Making Democracy Work

Utility Rate Setting

Advocating Transparency in Rate Setting by Public Utilities

The Alabama Public Service Commission is currently in the process of reviewing rates for customers of Mobile Gas Company, Alabama Gas Company, and Alabama Power Company. The current system of rate-setting was established in the early 1980s and essentially guarantees utility companies a certain amount of profit. This system, known as "rate stabilization and equalization" (RSE), automatically adjusts utility rates based on a formula called "return on equity" (ROE) + the amount of return the utility sees on money invested by stockholders.

In January the Public Service Commission, which regulates these utilities, announced that it would hold public hearings "to investigate all regulated aspects of Mobile Gas ... and other utilities that fall under the agency's jurisdiction." These hearings began in February and are ongoing. Most of them have been held in Montgomery at the Public Service Commission's offices but one was held in Mobile on March 18 at the public library's Bernheim Hall. The hearings are called "informal hearings" to distinguish them from traditional rate-setting hearings which resemble court proceedings; this process of holding informal hearings is new and continues to evolve as the public becomes more involved.

Because we have not formally studied all aspects of public utility pricing, we in the League of Women Voters cannot officially comment on the actual utility rates themselves. We are, however, very concerned about the process of rate setting. Our principles state "The League of Women Voters of the United States believes that democratic government depends upon informed and active participation at all levels of government.

The League further believes that governmental bodies must protect the citizen's right to know by giving adequate notice of proposed actions, holding open meetings and making public records accessible." The Public Service Commission itself is elected and should be held to these standards. We are concerned that these "informal hearings" not be dominated by special interest groups with close ties to the utility and its resources. We believe that the public itself should be allowed access to materials critical to the determination of fair rates and encouraged to ask questions and to testify as to the effects of proposed utility rates and rates of return on equity.

To that end, we have commented at two hearings on Mobile Gas's services, one in Mobile on March 18 and the other in Montgomery on April 25. Along with the state League, the Mobile League has been given "standing" to ask questions and provide testimony and experts if desired at future hearings. We will follow the process with interest over the summer.

Read our comments below:

The comments of the Alabama League were read into the record of the second informal hearing held in Mobile on March 18, 2013. The comments of the Mobile League were read into the record at the fourth informal hearing pertaining to Mobile Gas held in Montgomery on April 25, 2013.