Regulators OK Alabama Power cut; more may follow

MONTGOMERY, Ala. - Thousands of small businesses that rely on Alabama Power Co. will get a break on their electric bills in the new year. Savings for other customers may also be ahead.

The Alabama Public Service Commission voted unanimously Tuesday for a rate adjustment that will save more than 22,000 small businesses more than $25 per month.

On Dec. 1, the PSC will review the rates that Alabama Power's residential customers pay. Commission members said they anticipate a rate reduction that will begin around Jan. 1.

"I think December will be a good month for the consumer," Commissioner Jan Cook said.

Zeke Smith, Alabama Power's vice president for financial and regulatory planning, said he shares Cook's optimism.

He said heavy rainfall has increased production from the company's hydroelectric plants, which is the cheapest kind of electricity. Also, coal prices have stabilized after rising sharply, and natural gas prices are lower than a year ago.

The PSC's rate structure guarantees Alabama Power, a subsidiary of Southern Co., will recover what it spends on fuel costs for its power plants. For many months, the utility had been going in the hole.

Last November, the deficit reached $328.6 million. But now Alabama Power is ahead $54.7 million, which commissioners said is another indication a rate reduction is likely.

Smith said it's too early to predict the size of any changes Alabama Power might recommend.

The rate change the PSC approved Tuesday for small businesses will begin Jan. 1, company spokesman Pat Wylie said.

The PSC is changing a fee that businesses pay each month for being connected to Alabama Power's utility lines. The PSC is raising the amount of electricity that a business can use at one time and be classified a small business from five kilowatts to 15. That means some businesses now classified as medium-size businesses will become small businesses, and they will go from paying $50 a month for a connection fee to $25.

Besides the reduction in the fee, businesses dropping from the medium to small category will no longer have to pay a fee for Alabama Power being prepared to meet their highest electric demand. They will also save on utility taxes, which will create a total annual savings of $9.8 million.

"Especially in these times, small businesses needed relief," Commissioner Susan Parker said.

The PSC raised business rates last year. As part of the changes, more businesses got lumped into the medium-size category than expected, and their monthly connection fee ended up being a large part of their bill. The adjustment approved Tuesday corrects that, PSC staff members said.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.