Georgia Power and staff for state regulators presented the Georgia Public Service Commission on Thursday the terms of a settlement agreement reached this week, which — if approved — would allow the company to raise customers’ rates by nearly $1.8 billion over the next three years.
Over months of hearings, Georgia Power faced blistering criticism from consumer advocates for its proposal to collect $2.9 billion by raising customers’ bills. And while the utility did not obtain everything it requested, it appears primed to get much of what it wanted, including new revenue and no expansion of a popular residential rooftop solar program.
Instead of a steep rate increase next year with smaller bumps in 2024 and 2025, as Georgia Power had originally proposed, the average ratepayer’s monthly bill would rise by just under $4 next year based on the agreement. That would be followed by larger steps up in rates the last two years of the term.
The plan would mean the company receives 38% less revenue than it had initially asked to collect from its 2.7 million customers over three years. Still, the rate hikes outlined are more than triple what the PSC’s public interest advocacy staff had recommended the commission approve.
Even more rate increases are still on the horizon. As Georgia Power and partners prepare to finish two new nuclear reactors at Plant Vogtle that are billions over budget and years behind schedule, the company is likely to request more rate hikes to cover construction costs. The company is expected to ask to recover the cost of gas and coal burned at its power plants from customers early next year, among other potential rate-hike requests.
The settlement announcement comes just days after negotiations between PSC staff and the company appeared to have stalled, with the parties at odds on nearly all major aspects of the plan. The agreement is not final and still must be approved by a majority of the five elected members of the PSC, who are set to vote on Dec. 20.
The tentative plan punts a few key decisions to the commissioners, but provides a glimpse of the new rates Georgia Power customers would begin paying on Jan. 1 next year.
In a statement about the settlement, Georgia Power spokesman Jacob Hawkins said “we believe this stipulated agreement takes a balanced approach that not only asks the Georgia Public Service Commission to set rates at a level that support the essential, critical investments needed to meet our state’s evolving energy needs, but also recognizes affordability needs for customers.”
Several intervenors in the case, mostly representing government and manufacturing interests, also joined in support of the settlement.
Meanwhile, other parties in the case, including those representing clean energy and environmental interests, criticized the plan.
“There’s a lot to like if you’re Georgia Power and its shareholder, Southern Company; they appear poised to retain a sky-high profit rate at a time when everyday folks are struggling to pay electric and grocery bills,” said Jill Kysor, a senior attorney at the Southern Environmental Law Center. “The commission can and should do more.”
Rate increases
Under the proposal, Georgia Power would collect just under $1.8 billion in revenue from its customers through 2025, with staggered increases kicking in each of the next three years. That’s less than the $2.9 billion revenue increase the company had initially proposed, but much more than the roughly $560 million alternative plan put forth by PSC staff.
The electricity rates paid by the average household would climb by an estimated $3.60 per month in 2023. That’s far below the $14.90 monthly rate hike customers would have faced next year under Georgia Power’s initial plan. But rate increases would be larger the next two years, rising 4.5% in 2024 and 2025. The monthly dollar impact on the average customer’s monthly bill in those years is not yet known.
Profits
The company has agreed to leave its target return on equity from capital investments — otherwise known as profits — at 10.5%, after proposing an 11% return previously.
The settlement leaves it up to the PSC commissioners to decide where to set the ceiling on its returns. Georgia Power has proposed leaving the cap at 12%, while PSC staff has recommended a reduction to 11.5%. The median return on equity for similar U.S. utilities is 9.5%, according to Fitch Ratings.
Rooftop solar
The proposal is likely not what many clean energy advocates had hoped for.
Despite calls for expansion, the plan leaves a popular rooftop solar pilot program capped at 5,000 enrollees. The program allows customers with panels to dramatically lower their bills, but it has been maxed out for nearly a year and a half.
Under the proposal, customers already in the program would be grandfathered in for 15 years and continue to be credited for excess electricity sent back to the grid as they are now.
Going forward, all new Georgia Power customers that install rooftop solar will be credited for their extra electrons at a yet-to-be-determined rate, with the final figure left to the commission to set.
Rate plans
Georgia Power would revert to placing all new residential customers on a standard residential rate plan, rather than the company’s “Smart Usage” rate plan. During hearings on the company’s rate plans, several witnesses testified that the “Smart Usage” plan is difficult for even the most energy-savvy consumers to understand and often increases customers’ bills, especially for those who use less energy.
After Georgia Power initially proposing to do away with the standard plan entirely, the agreement reached Wednesday would require the company to continue offering the traditional rate as an option for customers.
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