Since when does putting Alabama utility customers first translate into being “dismissive of Obamacare,” as my opponents in the Public Service Commission race are trying to persuade you?
How does working hard for truly fair utility rates make someone a “tacit enabler” of liberal environmentalists?
It doesn’t of course. Alabama’s regulated utilities exercise tremendous political influence, and that machine revved up mightily – with lots of noise and smoke – when I proposed a comprehensive series of formal rate cases, which would have been the first at the PSC in decades.
The propaganda machine spit out two lies: (1) that I’m in league with radical environmentalists; and (2) that I oppose the use of coal. I’m sure they’ve searched for something else, but for the past year or so, those lies have been their only argument against a genuinely transparent examination of whether our largest utilities’ rates are fair.
My opponents in the Republican primary for Place 2 are desperate to tap Alabamians’ genuine concern about Obama’s executive overreach, particularly Environmental Protection Agency (EPA) regulations and their impact on rates. They have plenty of money behind them to keep you focused on these broad concerns, which I share; in fact, my record documents clearly that I have fought EPA at every opportunity during my first term. And I’ll continue to do so.
My every action at the PSC reflects the policy of a conservative Republican businessman. I have NEVER supported Obama, Obamacare or any environmental policy that would put upward pressure on Alabama utility rates. That’s the truth. My opponents know it is, and so do Alabama’s regulated utilities.
In fact, because I was confident the Alabama PSC had been plenty fair to the utilities for many years, I devoted my first term to making sure it’s fair to their customers. After fighting hard for fair rates, why would I do anything that would increase them?
The Alabama Public Service Commission (PSC) closely monitors regulated utilities’ management of their fuel costs, with monthly reports on the net recovery of these costs in the rates you pay. Where fuel is concerned, cost recovery is dollar for dollar, with no profit component for the utility, but the cost to Alabama consumers usually totals more than $2 billion a year. As you can see, this area of the utilities’ financial management is extremely important.
For Alabama Power Co. alone, fuel purchases — the company’s largest single cost — regularly total about $2 billion a year. These purchases take place on the open market, mostly through negotiated contracts (rather than spot purchases), at prices set by the marketplace. Understandably, Alabama Power and the state’s regulated gas distribution companies, Alabama Gas Corp. and Mobile Gas Service Corp., devote considerable resources to managing this key part of their businesses.
Because the price Alabama utilities pay for coal, natural gas or purchases of electric power are a major component of their customers’ bills, the public interest is best served by the lowest overall fuel cost that is consistent with system reliability. For the PSC, upholding that standard requires putting aside — deliberately and explicitly — any preference among fuel types. We demand professional management of these costs by the utilities, and the PSC should do nothing that undermines the companies’ abilities to perform well in this key area.
For one fuel source, coal, market price has long been an advantage. Its low market price justified even the multibillion-dollar environmental compliance costs already set to be recovered from Alabama utility customers. The people of Alabama are fortunate to have major utilities that are managed professionally, including the good-faith effort of each to manage purchases of coal, natural gas and electricity on the open market.
The hit that coal has taken from gas in the marketplace, coupled with lower federal compliance costs associated with natural gas, has left the U.S. coal industry reeling. Alabama coal companies have shared in that national market downturn, as have the families that depend on them, although most of the pain in Alabama is tied to softer markets for steel and pipe, not Alabama Power’s coal-fired generation.
The United States is now the world’s largest producer of natural gas. Market prices for natural gas have fallen sharply: by as much as two-thirds since 2008. It’s important to remember that while the PSC has absolutely no control over commodities prices, we do recognize the duty of the companies we regulate to participate in these markets efficiently. That’s why, for members of the Alabama Public Service Commission, fuel “neutrality” is imperative. It’s also why I support Alabama Power’s logical shift toward more gas-fired generation, which the company will be the first to attribute to sound business practice in the current marketplace.
Commissioners also must remain strictly neutral with respect to fuel as a matter of fairness to customers and regulated companies. We demand economically sound management on behalf of the utilities’ customers while appreciating the competitive reality, not to mention the legal reality, the utilities encounter as participants in open markets for coal, natural gas and electricity.
I have never been anti-coal — a charge made against me after I suggested the PSC conduct formal rate hearings for the large utilities. I have never been “anti” any fuel.
It’s important for the public to know that a bias toward coal, natural gas or any other source of energy is wholly inappropriate for a member of the PSC. For sitting commissioners, any such bias is not only a violation of the public trust, it’s also unfair to the utilities. We expect them to manage their commodities purchases as economically as possible – again, and always, consistent with maintaining reliability.
You’ve heard a lot about the “War on Coal.” As a member of the PSC, it’s my job to monitor the costs our regulated utilities’ incur to comply with federal legal mandates. Once again, Alabama utilities deserve credit for professional management of their federal affairs. Because the PSC expects nothing less of the companies, I believe customers should be kept informed of the multibillion-dollar costs our utilities pay to comply with federal environmental regulations.
What many people seem to forget is that the Alabama PSC must deal with the way things are, not a world in which the market price of coal can be considered apart from the hard fact of its environmental costs. The PSC works closely with our regulated utilities as they navigate the challenging markets for coal, natural gas and electricity, where bias makes no business sense. For commissioners, such bias goes beyond being ill advised; it is unethical.
That’s why I’m working to draft legislation that outlaws contributions to Public Service Commission members, or candidates for the office, by wholesale suppliers of coal, natural gas and electricity to the state’s regulated utilities. I’m hopeful the Alabama Legislature will see fit to enact such a prohibition, whether as part of the state ethics law or in statutes related to campaign finance.
Fuel neutrality by members of the PSC should never be in doubt, for business reasons as well as legal ones. Today, wholesale suppliers of some $2 billion of fuel per year can — and do — contribute tens of thousands of dollars to PSC campaigns. We should change that.
As your Public Service Commissioner, my priority has always been fairness. The extremely important work of the PSC touches on a number of large and complex business challenges. In managing those, my decisions are based on keeping costs low and system reliability high. That holds true in the case of existing federal mandates, and I will continue to expect regulated utilities to manage their wholesale fuel purchases based on keeping costs down and reliability up.