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PSC mulls rate hike
Ga. Power asks for boost

ATLANTA - Georgia's largest electric utility must produce more power to keep up with a growing state, and it's being required to install expensive pollution controls on what it's producing now.

Those are the two major factors behind Georgia Power Co.'s request for a $406 million rate increase that would drive up the average customer's bill by $6.67 a month.

But when the state Public Service Commission takes up the case this week, an array of interests will be lined up to oppose the request.

The list includes large industrial power customers and elderly and environmental advocacy groups, although no environmental organization formally filed as an intervenor in the case.

But the most important intervenor of all could be the PSC's own public advocacy staff.

In testimony filed last month, the staff not only argued that Georgia Power's rates should not be increased. It is calling for a slight rollback in rates that would knock 23 cents off of the average monthly bill.

The weeklong hearings beginning on Monday are the second of three rounds on the request, which Georgia Power submitted last June.

After a final round of hearings late this month and early in December, the PSC is scheduled to decide the case on Dec. 20. Any increase would take effect in January.

Part of the proposed rate hike would help the utility recover the cost of investments in new power generation and power lines, Michael Garrett, the company's president and CEO, said in previous testimony submitted to the PSC.

Georgia Power has added more than 127,000 customers since 2003, he said.

At the same time, Garrett said, the utility's customers are using power at a higher rate. The average customer now uses 15 percent more electricity than a decade ago and 6 percent more than five years ago, he said.

Emissions cleanup

On top of that, Georgia Power is planning to spend more than $2.2 billion through 2010 on state-mandated pollution controls at coal-fired power plants, company spokesman John Sell said.

The utility further bolsters its case for an increase with statistics showing that Georgia Power's rates currently are 17 percent lower than the national average.

"We think we have a pretty strong argument there," Sell said.

But Roy Bowen, president of the Georgia Textile Manufacturers Association, said the rate hike would drive up production costs for Georgia Power's large industrial customers significantly.

"Electricity is second only to labor in costs," he said.

Bowen said such a large increase would put Georgia industries at a disadvantage with competitors in other Southeastern states, where electricity costs less.

"Georgia manufacturers, particularly companies with multi-state operations, compete for investment," he said. "These companies are going to go where the costs are lowest. ... It would hurt jobs in this state."

Representatives of much smaller users of electricity also are concerned about the rate hike.

Resource Service Ministries, an Atlanta-based social services agency that advocates for low-income elderly, is asking for an additional $6 discount on the $14 monthly break qualified seniors already receive on their power bills.

"Because costs have gone up over the past three years ... we feel justified in asking for an additional $6," said Lynn Westergaard, the agency's president.

"We want to be fair and allow Georgia Power to recover the costs of their investments. But we don't want it to be exorbitant when it hurts people across the board."

Environmental advocates argue that the utility wouldn't need to ask for such a large increase if it weren't determined to continue operating high-polluting coal-burning plants rather than investing more aggressively in renewable sources of energy.

Sara Barczak of the Southern Alliance for Clean Energy's Savannah office said those costs likely will climb even higher if the federal government starts regulating carbon dioxide emissions as authorized by a Supreme Court ruling this year.

"These upgrades are important and we support them," she said. "But it's unfair for ratepayers to have to keep shouldering costs that are borne because the utilities and regulators are making wrong decisions."

Renewables impractical

Sell said Georgia Power has considered stepping up investments in solar and wind energy but has found it impractical to launch large-scale projects with those sources.

"Wind is becoming more competitive, but we don't have enough sustainable wind in the Southeast," he said.

The biggest disagreement the PSC advocacy staff has with Georgia Power is with the return on equity the utility is seeking, the profit it is allowed to earn on its assets.

While Georgia Power is asking for 12.5 percent, the staff is recommending 10.25 percent. The utility's current return on equity is 11.25 percent.

While those numbers might not look substantially different, each 1 percent return on equity generates $100 million in revenue.

Sell said the reason for the disparity is that the PSC staff and Georgia Power have different ideas about the period of time the company should be required to take to recover its costs.

"It's pay me now or pay me later," he said. "Either way, we're going to get some recovery."

Sell said the vast difference between what Georgia Power is seeking and what the commission's staff is recommending isn't unusual. He said neither side generally gets what it asks for in rate cases.

"They typically come in and set the basement," he said. "We set the ceiling, and then we negotiate an agreement we can all live with for the commission to vote on."

SideBar: At a glance

Georgia Power Co. and the state Public Service Commission's advocacy staff differ widely over a rate increase requested by the utility. In fact, the staff is recommending a slight reduction in Georgia Power rates for next year and only a slight increase during the next three years:

Ga. Power request/PSC proposal

One-year plan/$406 million/-$11 million

Effect on avg. monthly bill/$6.67/-$0.23

Return on equity/12.5%/10.25%

Three-year plan/$642 million/$28 million

Effect on avg. monthly bill/$10.29/$0.66

Source: Georgia Power Co.