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  • Donald V. Watkins

Alabama Power’s Shabby Treatment of “Captive” Customers

By Donald V. Watkins

©Copyrighted and Published on June 11, 2019


Perry County, Alabama County Commissioner Albert Turner, Jr., called me yesterday. He is disgusted with Alabama Power Company.


Turner is a longtime human rights activist and one of the few elected officials in Alabama who is “unbossed” and “unbought.” Like his mother and father, who were nationally-recognized human rights icons in West Alabama, Commissioner Turner stands up for poor people, middle-class Alabamians, senior citizens on a fixed income, and small business owners whenever he sees an injustice inflicted upon them.


He saw such an injustice over the weekend when Alabama Power Company announced that it was closing 40 of its 86 business offices across the state by August 2019. As expected, these offices are located in West Alabama’s Black Belt counties and in a host of rural communities around the state. The office in Marion, which is the county seat for Perry County, is on the list of closures.


Turner understands the articulated business case for closing these offices, but he denounces Alabama Power’s practice of allowing privately owned and operated payment centers to charge customers a processing fee of $1 to $3 for each bill payment made in person at these locations. In Turner's view, this transactional fee gouges the company's "pay in person" customers and effectively constitutes an unauthorized rate increase that is borne solely by these customers.


Commissioner Turner pointed out that this transactional fee should be borne exclusively by Alabama Power Company. This was Alabama Power's practice in the late 1990s and early 2000s when the company began the gradual shift to privately operated payment centers.


Although Alabama Power is cutting customer services for poor people, middle-class consumers, senior citizens on a fixed income, and small business owners in these 40 locations, the company’s cost cutting measures do not apply to its high-flying corporate lifestyle and mind-blowing executive perks. For example, Alabama Power continues to sponsor extravagant game-day events at college football games in Tuscaloosa and Auburn. Its corporate jets are still ferrying executives and dignitaries to and from exotic ports of call. Its presence is still felt at the Masters golf tournament in Augusta, Georgia, at Regions’ golf tournament in Birmingham, at national championship football games around the nation, at NFL Super Bowls, and at ritzy international air shows in Paris and London. Just last year, Alabama Power agreed to pay $500,000 per year for 15 years for a naming rights package for the new UAB football stadium in downtown Birmingham and for the luxury skybox that goes with this package. The list of Alabama Power's over-the-top corporate perks that are paid for by ratepayers in Perry County and other parts of the state is endless.


For the record, Alabama Power Company generated a record $6 billion in gross revenues in 2018. The company’s net income after payment of operating expenses and shareholder dividends was $930 million. This amount represents an increase in net income of $82 million, or 9.7%, over the previous year.


Can Alabama Power Be Trusted to do the Right Thing for Ratepayers?


Former Alabama Governor George Wallace never trusted Alabama Power Company to treat its customers right. Commissioner Turner does not trust Alabama Power either. Like Wallace, Turner realizes that Alabama Power is a regulated monopoly with no competitors in the state. Its market share dwarfs other power providers in the state. As such, Turner holds Alabama Power to a higher degree of transparency and accountability.


Starting in his second term of office in 1971, Wallace took direct aim at Alabama Power and its frequent fights with the Alabama Public Service Commission over rate increases. Wallace hired lawyers to oppose Alabama Power’s exorbitant rate increases. He fought Alabama Power for more than a decade while he was in office.


Wallace, who later found an ally in Attorney General Bill Baxley, fought Alabama Power on behalf of poor people, middle-class consumers, senior citizens on a fixed income, and small business owners to stop the company from ripping off its “captive” customers with outrageous rate increase requests. Commissioner Turner has taken over this “watchdog” function today, at least for Alabama Power's customers in Perry County.


Alabama Power’s Ironclad Grip on the State’s Political Establishment


Once George Wallace left office in 1987, Alabama Power Company made a corporate decision to conquer the state's political scene. The company “bought” or “rented” every politician in Alabama who was “for sale” or “for rent.” Nearly every elected official in the state quickly surrendered to the seductive power of the company’s cash campaign contributions and litany of other inducements.

Alabama Power has never able to “buy” or “rent” Commissioner Albert Turner. He aggressively represents the political interests of his constituents, without hesitation, reservation, or fear.


Today, Alabama Power Company totally owns and controls the Public Service Commission. This is the agency that is supposed to regulate Alabama Power’s utility rates and its treatment of ratepaying customers.

Alabama Power also controls a dazzling collection of greedy, self-centered, statewide elected officials and legislators through campaign contributions from its affiliated political action committee.


In 1990, Alabama Power Company formed a non-profit foundation to hand out charitable gifts. Every group with any influence in Alabama that was not directly controlled by the company’s campaign contributions, advertising dollars, sponsorship agreements, and strategically awarded consulting agreements, is captured and neutered by Alabama Power’s tens of thousands of philanthropic gifts of cash to “deserving” entities chosen by the company since 1990.


Finally, Alabama Power controls the state’s mainstream media organizations through a combination of advertising dollars, financial contributions from its non-profit foundation, event sponsorships, and consulting fees for seminar participants affiliated with media entities. For example, the Alabama Power Foundation funded the non-profit organization that wholly owns The Birmingham Times newspaper and online website. This approach to public relations has bought Alabama Power Company a steady stream of "Happy News" and a form of protectionism from adverse media coverage of its business practices.


Except for Commissioner Albert Turner, no other elected official in the state has publicly complained about the business office closures that at are sure to hurt poor people, middle-class consumers, senior citizens on a fixed income, and small business owners in the affected service areas.


For all Practical Purposes, Alabama Power Sets its Own Customer Rates


Because Alabama Power Company is a publicly owned regulated utility, its allowed return on equity (ROE) is set by the Alabama Public Service Commission. As of January 2019, the average ROE across 93 major industries and almost 8,000 firms for the U.S. market is 14.49%. Utility companies like Alabama Power – with an average ROE of 10.13% – are on the lower end of the spectrum because Wall Street views them as less risky investments.


The ROE for power companies varies significantly from state to state, as each public utility commission has exclusive authority to regulate utility operations as it chooses. According to Advanced Energy Economy’s Power Portal database, which tracks ROE for over 100 publicly-owned utilities across the country, the highest ROE allowed by a public utility commission belongs to  Alabama Power Co., at 13.75%.  This ROE places Alabama Power is in a class by itself. Furthermore, Alabama taxpayers guarantee Alabama Power a five percent minimum annual return on the company’s equity. If there is a shortfall in this guaranteed minimum return on equity, taxpayers must make up the difference.


Against this backdrop, critics with expertise in regulated utilities question whether the Public Service Commission is properly balancing the interests of consumers and shareholders. Based upon the empirical evidence regarding Alabama Power’s self-determined rate increases since George Wallace left office, the answer is, “no.”


Instead of making an individual case for a rate increase in an open forum that permits independent expert scrutiny and ratepayer input, Alabama Power uses a formula-based ratemaking process (called the “Rate Equalization and Stabilization” formula) to adjust its rates each year without any public evidentiary hearings and without any participation by consumer advocates and ratepayers. This mechanism was adopted by the Public Service Commission in November 1982. Between 1982 and 2012, Alabama Power gave itself 12 rate increases and 3 rate decreases. There were 15 years during this period when Alabama Power made no adjustments in customer rates.

The company’s last rate decrease was recorded in 2016. Its last rate increase was in January of 2017.


Locations of Alabama Power Business Office Closures


Alabama Power’s business office closures this summer will occur in Columbiana, Gardendale, Leeds, Aliceville, Carbon Hill, Dora, Greensboro, Hamilton, Linden, Livingston, Sulligent, West Blocton, York, Clayton, Daleville, Slocomb, Alexander City, Ashville, Attalla, Blountsville, Heflin, Jacksonville, Wedowee, Bayou La Batre, Brewton, Butler, Citronelle, Flomaton, Grove Hill, Jackson, Prichard, Theodore, Fort Deposit, Georgiana, Marion, Tallassee, Wetumpka, Ashford, Florala, and Geneva.


PHOTO: Perry County, Alabama Commissioner Albert Turner, Jr. is holding Alabama Power Company accountable for cutting customer services in his political territory. Turner is the lone advocate for Alabama Power ratepayers. His iconic, civic-minded parents would be extremely proud of him for fighting against Alabama Power's shabby treatment of its "captive" customers.


© 2020 by Donald V. Watkins, P.C.