Georgia Power affected by recession, will use reserves

Georgia Power says it's being affected by the economy along with everyone else and it needs more revenue. In June, the utility company went to the state public service commission, indicating it needed to pull hundreds of millions of dollars out of a reserve fund.

In basic terms, the utility needs to prop up its revenues and profitability figures, to ensure a certain amount of return for shareholders. Georgia Power indicated without use of the reserve account, it would file for a rate increase. That's despite the fact that in 2007, the company agreed not to ask for a rate increase for three years.

Thursday, the Georgia Public Service commission responded with a settlement, indicating that the utility company may use up to $324 million dollars of ratepayers' funds as revenue. The commission voted unanimously to accept the settlement agreed upon by its staff and that of Georgia Power.

What it means for you and me - we won't face a rate increase until sometime in 2011. However, the money in the reserve account will likely need to be replaced at some point by customers.

"We have asked to use this money and put it back into our revenue stream because we're not earning enough," says Georgia Power spokesperson Carol Boatright. "This is mostly attributed to the recession which has reduced our revenues. A number of businesses have gone out of business and others have reduced production."

The fund from which Georgia Power will draw the money is essentially like a savings account. The money was collected to use for de-commissioning old power plants, outdated equipment, etc.

The ruling from the Public Service Commission says Georgia Power can use $108 million dollars by the end of 2009. The Commission also says that in 2009, Georgia Power may amortize no more of the fund than is necessary to bring the company's return on equity to 9.75%.

In 2010, the company will be allowed access to the remaining two-thirds or $216 million of the account. In 2010, the amortization is limited to the amount that would bring the return on equity to 10.15%.

The above is all stipulated on the company not filing a rate increase.

"Rather than filing another complete rate case at this time, we prefer to be able to use the money in this fund," says Boatright.

Boatright says the utility has done a number of things to reduce expenditures, including offering a voluntary attrition plan in which six and a half percent of employees ended up taking early retirement. Boatright says that has reduced the workforce by 570 people and these are jobs that will be be cut permanently.

"We have also reduced expenses back to 2006 levels and there were no raises at all given this year," says Boatright.

Boatright says Georgia Power will likely file for a general rate increase to take effect sometime in 2011. It also appears the utility company will file for a fuel cost recovery case by December 15 of this year. That's when the company is allowed to recover the cost of fuel to generate electricity by charging customers more. The last fuel cost recovery increase was in May or 2008.