Alabama Power's Rate Freeze: A Sweet Deal, or Just Sweet Talk?
Alabama Power is promising to hold electric rates steady through 2027. Sounds good, right? Especially when you're getting hammered by inflation on everything else. But before we start celebrating, let's dig into the numbers and see what's really going on.
The Freeze Frame: What's Actually Happening?
The company made an informational filing with the Alabama Public Service Commission, outlining a plan to keep rates stable. They're talking about freezing Rate CNP (Parts A, B, and C) and the Environmental Cost Recovery factor. In plain English, this means they're postponing some increases related to environmental regulations and new power plants, like the Lindsay Hill Generating Station (an 895-megawatt gas-fired plant).
But here's the kicker: they're not reducing rates. They're deferring increases. As John Dodd from Energy Alabama put it, "At the core of it, what Alabama Power is proposing is not a rate reduction but a deferral." It's like putting your credit card bill on hold – the debt doesn't disappear; it just waits for you later.
Alabama Power says this move is about helping customers manage their bills during tough times. And to be fair, they're not wrong – budgets are tight. But it's also worth noting that 2026 and 2027 are election years. Coincidence? Maybe. But as any good analyst knows, timing is everything. Alabama Power’s two year rate freeze is about politics, not people, nonprofit says
One crucial element of this plan involves using customer refund amounts from Rate RSE (Rate Stabilization and Equalization) to offset a negative balance in the Natural Disaster Reserve. In other words, money that could be going back to customers now is being diverted to a different fund. And they want to use federal nuclear production tax credits from 2025 through 2027 to further offset retail cost of service. It's a shell game of credits and reserves, and I've looked at hundreds of these filings, and this particular arrangement feels unusual.
The Stormy Weather Ahead
Of course, Alabama Power throws in the usual caveats: weather, fuel markets, natural disasters could all throw a wrench into the works. And wouldn't you know it, just a day after announcing the rate freeze, severe storms knocked out power to over 50,000 customers across the state. (Jefferson County alone saw around 33,000 outages.) Fallen trees, downed power lines – the whole nine yards.
Now, a cynic might say this is a convenient reminder of why they need that Natural Disaster Reserve. But let's be fair: Alabama does get hit by some serious weather. The National Weather Service issued warnings about 70 mph wind gusts, expecting "considerable tree damage." It is a fair point.
The company is also asking for permission to use any customer refund due from the 2025 Rate RSE calculation to the Natural Disaster Reserve. The reserve currently carries a negative balance. I wonder how negative? The filing doesn't specify.
Georgia on My Mind: A Pattern Emerges
Here's where things get interesting. Alabama Power's sister company, Georgia Power, pulled a similar move, proposing a rate freeze through 2028 after three years of increases. Advocacy groups in Georgia argued that the freeze just locks in the company's profit margin.
Is this a regional strategy? A way to keep regulators happy in the face of rising costs? It's hard to say for sure. But the similarities are striking. It's like a franchise restaurant chain offering the same "limited-time" deal in every location.
And this is the part of the report that I find genuinely puzzling. Why not just lower rates now? Dodd from Energy Alabama argues that both the rate deferral and the tax credits could be used to reduce bills immediately. The only thing pushed back is when the public sees the cost increases, and the company may also earn interest on those deferred balances. It doesn't pass the smell test.
Smoke and Mirrors: Rate Stability at What Cost?
Alabama Power's rate freeze isn't about saving customers money; it's about managing optics and potentially kicking the can down the road.
