What are the main changes to Alabama Power's Rate RSE?

The Alabama PSC recommended changes to Rate RSE that will alter how allowed returns are calculated. Specifically, the current range for return on common equity (13.0%-14.5%) and the equity ratio limit (45%) will be replaced by a weighted cost of equity (WCE) range of 5.75%-6.21% (adjusting point 5.98%). A small performance-based adder may also be applied.

Will these changes to Rate RSE affect customer rates in 2014?

The filing indicates that Alabama Power does not currently expect any rate adjustment to be required under Rate RSE for 2014, despite the modifications to the rate-setting mechanism. This is partly due to the approval of revisions to Rate CNP Environmental.

What is the significance of the Rate CNP Environmental approval?

The approval of revisions to Rate CNP Environmental allows Alabama Power to recover costs associated with pre-2005 environmental assets that were previously being recovered through Rate RSE. This change contributes to the expectation of no rate adjustment under Rate RSE for 2014.

What is the impact of the non-nuclear outage accounting order?

Alabama Power has been granted authority to defer certain operations and maintenance expenses related to planned non-nuclear generation facility outages in 2014. These deferred costs will be recognized as a regulatory asset and amortized over a three-year period beginning in 2015, smoothing out the impact of these expenses.

SOUTHERN CO 8-K SEC Disclosure

Summary

This 8-K filing from Southern Company (SO) primarily concerns updates from the Alabama Public Service Commission (PSC) regarding Alabama Power's rate structures. Key decisions were made on August 13, 2013, impacting Rate RSE (Rate Stabilization and Equalization) and Rate CNP Environmental. For Rate RSE, the Alabama PSC recommended modifications that, while changing the mechanisms for determining the allowed return on equity, are expected to result in rates that are just and reasonable. Alabama Power has since consented to these recommendations, which will be effective for calendar year 2014. The filing also notes that Alabama Power received approval for revisions to Rate CNP Environmental, allowing for the recovery of costs associated with pre-2005 environmental assets. Additionally, the company secured authority to defer certain non-nuclear outage-related operations and maintenance expenses for 2014 and amortize them over the following three years. These combined decisions suggest that Alabama Power does not anticipate a rate adjustment under Rate RSE for 2014.

Key Highlights

1Alabama PSC voted on August 13, 2013, to modify Alabama Power's Rate RSE mechanism.
2Key modifications to Rate RSE include eliminating the allowed range of return on common equity and the equity ratio limit, replacing them with a weighted cost of equity (WCE) range.
3Alabama Power's proposed WCE range of 5.75% to 6.21% (adjusting point 5.98%) differs from what would result under current RSE provisions.
4A performance-based adder of 0.07% to the WCE adjusting point is possible if Alabama Power meets certain credit rating or customer value benchmarks.
5Alabama Power has filed its consent to these Rate RSE recommendations with the Alabama PSC, with changes effective for 2014.
6The Alabama PSC approved revisions to Rate CNP Environmental, enabling recovery of pre-2005 environmental asset costs.
7Alabama Power received authorization to defer 2014 non-nuclear outage expenses and amortize them over three years starting in 2015.

SOUTHERN CO 8-K Report, Corporate Update (Aug 21, 2013)

Summary

Key Highlights

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