MONTGOMERY – The Alabama Legislature’s decision to reorganize and expand the Alabama Public Service Commission (PSC) has significantly altered the landscape for candidates running to regulate state utilities, affecting how residential energy rates will be addressed in the coming years.
Governor Kay Ivey signed HB 475 this spring, a bill that expanded the PSC from three to seven members and placed the body under the supervision of a new secretary of energy, an appointee expected next year. Crucially, the legislation bans formal rate hearings on the state’s residential energy prices until 2029. This expansion of the board, according to the original source, makes it significantly less likely that the PSC will achieve a majority vote to call for formal hearings on Alabama’s high residential energy prices.
Alabama currently faces some of the highest residential electricity rates in the Southeast. Residents paid approximately 16.4 cents per kilowatt-hour in July, according to the Energy Information Administration. This figure is notably higher than the 14.61 cents per kilowatt-hour average paid by residents in comparable states such as Kentucky and Mississippi.
Since 1982, Alabama has largely relied on a system known as rate stabilization and equalization (RSE) rather than formal rate hearings. Under RSE, utilities are effectively guaranteed a certain profit margin, a process critics say makes the reasons behind rate increases opaque and difficult to understand. The original version of HB 475, filed by Rep. Mack Butler, R-Rainbow City, would have required formal rate hearings at least every three years, involving sworn testimony, financial disclosures, and public input, but senators rewrote the bill to its current form.
Democratic nominees for the PSC, James Gordon (Place 1) and Sheila McNeil (Place 2), have both indicated in separate interviews their commitment to achieving competitive rates and greater accountability. Gordon stated that it will require “one hell of a negotiation to get that ball across the line,” but affirmed that providing relief to residents would be his goal. He aims to reduce rates to 12 cents per kilowatt-hour and extend the current rate freeze, which is set to expire in 2029, to 2030.
McNeil has taken legal action against the new law, filing a federal lawsuit in May to void HB 475, which remains pending. She expressed strong disapproval, stating she is “absolutely not happy with the way they changed the rules,” believing the changes violate constitutional, voting, due process, equal protection, and separation of powers rights. McNeil intends to negotiate with colleagues and utility companies, including investor-owned entities like Alabama Power, to reduce rates. She believes the PSC can appeal to a utility’s reasonable side, suggesting that if charges are legitimate, companies “should not have a problem opening up the books.” McNeil also advocates for reviewing and reforming the RSE formula to ensure fairness and for establishing an advisory council to give ratepayers a voice on the PSC.
Messages seeking comment from Republican nominees, Matt Gentry (Place 1) and Jim Zeigler (Place 2), were sent on Thursday, and their campaign websites did not contain specific statements about HB 475. Both candidates have publicly stated the PSC needs to conduct oversight of public utilities. Governor Ivey earlier this year appointed four of the new PSC members, who will face elections in staggered terms.
The reorganization of the PSC has raised concerns about voter influence. Daniel Tait, executive director of Energy Alabama, an organization advocating for renewable energy, noted that the shift from an entirely elected to a partly appointed commission reduces the individual voter's power to control the PSC's makeup. Jaclyn Brass, an attorney with the Southern Environmental Law Center, highlighted that the bill “doesn’t require regular rate cases” and does not mandate public access to the rate-setting process.
After 2029, the newly created secretary of energy will have the authority to convene a rate case, or a vote by five commissioners could also initiate one. Candidates interviewed for the article indicated that convening a rate case and reducing utility rates would require extensive negotiations with both fellow commissioners and utility companies.
Data centers have also emerged as a topic in the race. Gordon stated that the decision to host a data center in a community should rest with mayors and county commissions, not the PSC. He also emphasized that data centers should provide their own electricity, for example, by installing solar farms to power operations and avoid drawing from the existing grid. McNeil proposes studying the issue and adopting a regional approach to approving data center developments. She suggested creating an organization similar to a Metropolitan Planning Organization, which brings together leaders from various levels to address infrastructure, to consider a data center’s impact on electricity demand, water use, and the need for fire protection and first responders. Gentry’s campaign website calls for transparency and community engagement regarding data centers, though it does not detail specific policies. Zeigler’s campaign website states his commitment to protecting ratepayers from potential added costs associated with data centers and to thoroughly reviewing rate requests, emphasizing his intent to “ask detailed questions, and ensure transparency” in cost recovery from ratepayers.
