, which is inexpensive to operate, he said.

Now, Alabama Power's shortfall on fuel costs is down to $158 million, and the PSC estimates the amount will keep shrinking, even with the rate cut.

The rate reduction approved Tuesday is good through October 2010, when the PSC will again review prices.