Customers of Alabama Power will see a significant rate decrease beginning Jan. 1, 2010, and will enjoy a second rate reduction come April.

The state Public Service Commission (PSC) on Dec. 1 approved the $350 million reduction, the largest ever in PSC history. The reduction gives retail customers an average 7.4 percent decrease, beginning next month. For a typical residential customer using 1,000 kilowatt-hours of electricity per month, it means a price decrease of $7.20 a month compared to a year ago.

The company was able to reduce rates because it is paying less for the fuels it uses to produce power. The abundant rains this year has also helped, by allowing the company to use more hydro power, which is the least expensive way to generate electricity. The company makes no profit on fuel costs, but passes on those costs to customers.

Alabama Power was able to reduce rates even though the company is having to spend more on government-mandated environmental improvements to meet tougher clean air standards. Over the past 10 years, the company has spent more than $2.7 billion on clean air technology, and expects to spend an additional $400 million through 2012. The new technology will allow the company to continue using its low-cost coal-fired power plants for years to come.

In addition to the rate reduction taking effect Jan. 1, the company has committed to another reduction of about 1 percent, effective April 1. Combined with an earlier rate reduction that took effect in June, Alabama Power retail customers will see a total rate reduction of about 10 percent between January 2009 and April 2010.

While all customers are seeing their rates reduced, more than 20,000 small businesses can take advantage of an additional benefit. Beginning Jan. 1, businesses that use 15 kilowatts of electricity per month or less can sign up for a new rate that features a lower customer base charge. The new rate will save small businesses another $25 per month.

Eligible businesses will be notified by the company before the end of the year, and can then sign up for the new rate. If you are a small business and have not been notified by Jan. 1, call Alabama Power’s Business Call Center at 1-888-430-5787 and ask whether you are eligible for the new LPS rate.