Copyright Inside Climate News
Wired for Profit: First in a series about Alabama Power’s influence over electric rates, renewable energy, pollution and politics in the Yellowhammer State. MCCALLA, Ala.—Mary Rosenboom is fed up. Like 1.5 million other Alabamians, Rosenboom is forced to pay ever-increasing electricity prices set by Alabama Power and approved by the state’s Public Service Commission. Each month, Rosenboom forks over hundreds of dollars to the utility—and a massive hyperscale data center proposed near her home, she fears, will make the situation even worse. Her electricity costs are already a huge financial burden. Rosenboom, who works as a sales professional, said she chooses not to run her air conditioner during much of the day to prevent an untenable power bill. Even that isn’t enough. Often, Rosenboom said she must turn to high-interest credit cards to keep the lights on. “I’m robbing Peter to pay Paul,” she told Inside Climate News. “It makes me sick.” Rosenboom’s plight isn’t unique. Inside Climate News examined the 2024 federal filings of 100 of the largest electric utilities in the country. None reported higher total residential electric bills, on average, than Alabama Power. Because Alabama is one of the poorest states in the nation, that hits especially hard. Electricity customers here are among the most financially burdened in the nation, the U.S. Department of Energy found. And an analysis by think tank RMI showed that among households with extremely low incomes, Alabamians pay nearly a quarter of their earnings for electricity—the highest percentage in the country. So why are power bills so high? Experts point to lax regulation by the Alabama Public Service Commission, which is charged with regulating Alabama Power and overseeing any large spending or rate increases proposed by the utility. Robert Blanton, chair of the Department of Political Science and Public Administration at the University of Alabama at Birmingham, has been digging into the mechanisms that allow Alabama Power to earn record profits in such an impoverished state. Ultimately, he said, there’s strong evidence that Alabama Power has effectively “captured” its regulator, the PSC. Academics use the concept of regulatory capture to describe a situation in which regulators are more beholden to the entities they are charged with regulating than the public they represent. The commission conducts much of its regulation of Alabama Power behind closed doors, with little to no access for the public or outside interest groups. It has consistently granted Alabama Power unusually high profit margins. The company’s return on equity was 11 percent in 2023, according to a utility analysis by financial firm S&P Global. That’s down slightly from the company’s historical average of around 13 percent, but still among the highest of any utility in the country. Nationwide, the average rate of return approved for electric utilities in 2024 rate cases was 9.74 percent, according to S&P. “I don’t think there’s a single utility in the country that would be upset with an 11 percent earned ROE,” said Kent Chandler, former chairman of the Kentucky Public Service Commission, now a senior fellow in energy and environmental policy for the R Street Institute. “I mean, that’s like double what I know some utilities are actually earning.” Meanwhile, Alabama Power and its parent, Southern Co., have boasted about their record profits. “Every quarter for 78 consecutive years, Southern Company has paid a dividend to its shareholders that is equal to or greater than the previous quarter,” the company said in a July press release. In a statement, representatives for Alabama Power said the company’s rates were fair and its reliability was among the best in the nation. The company pointed to high per capita electricity usage in the state, the seventh-highest in the country, according to the U.S. Energy Information Administration, and the third-highest residential usage. The company said that its residential rate, not the total bill, is a more appropriate way to evaluate the company’s affordability. “On those price-based measures—paired with our industry-leading reliability—Alabama Power’s residential service is fairly priced under PSC oversight,” the company said. Alabama Power’s average residential rate last year was 16.77 cents per kilowatt-hour, higher than the national average of 16.48 cents and 35th highest out of 100 utilities examined by Inside Climate News. But the national average includes places like Hawaii, Connecticut and Southern California, which are all among the top 10 states for median household income. Shipping fuel oil to Hawaii and wildfire prevention in California are also huge costs that don’t apply in Alabama. Alabama Power’s combination of above-average rates with top-five usage yielded the highest total residential bills in the nation last year. Other states with similar or greater usage feature lower rates. One reason Alabama’s usage is so high: nearly 70 percent of Alabamians use electric heat, as opposed to natural gas, thanks in part to incentives offered by Alabama Power. Louisiana, which has the highest per capita residential electricity use in the nation, has electric rates that averaged 11.64 cents/kWh in 2024, about 30 percent lower than Alabama Power’s rate. The average Alabama Power residential customer used 1,129 kWh of electricity per month last year, at a cost of about $189. A customer using the same amount of electricity in Louisiana would have paid $58 less every month. Those figures do not include state or local taxes, so the actual bills are even higher. Average residential rates in the states bordering Alabama—Mississippi, Tennessee, Georgia and Florida—are 15 to 25 percent lower than Alabama Power’s rates. Alabama Power’s rates are also well above those of other providers in the state—46 percent higher than the average rate last year charged by Huntsville Utilities, which serves almost 200,000 residential customers in north Alabama. The R Street Institute, the think tank where Chandler now works, gave Alabama an “F” in its ranking of electricity competition—how much choice consumers have about where their power comes from. No other state received such a bad grade. The group only considered investor-owned utility companies in its rankings, and Alabama Power is the only such company in Alabama. Alabama Power also charges about 16 percent more than Mississippi Power and about 8 percent more than Georgia Power, the other two utilities owned by its parent company, Southern Co. The difference, at least in part, is that Alabama Power’s rates are driven up by the company’s ever-increasing profits. The company reported a $1.4 billion profit in 2024, almost double the $712 million it earned in 2013, the year the PSC changed its formula for measuring Alabama Power’s profits. The company’s book value—its assets minus debt—more than doubled over that span, going from $5.5 billion to $13 billion. Alabama Power said the increase in equity is driven by investments made to improve the system. “Growth in book equity primarily mirrors system investment—storm hardening, cyber and physical security, as well as transmission and distribution upgrades, along with other investments driven by reliability and compliance,” the company said. Almost No Public Participation In virtually all states with regulated utilities, rate cases force the company to justify its proposed increases in a public forum, providing sworn, expert testimony and allowing outside groups to challenge the projections and assertions made by the power company. Not in Alabama. The PSC hasn’t conducted a formal rate case related to Alabama Power since 1982, more than four decades ago. “There are no courtroom-style hearings on Alabama Power’s long-term energy planning or how those plans impact customers’ bills,” said Christina Tidwell, a senior attorney in the Southern Environmental Law Center’s Alabama office. “These types of proceedings are routine in other states. When the public can participate, we believe they’re better informed about how this process impacts their lives.” Chandler, the former chairman of the Kentucky Public Service Commission, said that while rate cases can be tedious, they are valuable to the public. “One of the benefits of having rate cases is that you get a holistic look at a utility’s revenues and a utility’s costs,” Chandler said. “In my experience in Kentucky, consumers benefit from having periodic reviews by an objective regulator.” And since regulated utilities earn profits on all their approved spending, the more they spend, the more they earn, he said. “They have an incentive to over-invest,” Chandler said. “And if you never check things after the fact, then you’re just writing them a blank check.” Wall Street has taken notice. A 2024 report by S&P Global put Alabama in a tier of its own atop the rankings in its State Regulatory Evaluations, examining the likelihood that state regulators might decrease or limit a utility’s profits. The report found no other state where a utility’s profits were as safe as in Alabama. The last PSC commissioner to advocate for formal rate hearings for Alabama Power—Terry Dunn in 2013—was promptly voted out of office in the next election. Dunn, a self-described conservative Republican, faced a curious and largely anonymous campaign linking him to environmental groups. Twinkle Andress Cavanaugh, the former PSC president, described Dunn’s efforts to initiate formal reviews of Alabama Power as a “full frontal assault” by “extremist groups” and their “fancy San Francisco environmental lawyers.” Dunn, who died last year, called the efforts “a smear campaign orchestrated against a Republican by fellow Republicans,” in a letter to the state party in 2013. Later that year, about 10 people staged what many believe to be a faked environmental protest on the front steps of the PSC building. The protesters, wearing blue surgical masks and other items obscuring their identities, bore signs with slogans such as “Environmentalists [heart] Dunn,” and “Save the Warrior,” likely a reference to the Black Warrior River, which runs through Tuscaloosa. Representatives of environmental groups who were there to attend a meeting said they had no idea who the people were. Ultimately, Dunn was defeated in the 2014 Republican primary by Chris “Chip” Beeker Jr., a cattle and catfish farm operator and former county commissioner in rural Greene County—a county whose largest employer was an Alabama Power plant. Beeker had help. Former Mississippi Gov. Haley Barbour, whose lobbying firm represented Alabama Power’s parent company, organized a fundraiser for Beeker in 2013. Beeker stepped down from the commission partway through his term last year, citing health issues. His son, Chris Beeker III, filled his seat after being appointed by Gov. Kay Ivey. The PSC’s new president, Cynthia Lee Almond, has said transparency will be one of her priorities. But PSC staff would not make her or other commissioners available for an interview to discuss the absence of rate hearings or the public’s limited role in PSC affairs. Instead, the PSC’s press office provided written responses to questions. When reporters reach out to the agency seeking information, the answers come with this warning: “All verbal and/or written responses provided by the staff of the Alabama Public Service Commission (“APSC”) are for informational purposes only and may not be the subject of quotation(s) attributed to staff in any public medium without the express permission of the APSC.” A Profitable Change A turning point for Alabama Power’s profits came in 2013. That’s the year Alabama state regulators changed the way they measure Alabama Power’s returns, switching from the industry standard return on equity metric to a formula they created, called weighted retail return on common equity. The weighted return rate rewards Alabama Power for having higher ratios of equity to debt. The idea was that by incentivizing company officials to carry a greater percentage of equity as opposed to debt, they would secure higher credit ratings and be able to borrow money under better terms, decreasing overall costs. At the time, commissioners and the company said they expected electric rates to go down as a result. “I will tell you as you see adjustments over the next few years, you are going to see a decrease,” then-PSC President Cavanaugh said. That didn’t happen. Instead, the company benefited from the change far more than its customers did. Alabama Power’s electric rates have risen 45 percent across all customer groups since the novel rate formula went into effect. That’s far more than the national average, which increased 29 percent over the same span. Meanwhile, the company’s profit nearly doubled, despite producing less electricity today than it did in 2013. Since Alabama Power earns a return on all of its equity, having more power plants and infrastructure in place increases its profitability. The company also earns bonuses under the rate structure for maintaining positive credit ratings by financial agencies and for having a greater than 50 percent ratio of equity to debt. The PSC, in a written statement, denied that its switch to weighted common equity was driving Alabama Power’s increased profitability. “With regard to your analysis of public documents, which reflect the financial position of Alabama Power, please be advised there is no correlation between Alabama Power’s current financial position and the implementation of the weighted retail return on average common equality mechanism in 2013,” a commission representative told Inside Climate News. Instead, the PSC said the increased net income was the result of Alabama Power’s “significant capital investments to modernize its systems,” which were approved by the PSC. “If That’s Not Regulatory Capture…” Blanton, the political science professor at UAB, sees the absence of rate-making cases, the nation’s highest electricity rates and Alabama’s record profits as unmistakable signs that Alabama’s PSC has been captured by the company it regulates. He points to three ways regulatory capture manifests itself in Alabama. “One is campaign finance, the ability of the regulated industry to financially contribute towards the campaigns of regulatory bodies,” he said. A 2024 analysis by Floodlight, a nonprofit newsroom, showed that of the states that elect the members of their utility regulator, Alabama tops the list of those receiving the most campaign finance cash from fossil fuel-linked interests. Fifty-five percent of political donations to Alabama public service commissioners above $250 from 2013 to 2023 came from fossil-fuel interests, the analysis concluded. “You don’t have to have a conspiratorial mindset to figure out that gives these donors leverage—if they’re the ones that are financing the campaigns of the people they’re supposed to be regulating,” Blanton said of such contributions. Part of the problem, Blanton said, is that Alabama is one of 10 states that directly elects its utility commissioners. PSC commissioners say they don’t accept money directly from the utilities they regulate, but lax campaign finance laws provide ample opportunity for influencing regulators, Blanton said. An examination of “information flows” in the state also points toward capture, he said. There’s a general opacity and complexity around the information involved and a relative dominance of the industry as the primary source for information for the regulators, according to Blanton. The third aspect of regulatory capture is “cultural capture,” Blanton said, a concept that alludes to the extent to which industry and regulators share similar worldviews or perspectives. “The key is whether or not regulators are likely to unquestioningly accept evidence and opinions put forth by the industry, and the extent to which regulators accept information from outside sources,” Blanton said. Looking at these three lines of evidence, Blanton said there are some clear takeaways about where Alabama finds itself—captured. “There’s no objective reason why Alabama should be an outlier. We’re not hotter than Texas. We don’t have worse conditions than Louisiana,” he said. “There’s just nothing that makes sense. … Any reasonable person, looking through the data, looking through the evidence, will say, ‘We have a situation that’s, if that’s not regulatory capture, I don’t know what is.’” Data Center Angst Inside Climate News interviewed more than a dozen Alabama Power customers for this story, and each shared the concerns voiced by Mary Rosenboom, the customer who lives near the proposed hyperscale data center—rising energy costs, a lack of transparency and fear about what the future may hold. Rosenboom and others worry that construction and operation of power-hungry data centers will drive their electricity costs even higher. “I know that’s what’s coming,” Rosenboom said. “And it’ll be us that foot the bill. It’s not good for the citizens. It’s good for Alabama Power’s pocketbook.” Alabama Power and the PSC both insist that data center costs will not be passed on to other customers. But they also declined to say whether those agreements with data centers will be made public, making it impossible to verify those claims. In a statement, a representative for the company said that it takes a “disciplined approach” to engaging with potential data center customers. “We understand that budgets are tight, and affordability is central to our mission. That is why we work hard to connect customers with offerings like Budget Billing, payment plans, efficiency tools, and assistance programs,” the company’s response said. Data centers will “pay the full, fair cost to serve their needs,” the company said. “We work with the Alabama Public Service Commission to approve large-load customer contracts and any needed operational investments, ensuring a thorough process that validates needs and protects customers.” This story is funded by readers like you. Our nonprofit newsroom provides award-winning climate coverage free of charge and advertising. We rely on donations from readers like you to keep going. Please donate now to support our work. Donate Now Alabama Power declined to provide a list of planned data center projects and their anticipated electricity demand. “Long-term capacity planning is reviewed with the PSC,” the company responded. “We don’t publish speculative load projections for individual customer classes or projects. Any major resource additions follow established processes to ensure reliability and fairness for all customers.” Regulatory interactions involving Alabama Power and the PSC are often similarly opaque. During depositions involving Alabama Power’s request to purchase a natural gas plant earlier this year, lawyers for environmental groups questioned company management about data centers and their anticipated loads. The company’s representatives were often vague in their answers, though they did admit that data centers are the “primary driver” of increased load projections. When company lawyers did provide substantive information about specific load figures, their answers were redacted in PSC transcripts. “I’ll say that some projects fall off of this list and some projects are added to this list and the net change is [redacted] megawatts,” Alabama Power forecasting manager Maria Burke said in a deposition. “They have a mixed answer because in the previous forecast I would say we only had [redacted] megawatts to data centers and in this forecast we have [redacted]. So the delta is [redacted].” If built to capacity, a proposed data center campus in Bessemer, just southwest of Birmingham near Rosenboom’s home in McCalla, is expected to consume as much as 1,200 megawatts of electricity, running every hour, 24 hours a day, according to estimates provided to residents. That amount of energy is about 10 times the usage of all residences in nearby Birmingham or around 90 times the usage of all residences in Bessemer. In one fell swoop, it could increase Alabama Power’s total demand across the state by around 10 percent. “My power bill’s already not affordable,” said Brenda Small, who lives in a trailer park adjacent to the site of the proposed data center. “I had one bill that was $495. No one can afford that.” Reliant on Fossil Fuels Alabama Power’s electricity is not only expensive, it’s dirty and comes with a heavy environmental footprint. The PSC has approved costly upgrades to old coal-fired power plants, allowing Alabama Power to spend hundreds of millions of dollars to delay their retirements by only a few years. The PSC greenlit massive natural gas additions in 2020, 2022 and 2025, making Alabama Power increasingly reliant on fossil fuels for decades to come and its customers vulnerable to price spikes in natural gas and supply shortages in times of heavy energy use. Its coal-fired power plant near Birmingham, the James H. Miller Jr. Electric Generating Plant, has been the nation’s largest single source of greenhouse gases for nine years running. The company charges hefty fees to customers who install solar panels, smothering the small-scale renewable market. Alabama ranks second to last among states in energy efficiency efforts in a recent scorecard, and upgrades to its old and expensive coal plants seem destined to continue as electricity demand rises due to large data centers. The company has also stuck to its guns on plans to leave nearly 77 million cubic yards of toxic coal ash in unlined ponds along Alabama’s rivers, leaching contaminants into the groundwater indefinitely, even as other utilities in the South have agreed to dig out some or all of their ash ponds. And this environmental record, UAB’s Blanton said, has come under the watch of state regulators, who have minimized the effects of climate change and Alabama Power’s pollution. A New Profit Formula Review—With No Public Input When adopting the 2013 profit formula, called Rate Stabilization and Equalization, or RSE, the commission agreed to review its performance every six years. The first review was conducted in 2019, with no changes made to the rate structure. In its responses to Inside Climate News, the commission said the second review has already begun—with no public input—through a series of closed-door meetings with Alabama Power and the state attorney general’s office. Whether outside experts or concerned members of the public will be provided an opportunity to weigh in on the review will only be decided after the commission’s staff has made its findings, the PSC statement said. Tidwell, the Southern Environmental Law Center attorney, said public participation should be essential in utility regulation. “Alabama Power customers who are impacted by the PSC’s decisions deserve to have a say in the process,” Tidwell said. “The Public Service Commission is tasked with ensuring that rates are just and reasonable not just for Alabama Power, but also for the public. … How can you protect customers’ best interests when there are almost no avenues for them to participate in the process?” Coming next: Part two of Wired for Profit, how the Alabama Public Service Commission has allowed Alabama Power to earn profits far above the national average for decades.
