Georgia Power steadfast as decision nears in $2.9B rate case

Regulators are scheduled on Dec. 20, 2022, to decide the company's request for a 12% rate increase worth $2.9 billion over three years. (AP Photo/Branden Camp, File)

Georgia Power Co.’s message to regulators Tuesday was clear: Despite attacks that its proposed 12% rate hike is padded with profit, unneeded spending and consumer harm, the utility still wants $2.9 billion more over the next three years.

Georgia Power Chief Financial Officer Aaron Abramowitz testified Tuesday before the Public Service Commission that hurting the company’s finances would ultimately hurt the company’s 2.7 million customers.

“Many of the recommendations made by parties in this case would cause direct harm to customers by turning a well-designed and balanced regulatory structure currently in place on its head, ultimately undermining the financial health of Georgia Power,” he said.

The two days of hearings come at a crucial time. The five elected commissioners are scheduled to decide by Dec. 20 how much money the largest unit of Atlanta-based Southern Co. should be able to charge ratepayers starting in January. Staff employed by the commission says Georgia Power only needs to raise rates by $529 million over the next three years.

A residential customer who uses 1,000 kilowatt hours of electricity per month pays Georgia Power an average of $128 a month now, the company has said. Under the company plan, that would rise by $14.32 a month in 2023, reaching a total of $16.29 more over the three-year period. That’s nearly $200 a year more by 2025.

Commissioners are also grappling with other bills coming due. Georgia Power is likely to ask the commission to let it charge more early next year to cover higher natural gas costs. The commission has already approved an increase when the third nuclear reactor at Plant Vogtle begins generating electricity, also likely early next year. And a larger Vogtle-related increase will come when the fourth reactor is finished, possibly in 2024.

Public Service Commission staff warns all those additions could increase bills $55 to $60 month, or 45%.

Importantly, staff has recommended that Georgia Power should earn a lower return on its capital, even as the utility seeks to raise that return. The staff wants Georgia Power to earn a 9.45% return on equity, down from the current target of 10.5%, while Georgia Power wants to increase earnings to 11%.

“Our analysis is the market demands something higher,” Abramowitz said, arguing superior returns let the company sell more stock and borrow money more cheaply.

Testimony on Tuesday showed that difference could cost customers almost $250 million a year.

The company wants to frontload rate increases, getting almost all the money in the first year, unlike traditional yearly steps. Abramowitz stuck by the company’s plan Tuesday, but acknowledged the commission might approve yearly steps.

The company says it needs more money to improve the grid, retire old coal plants, acquire electricity from new sources and upgrade customer-facing computer systems. But the staff questions Georgia Power spending plans, concluding the company wants to unnecessarily replace transmission equipment before it wears out while getting few benefits in reliability.

Staff proposes cutting Georgia Power employee incentive pay linked to company profits. Staff also opposes company spending on equipment and wiring to charge electric vehicles, finding the utility is spending on private property the public generally can’t use. Opponents including gas station owners also warn that the program to “make ready” for electric vehicles lets Georgia Power spend regulated customer revenue to dominate an unregulated market for vehicle charging.

One key element is whether Georgia Power and the commission’s staff will reach a negotiated settlement, creating a proposal likely to win commission approval. Past settlements were common, but staff did not settle with the company during the 2019 rate case. Then, commissioners mostly gave the company what it wanted when they granted a $1.77 billion increase over three years.

Another fight is over how much Georgia Power must pay for electricity generated by owners of rooftop solar panels. A 5,000-unit pilot program has filled, and some commissioners have pushed to expand the cap. Georgia Power says rooftop solar unfairly shifts costs to other customers who don’t have panels, an analysis pro-solar forces dispute.

Consumer groups also sharply attack Georgia Power “smart usage” rate plan that includes a fixed monthly fee based on a customer’s peak usage. Opponents say the demand charge rate plan, the default for customers in newly built houses since 2021, unfairly drives up bills. Now, customers can switch back to the traditional rate plan, if they know enough to ask. But the company wants commission approval to force all new customers to use the demand charge plan.