Materials drive pending rate increase

Published 8:04 pm Wednesday, September 3, 2008

Last week, Alabama Power Co. asked the Public Service Commission (PSC) to raise rates for residential customers by 14.6 percent due to rising costs for coal and natural gas.

Senior Vice President of Alabama Power Jerry Stewart, who was in town yesterday speaking to the Rotary Club of Demopolis, said the company could not afford to continue to absorb blows from rising material costs.

“Cost is a tremendous problem for us,” he said. “Copper wire has increased 437 percent in the last four years. That’s a key element in wire.”

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More than 100 percent increases in cold rolled steel and structural steel have also compounded the problems in the company’s expense column. However, Stewart said the largest and most obvious strain on the state’s largest energy supplier is the cost of fuel.

“A year ago, the coal we would get from West Virginia cost $50 per ton,” he said. “Now, that same coal is going for $115 per ton.”

Alabama-mined coal has also seen a spike of nearly 100 percent.

“We burn 27 million tons of coal a year,” Stewart said. “Just a five dollar swing in price is an additional expense of more than 440 million dollars over 12 months.”

Twenty-seven million tons of coal, Stewart said, would be the equivalent of full rail cars stretching from Raleigh, N.C. to Los Angeles.

The state’s utility regulatory board announced last Tuesday that it will hold a public hearing Sept. 23 in Montgomery to consider the power company’s request.

The PSC’s regulations allow Alabama Power, which is operated by Atlanta-based Southern Co., to recover its fuel costs. But as of July, the company was $239 million behind because coal costs have gone up 16 percent and natural gas costs 46 percent since 2007, company spokesman Michael Sznajderman said Tuesday.

“Like other utilities, we have experienced pretty dramatic increases in the cost of fuel,” Sznajderman said.

Without a change in rates, Alabama Power predicts it would be nearly $1 billion behind in fuel costs by October 2009, he said.

Under the power company’s proposal, a residential customer using 1,000 kilowatt hours per month would go from paying $112.74 to $129.19 _ an increase of $16.45 each month.

The power company’s plan calls for an increase of 16 percent for commercial customers and 24.8 percent for industrial customers.