Georgia Power Co. on Dec. 11 reached a settlement agreement with Kroger Co, Georgia Industrial Group, the Georgia Association of Manufacturers and The Commercial Group, Inc. regarding certain components of its pending rate case.

Under the terms of the settlement agreement, Southern Co. subsidiary Georgia Power would increase its rates annually through 2022, reflecting incremental revenue requirements.

Georgia Power's earnings will be evaluated against a retail return on equity range of 9.5% to 12%, according to the filing. Any retail earnings above 12% would be shared, with 40% being applied to reduce regulatory assets and another 40% refunded directly to consumers. The remaining 20% will be retained by Georgia Power.

The utility in June filed the rate case, seeking a $942 million multistep permanent base rate increase based on a 10.9% return on equity, at 56% of capital, and a 7.93% rate of return on an average rate base valued at $20.079 billion.

The PSC Public Interest Advocacy Staff responded by recommending an $895 million base rate based on a 9.2% return on equity, at 51% of capital, and a 6.69% rate of return on an average rate base valued at $20.065 billion.

While there will be no recovery of any earnings shortfall below 9.50% on an actual basis, under the settlement the company can petition the PSC for implementation of a cost recovery tariff if the company projects that its annual retail earnings will fall below that figure.

The settlement allows for coal retirement obligations to be recovered through the Environmental Compliance Cost Recovery tariff, with the full weighted average cost of capital applied to the under-recovered balance. The PSC would set the amount for incremental revenue requirements.

There was no agreement reached on the appropriate level of equity in Georgia Power's capital structure and the allowed retail return on equity, decisions which are the prerogative of the PSC.

The Georgia PSC is expected to resolve all matters in the rate case Dec. 17.