MONTGOMERY, Ala. – After a first-of-its kind investigation, the Alabama Public Service Commission on Tuesday approved lowering a metric that dictates gas companies Spire Alabama and Spire Gulf’s profit returns.
The PSC dug deep into Spire’s books and heard from industry experts as part of the process, commissioners explained at their Tuesday meeting. The goal was to determine whether Spire’s request to increase their return on equity was justified and, ultimately, what rates are fair.
Energy Alabama, a clean energy advocacy group, and the Attorney General’s office offered suggestions alongside Spire’s requests to the commission during the rate stabilization and equalization investigation.
Spire, which operates Spire Alabama in the central and northern parts of the state and Spire Gulf in the Mobile area, had asked for return on equity increases for both sectors of the utility. It requested an increase from 9.7% to 10.5% for Spire Alabama and from 9.95% to 10.75% for the Gulf region.
The PSC instead voted on Tuesday to decrease the return on equity for both sectors, dropping ROE to 9.4% and 9.6%, respectively. These lower profit return rates will stay in effect for two years for Spire Alabama and three years for Spire Gulf.
The return on equity reduction means customer rates set during the next budget process will be lower than they would have been if Spire had maintained its previous RSE terms, PSC President Cynthia Almond said.
Spire in a statement expressed disappointment with the PSC’s decision.
“Although we respect the Commission’s decision, we are disappointed,” Spire said. “A return on equity that falls below that of neighboring states impacts our ability to attract investment that supports economic development, job creation and meaningful community engagement across Alabama. We’ll continue to work closely with all parties as we remain committed to safely and reliably serving the energy needs of our customers.”
Spire also requested a $5 price hike on the flat service fee customers pay every month. The commission honored this request but imposed a phasing approach over two years. The fixed customer charge will increase by $2.50 on Oct. 1 and an additional $2.50 on Oct 1, 2027, for both sectors.
Though the fixed cost will go up, Almond said that the increase “will be offset proportionately by proportionally lower usage rates for the average customer.”
“This change is revenue neutral,” Almond said. “It does not increase the total revenue the companies are authorized to collect. Instead, it shifts a portion of the recovery of fixed customer costs away from the volumetric or usage-based portion of the bill and into the monthly customer charge… I believe it’s been more than 70 years since there has been an adjustment or an increase for Spire Alabama, so it’s been quite a long time.”
Almond reiterated during discussion about the RSE investigation that the PSC’s responsibility is to ensure regulatory balance between companies and customers in order to provide safe and reliable service at fair prices.
“The decisions we make here have real impacts on both the customers who pay the bills and the companies that are responsible for providing safe and reliable service,” Almond said. “Our responsibility is to carefully weigh both sides to protect customers and keep service affordable, while also ensuring that the utilities we regulate remain capable of maintaining the infrastructure and service that customers depend on. A well-functioning utility and affordable service are both essential parts of that balance.”
Energy Alabama had advocated for even lower rates but applauded the PSC’s decision in a press release. Pulling from data from the AG’s office, the advocacy group estimates that Spire customers in Alabama will save more than $15 million annually compared to what Spire had requested.
“Energy Alabama thanks the Commission for opening this first-of-its-kind rate investigation and for its decision to bring Spire’s return on equity down to a more reasonable level,” said Sheree Martin, the group’s deputy director and general counsel. “Energy Alabama asked for a bigger reduction than the PSC approved, but the final result is still a big win for consumers. We are committed to continuing to push for clean and more affordable energy for all Alabamians.”