POWERGRAMS

REGULATORY Public Service Commission recommends modifications Alabama Power officials are reviewing the Public Service The PSC recommended other changes to the company's rate Commission's Aug. 13 recommended modifications to Rate RSE mechanism. Among them: (Rate Stabilization and Equalization) to determine how it would • Creating a performance-based incentive that could add seven affect customers and the company. basis points (0.07 percent) to the 5.98 percent "adjusting point" In a crowded commission chamber in Montgomery, the PSC for weighted cost of equity at the time of the annual RSE filing. voted 2-1 on a recommendation to begin measuring Alabama The incentive would be added only if Alabama Power holds Power's allowed range of return on a weighted cost of equity an "A'' credit rating with at least one of the recognized rating basis instead of return on equity (ROE). Weighted cost of equity agencies or if the company ranks in the top one-third of its (WCE) is ROE multiplied by the percentage of the company's customer value benchmark survey. total capital structure funded through equity, which is Southern • Adding a new mechanism to test for significant changes in the Company stock. Equity currently interest rate for 30-year Treasury makes up about 44 percent of the bonds. An increase of more than company's financing. 350 basis points or a decrease of Commission President more than 200 basis points could Twinkle Andress Cavanaugh and signal that a review of the WCE Commissioner Jeremy Oden voted range may be needed. for the change, while Commissioner • Requiring Alabama Power to Terry Dunn voted against the file its income statement and change. balance sheet twice a year with Under the new plan, if Alabama the PSC. Around March, the Power accepts it, the allowed range company would report on the most for WCE would be between 5.75 recent 12-month period ending percent and 6.21 percent. Alabama Dec. 31. Around September, the Power's current allowed ROE range company would provide financial is 13 percent to 14.5 percent. information related to the first six Alabama Power officials in the months of the current year. four PSC public meetings since • Every six years, beginning in May presented hours of testimony 2019, Alabama Power would for keeping the current system in prepare for the PSC staff and the Nick Sellers, vice place. Zeke Smith, executive vice Attorney General's Office financial president of Regulatory president for External Affairs, said and operational information the company "made a strong case comparable to what the company and Corporate Affairs that the system as it stands is fair presented during the four public and works well for customers." meetings that took place this "We will be reviewing the year. After the more detailed sixrecommendation in its entirety," he said. year review, the staff would report to the commission whether Nick Sellers, vice president of Regulatory and Corporate Affairs, any further review or other action concerning the return is said the switch from ROE to WCE is a better measure of the warranted. company's broader capital structure, an argument Alabama Power officials advanced during the public meetings. "We've always said you can't look at the return on equity alone, which is just one component of the capital structure, when determining our return compared to our peer utilities," Sellers said. "We've always said you can't look at the return on equity alone, which is just one component of the capital structure, when determining our return compared to our peer utilities." 4

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