The AAR Public Policy Team attended a special meeting of the Alabama Public Service Commission (PSC) on October 24 and the PSC’s regular monthly meeting on November 5 to monitor its impacts on the real estate industry and property owners.

Summary:

Lowering natural gas prices was the main item of note from these two meetings. At the October 24^th meeting, the PSC issued an order extending Rate Stabilization and Equalization (RSE) for Spire Alabama, Inc., while lowering the rate of return for Spire Alabama. This order will save Spire Alabama customers approximately $5.9 million annually.[i] According to the PSC, the rate of return reduction will result in around $26 annual savings per customer for the duration of the RSE period, which will stand through September 30, 2022.

The PSC’s approval order specifically provides for a Return on Equity (ROE) range lowered from the current range of 10.50% to 10.95% down to 10.15% to 10.65%, and removing a performance-based ROE adder of 0.05%.[ii] These ROE reductions lower Spire Alabama’s rate of return and are the reason consumers will save, as stated above.

The PSC’s order also provides incentives for Spire Alabama to replace aging cast iron and bare steel gas mains and services. Under the replacement program, Spire Alabama will be allowed to earn .10% above the ROE range or have their ROE reduced by .10% depending on the number of aging pipe miles replaced over a 15-year period.  

The PSC conducted routine business at its November 5 monthly meeting.

Background on RSE Process:

Rate RSE is a mechanism established by the PSC for regulating utility rates. Once Rate RSE is established for a utility company, it can be modified and/or extended in a process involving representatives from the company, PSC staff, and usually the Office of the Alabama Attorney General, which is the statutorily designated representative of Alabama consumers.[iii] Together, those representatives negotiate utility rates for a given period of time, typically several years. Rate RSEs may also be modified to better reflect seasonal needs and to better protect consumers. Companies currently operating under Rate RSE include Spire Alabama (formerly Alagasco) as well as Alabama Power. Once the Attorney General’s office and the company reach an agreement on extending or modifying an expiring Rate RSE, the PSC will then vote on whether to approve that agreement. The most recent Rate RSE extension for Spire Alabama took place in 2013 and expired on September 30, 2018.

Further information on the PSC

The PSC was originally established as the Railroad Commission of Alabama in 1881. Its regulatory purview evolved to include other utilities and common carriers, and it was eventually designated by the Alabama Legislature as the Alabama Public Service Commission in 1915. Today, the PSC regulates electricity, natural gas utilities, telecommunications providers, private waste water utilities and motor carriers.

The PSC is composed of three elected members: the president and two associate commissioners. The PSC’s mission is to “ensure a regulatory balance between regulated companies and consumers in order to provide consumers with safe, adequate and reliable services at rates that are equitable and economical.”