Review of The Georgia Retail Association’s Success From Intervening In The 2004 Georgia Power Rate Case

The GRA’s intervention in the 2004 rate case was successful in establishing retailers as an important player at the Public Service Commission for the first time. We were one of the leaders at the table during all of the settlement discussions, and substantially influenced the outcome of the case in many significant ways. In particular, we were able to prevent the traditional dumping of new costs on the commercial customers. Working with other interveners in the case, we prevented approximately $35 million in new revenue increases that Georgia Power proposed to shift to retailers’ electricity bills.

The evidence in the hearings proved that commercial customers are subsidizing other classes of customers by $130 million, and we worked hard to make progress in reducing this large and unjustified burden on commercial customers. Given an environment where the Commissioners were very nervous about the first rate increase for consumers in thirteen years, we were not able to gain ground on this issue. However, we are confident that if the GRA had not been present, the PSC would have increased the subsidy and retailers would have lost additional ground, as has occurred so often in the past.

As you may know from published reports, the PSC Staff, Georgia Power, and many of the interveners reached an agreement on the issues in the case and presented their recommendations to the Commission. The Commission accepted this agreement in its final resolution of the case on December 21st. Under the agreement, the Commission permits Georgia Power to increase its rates by $194 million, but it cannot seek additional increases for three years.

The Georgia Retail Association was an important player in the negotiation of this agreement, but in the end we could not endorse it since it did nothing to reduce the subsidy being paid by commercial customers. We were, however, able to raise significantly the profile of this important issue for the first time. As a result, the Commissioners publicly said they want to take action on this issue in the next rate case, when there will hopefully not be such a large rate increase on the table.

The following are the specific accomplishments stemming from GRA’s participation in the proceedings and negotiations:

1. Georgia Power proposed a $37 million revenue increase for commercial customers because it contended there would be this much erosion in revenue from customers moving to better rates. We were able to eliminate $27 million of this proposal.

2. Georgia Power initially asked to increase revenues by an equal percent for each class of customers after fuel costs were considered. Working with the representatives of the industrial customers and other commercial interest, we were able to make sure the revenue increase will be applied equally to the customer classes before fuel costs are considered. Since the commercial class has relatively higher fuel costs than residential consumers, this accomplishment saved commercial retailers several million dollars.

3. The RTP rates, which are much less expensive rates for larger commercial customers, will be opened up for use by more existing commercial customers. Previously this rate was largely available only to new customers.

4. Georgia Power proposed a 2 mill increase in the RTP rates, which we worked with other interests to eliminate. This resulted in a savings of approximately $3 million for commercial customers on the RTP rates.

5. The staff proposed new demonstration policies that would have made it much more difficult for commercial customers to obtain and stay on the RTP rates, and we were able to keep these proposals form being adopted.

6. Small commercial accounts, those on GS and PLS rates, will get less of the commercial class increase.

7. Various rate discounts to the residential and industrial classes will be recovered within the class benefiting from the specific discount and not shifted to commercial customers, which we estimate will result in at least $2 million in cost savings to the commercial class of customers.

We feel strongly that this was an important and successful first effort by GRA to favorably influence the electricity rates charged to its members. We were able to thwart more than $35 million in increased costs for our members. In past rate cases when commercial interests had no significant presence, many increased revenue requirements were hoisted onto the commercial class, which created the disparity in rates that we have now. We were able to change that dynamic, and if the GRA continues to have a sustained presence at the PSC, we believe that the Association will be able to influence the process to reduce gradually the huge subsidies that our members are currently paying.

We are working presently to propose legislation that in the future will require the Commission to eliminate the subsidies paid by commercial customers. In the near future, we will be calling on you to reach out to state legislators to support this legislation. We will also be working to strengthen the GRAs relationships with the Commissioners.

It is worth noting that Commissioners Baker and Speir expressed strong support for Georgia Retailers during the 2004 rate case. With the support of only one more Commissioner, much more could be accomplished for GRA members.