Alabama Power Rates To Drop By More Than 2 Percent

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.