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State regulators approve Georgia Power's more than $2 billion rate hike

Highlights

PSC debates 10.5% ROE

Solar PPAs also approved

Houston — The Georgia Public Service Commission Tuesday approved Georgia Power's 2019 rate case and nuclear unit construction cost recovery tariff, which should increase Southern Company's revenue by more than $2 billion over the next three years.

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In a 4-1 vote, the all-Republican commission approved PSC Vice Chairman Tim Echols' motion to adopt a December 11 settlement agreement of Docket No. 42516 between Georgia Power and the Commercial Group, Georgia Association of Manufacturers, Georgia Industrial Group, Kroger, and the Metropolitan Atlanta Rapid Transit Authority, with some modification.

Echols' motion would set the return on equity at 10.5%, with an earnings band available from 9% to 12% and a capital structure of 56% equity, 44% debt. Georgia Power had asked for a 10.9% ROE, but Echols said it was too high.

"That keeps the company on the low side of Moody's and S&P's metrics, but doesn't drop them below it," Echols said.

Echols singled out the customer-stipulation clause, calling for a $6 million/year spending increase for electric vehicle charging infrastructure, as "extremely important to me."

The PSC Advisory Staff recommended rejecting Georgia Power's three-year alternative rate plan, and instead pursue a traditional rate case with a test year which, "even under the company's calculations, supports a much lower revenue requirement than what Georgia Power has submitted for its three-year ARP." Such a test year would have been August 1, 2019, through July 31, 2020.

ROE AT ISSUE

Chairman Lauren "Bubba" McDonald proposed several amendments to Echols' motion, such as trimming the ROE to 10.25%, with a band of 9.25% to 11.25%, and reducing the equity/debt ratio to 54%/46%.

Echols said he would not support the ROE or capital structure amendments out of concern that they might trigger a credit downgrade.

McDonald said the ROE he suggested was 65 basis points above the national average, and a Southern Company Illinois utility had regulatory approval for a 9.73% ROE and a 54% equity ratio.

Commissioner Tricia Pridemore questioned the idea of comparing Georgia Power to utilities in other jurisdictions.

"Where nationally, we see electric utilities filing bankruptcy due to overregulation and massive coal residual spills, Georgia Power gets ahead of challenges," Pridemore said.

Georgia's economy is growing, with an expected 1 million more people within the next three years, she said. "Georgia needs to be ready. We have an opportunity to be our very best, and to do that, I support Vice Chairman Echols' motion."

Ultimately, the commission approved the rate case, with McDonald casting the sole dissenting vote.

Previously, the PSC had unanimously approved Georgia Power's Nuclear Construction Cost Recovery tariff, designed to raise $389 million in 2020, which is $64 million less than what is expected to be raised by this tariff in 2019.

SOLAR PPAs

The PSC also unanimously approved Georgia Power's application for a certificate of convenience and necessity for its 2020-21 utility-scale Renewable Energy Development Initiative power purchase agreements with a total capacity of 558.5 MW, which have an average rate of 3.4 cents/kWh.

The PPAs are for the following facilities:

  • Quitman II Solar, 150 MW, in Brooks County, Georgia
  • Cool Springs Solar, 213 MW, in Decatur County, Georgia
  • Broken Spoke Solar, 195.5 MW, in Mitchell County, Georgia

These PPAs were the result of a 2016 integrated resource plan, which was designed 1,050 MW of utility-scale renewable resources, with 525 MW through a 2018-19 requet for proposals and 525 MW through a 2020-21 RFP. These latest PPAs are a result of the second RFP.

Including other solar efforts, Georgia Power has almost 2 GW of solar capacity, the commission learned Tuesday.

-- Mark Watson, markham.watson@spglobal.com

-- Edited by Valarie Jackson, newsdesk@spglobal.com