Fixed Cost Tariffs

The Alabama Public Service Commission has authorized an electric utility, Alabama Power Company, to initiate two new pilot rate design tariffs. Both rates are part of a restricted residential research pilot program that is intended to educate customers on various rate components, while simultaneously demonstrating the billing impacts associated with changing customer usage patterns.

The utility had averred that its new rate design proposal would provide a more precise means of cost capture and recovery. To that end, the principal feature of the two new rates is a shifting of fixed cost recovery away from the variable energy component of bills to a fixed charge element. Under the "Rate RMC" option, a greater percentage of fixed costs will be recouped through a higher monthly base charge of $60, as compared to the current base charge of $14.50 in the standard residential rate.

However, in recognition of that differential, the energy charge in Rate RMC is set at 5.6 cents per kilowatt-hour (kWh), a reduction from the current standard residential energy charge. Similarly, the companion "Rate RMC-Plus" tariff utilizes an increased monthly base charge of $38, but this option employs a peak period demand charge of $8.50 per kW. The company said it anticipates offering the options to randomly selected customers, with participation strictly voluntary and at the sole request of the customer.

The commission remarked that the pilot rates will be available for a period not to exceed 12 months and will not extend beyond December 2018. After that time, a participating customer's electric service will transition back to the otherwise applicable standard rate schedule, absent the customer's request to be placed on another optional rate for which the participating customer is eligible. In connection with the pilot research, and to incentivize participation in the pilot program, the company pledged to provide and install a smart thermostat for certain customers in the Birmingham area. For those customers not receiving a thermostat, a one-time credit of $50 will appear on their bills at the end of the pilot program. (Docket No. U-5224)