Regulators approve $1.77 billion Georgia Power rate increase
ATLANTA – Bills will be going up next year for Georgia Power Co.’s 2.6 million customers across the state.
The Georgia Public Service Commission voted 4-1 on Tuesday for a plan projected to cost customers an additional $1.77 billion over the next three years.
Georgia Power spokesman John Kraft said a residential customer who uses 1,000 kilowatt hours of power a month will see bills rise beginning Jan. 1 by $5.89 a month, to $129.20. That will be followed by an increase of roughly half that size in 2021 and a larger increase in 2022, although Kraft said precise figures for those years weren’t immediately available.
The company says it needs the money to cover rising costs, including disposing coal ash now held near coal-fired power plants, as well as rebuilding following last year’s Hurricane Michael.
“The decision enables the company to continue investing our state’s energy future,” Kraft said.
As part of the deal, the basic service charge that residential customers must pay to connect to the grid will rise from $10 a month now to $12 in 2021 and $14 in 2022. Georgia Power had originally proposed raising the connection charge to $17.95 a month, among its proposals that raised the most opposition.
Georgia Power, the largest unit of Atlanta-based Southern Co., filed a request in June to raise rates by 7%.
Under a proposal by commissioner Tim Echols, rates will be set to give Georgia Power shareholders a return on equity of 10.5%. However, the company will be allowed a return in a band of 9.5% to 12%. The company had sought a band of 10% to 12%, while commission staff and Commissioner Lauren “Bubba” McDonald argued for a lower range.
If returns exceed that allowed level, 40% would be refunded to customers, while another 40% would be used to pay off certain items the company could otherwise ask ratepayers to pay for. The remaining 20% would go to the company. As part of the deal, shareholders agreed to forgo any share of excess earnings from 2018 and 2019, with half the money going to customers and half the money going to pay off items.
Echols argued that Georgia Power deserves a higher rate of return than other utilities because of superior performance, and said keeping the utility financially strong will benefit ratepayers because the company will be able to borrow money more cheaply.
“We’re not at war with the utility here in Georgia,” Echols told reporters after the vote. “We want them to be successful. ... We want them to serve our customers in an excellent way. ... We want a high quality grid, and that requires investment.”
The higher return on equity could mean hundreds of millions more in profits for Georgia Power over the period.
Echols’ plan also gives Georgia Power more equity and less debt in its overall capital structure than the staff had proposed, allowing a greater base on which to earn that return.
“The final outcome, I would imagine, from the company’s perspective, is everything they could have hoped for,” said Georgia Watch Executive Director Liz Coyle. She said that there are some good features to the agreement, but said the staff proposal “more fully balanced” the interests of ratepayers and shareholders.
McDonald and commission staff each proposed a much smaller rate increase that would have been worth only $1.26 billion over the three-year period. McDonald attempted a series of amendments on Tuesday, including an attempt to lower the ceiling for the company’s return range, but his changes won no support. McDonald was the only commissioner to vote against the plan.
Looming over the hearing is the cost of the two nuclear units that Georgia Power is building at Plant Vogtle near Waynesboro. Georgia Power owns just under half of the $17.1 billion project. Ratepayers are already paying part of the cost of construction and will have to begin paying the rest when the reactors are completed.
Those reactors are supposed to go into service in 2021 and 2022, according to the current schedule, although staff have warned recently those dates could be delayed, which would drive up costs.
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