Summary
Southern Company (SO) has filed an 8-K report detailing a significant settlement agreement reached by its subsidiary, Georgia Power, with the Georgia Public Service Commission's (PSC) Public Interest Advocacy Staff. This agreement, if approved, outlines a new Alternate Rate Plan (ARP) effective January 1, 2014, through December 31, 2016. The plan involves a multi-year increase in various tariff rates, including traditional base tariff rates, environmental compliance costs, demand-side management, and municipal franchise fees. The settlement also establishes a specific retail return on equity (ROE) for Georgia Power, set at 10.95%, with a performance range of 10.00% to 12.00%. Earnings above this range will be subject to customer refunds, while shortfalls below 10.00% may trigger an Interim Cost Recovery (ICR) tariff. While this settlement represents a potential resolution, the company acknowledges that the final outcome is subject to Georgia PSC approval and could differ materially from the current agreement. The cautionary note highlights numerous risks and uncertainties that could affect actual results, including regulatory changes, environmental regulations, litigation, and economic conditions.
Key Highlights
- 1Georgia Power and the Georgia PSC's Public Interest Advocacy Staff have reached a settlement agreement for an Alternate Rate Plan (ARP) for 2014-2016.
- 2The ARP, if approved, includes an approximate $110 million increase in base revenues effective January 1, 2014, through adjustments in traditional base tariff rates, Environmental Compliance Cost Recovery (ECCR), Demand-Side Management (DSM), and Municipal Franchise Fee (MFF) tariffs.
- 3Additional rate adjustments are planned for 2015 and 2016, with estimated base revenue increases of $186.8 million in 2015 and $169.8 million in 2016 to recover generation capacity and environmental compliance costs.
- 4The settlement sets Georgia Power's retail return on common equity (ROE) at 10.95%, with a performance range of 10.00% to 12.00%.
- 5Earnings above 12.00% ROE will be shared with customers (two-thirds refund, one-third retained), while earnings below 10.00% may allow Georgia Power to petition for an Interim Cost Recovery (ICR) tariff.
- 6The settlement is subject to final approval by the Georgia PSC, and the terms may change before final approval, with a PSC vote scheduled for December 17, 2013.
- 7The filing includes a cautionary note detailing numerous forward-looking statements and risk factors that could impact future financial performance.