What happens when a politically powerful utility is allowed to spend its customers’ money without any public accountability for over thirty years?
In Alabama, billions went to upgrade coal-fired power plants that are approaching – or have reached – the end of their useful lives, while the Alabama Power Company, which provides power to most of the state, faced nothing more than a rubber-stamp from the Alabama Public Service Commission, which routinely approves adding such costs to the rate base, according to a new report.
The result, says the study, is that customers will pay for decades for Alabama Power’s continued reliance on coal without the company ever having to demonstrate it's making good use of their money.
The report is called “LEFT IN THE DARK: How the Alabama Public Service Commission Makes Customers Pay Billions of Dollars for Alabama Power Investments without Any Meaningful Public Review or Involvement.” http://ieefa.org/wp-content/uploads/2015/02/Left-in-the-Dark-Feb-2015.compressed.pdf
Author David Schlissel, of the Institute for Energy Economics and Financial Analysis, has written before on Alabama Power and the Public Service Commission. Schlissel’s report was prepared for the Southern Environmental Law Center (SELC), the Southern Alliance for Clean Energy (SACE) and the Greater Birmingham Alliance to Stop Pollution (GASP).
Dominated by ultra-conservative Republicans who virtually never oppose Alabama Power’s will, the Alabama PSC has not conducted a public rate-setting hearing since 1982 when it traded hearings for something called “Rate Stabilization and Equalization,” under which Alabama Power adjusts its charges each year without the inconvenience of evidentiary hearings or participation by the rate-paying public. Instead, the utility opens up its books to the PSC and its staff, which reviews the numbers privately and renders a decision.
In an earlier report, Schlissel wrote that this “extreme rate-making process” - held up as a national model by the Edison Electric Institute - was devised specifically “to shield the process from public involvement and scrutiny.” http://arisecitizens.org/index.php/component/docman/doc_view/948-arise-report-public-utility-regulation-without-the-public-3-1-13?Itemid=44
Even within the Southern Company family of politically-influential utilities in Georgia, Mississippi and northwestern Florida, Alabama Power is considered unusually dominant in its home territory, where it provides electricity to about 1.2 million residential, 197,000 commercial and 5,200 industrial customers in the southern two-thirds of Alabama. And while Georgia Power has boasted of beefed-up solar capacity and its costly new nuclear plant, and while Mississippi Power brings delegations of energy ministers to its still-incomplete $6 billion “clean coal” facility, Alabama Power’s plan for the future is evidently to double down on its aging coal fleet.
For which it is being rewarded with industry-leading profits. Nationwide, the average return on equity for utilities between 2008 and 2011 was 9.4 percent. However, Alabama Power was allowed to earn 13.3 percent - nearly 30 percent more - under the PSC’s formula rate process. Given this atypically generous return, it’s easy to see why Alabama Power is considered the cash cow in the Southern Company empire.
Fueling this inflated profit margin is the 11.6 percent return the company gets on investments it adds to the rate base, such as the more than $3 billion in environmental upgrades Alabama Power has made at existing power plants in past 10 years, all without having to offer any evidence in a public forum that these expenditures are the most cost-effective and least risky of available alternatives. The same applies to another $722 million in upgrades that will be added to rates by 2019.
“Moreover, placing an investment into rate base means that the Company is allowed to earn a return on that investment for decades and can also recover annual operating & maintenance and depreciation expenses,” Schlissel notes.
In what could be a throwback to the 1990s, the National Journal just broke that British Petroleum (BP) has quit the American Legislative Exchange Council today, saying ALEC membership was not needed to pursue its interests.
"We continually assess our engagements with policy and advocacy organizations and based on our most recent assessment, we have determined that we can effectively pursue policy matters of current interest to BP without renewing our membership in ALEC," the spokesman said.
BP was not specific about what triggered this move. Shell and others have been under increased pressure since Google left ALEC in a hurry last September as a result of ALEC's climate change stance.
While BP is far from a green company and is not even greenwashing itself like it was in the "Beyond Petroleum" days, this reminds some climate policy observers of the late 1990s corporate defections from the Global Climate Coalition, when companies were no longer denying the urgency of climate change nor the scientific consensus underpinning that urgency.
As Lester Brown writes in his essay "The Rise and Fall of the Global Climate Coalition", BP left the GCC in 1997 after CEO Sir John Browne's famous speech on climate change at Stanford. Dupont departed even earlier. Then, Shell jumped ship in 1998 and soon companies couldn't leave fast enough, as Ross Gelbspan recaps here:
"Between December, 1999 and early March, 2000, the GCC was deserted by Ford, Daimler-Chrysler, Texaco, the Southern Company and General Motors. While many of the defecting companies said their anti-Kyoto posture had not changed, this was a major blow to a 10-year campaign by oil, coal and automotive interests to prevent public action to address the climate crisis."
We have detailed ALEC's CLIMATE DENIAL history in this Climate Investigations Center blog.
How important is it for ALEC to lose membership of large companies? Climate Investigations Center has compiled a table of the companies who have left ALEC since 2012.
Twenty three companies in the Fortune 500 top 50 have left ALEC since 2012. (BP is not in the Fortune 500 of U.S. Companies)
Ranked by Market Cap, the results are even more stunning. The total Market Cap of the companies that have left ALEC in recent years is over $7.25 Trillion (trillion with a T) The biggest company that is still an ALEC member is ExxonMobil with a current Market Cap of $355 Billion.
These tables with sources are available for reporters, please contact us at firstname.lastname@example.org
|Big Companies that have left ALEC 2012-2015|
23 of the top 50 companies in the Fortune 500 have left ALEC since 2012...
just 13 of top 50 Fortune 500 remain ALEC members, down from 36
|Companies in Bold below have left ALEC|
|Fortune 500 Rank|
|6||Phillips 66 (spun off from ConocoPhillips 2012)||out|
|10||Valero Energy||was not a member|
|18||J.P. Morgan Chase & Co.||not|
|20||Express Scripts Holding||out|
|21||Bank of America||out|
|27||Archer Daniels Midland||in|
|31||Procter & Gamble||out|
|39||Johnson & Johnson||out|
|40||American International Group||not|
|41||State Farm Insurance Cos.||in|
|50||United Parcel Service||in|
|Corp That Have Left ALEC since 2012||Market Cap Dec 2 2014 (billion $)||Fortune 500 rank|
|Berkshire Hathaway Energy||$366.86||4|
|Johnson & Johnson||$302.58||39|
|General Electric (GE)||$261.15||9|
|Roche Diagnostics Corporation||$250.84|
|Procter & Gamble||$243.00||31|
|Nestlé USA Inc.||$241.70|
|Bank of America||$177.30||21|
|Home Depot, Inc.||$130.04||33|
|Union Pacific Corporation||$103.48|
|Novo Nordisk Pharmaceuticals||$96.96|
|Lowe's Companies, Inc.||$61.68|
|General Motors (GM)||$52.70|
|Emerson Electric Co||$43.70|
|Reckitt Benckiser Group||$37.93|
|John Deere & Company||$31.97|
|The Pacific Gas and Electric||$24.13|
|Dr Pepper Snapple Group,||$14.30|
|MillerCoors (Molson Coors)||$14.09|
|Publix Super Markets||$11.46|
|Blue Cross Blue Shield||private|
|TOTAL MARKET CAP||$7,253.91|
People keep asking how much Soon got from each of his corporate funders year by year, and why some places it says $1.2 million total and others $1.5M...
The total funding since 2001 that we know about from Greenpeace FOIAs to Smithsonian and corporate foundation 990s is $1,573,270, tabulated below.
That total excluding the 'anonymous' donation from Donors Trust, leaved known fossil funding at $1,248,471
|Funder||Grant Description from source||Grant Year(s)||Grant Amount||Source|
|American Petroleum Institute||1994-1997||??||Soon published papers|
|American Petroleum Institute||Sun's impact on climate over the last 1000 years||2001, 2002||$58,380||Smithsonian FOIA|
|American Petroleum Institute||1000 years of solar variability||2003||$60,053||Smithsonian FOIA|
|American Petroleum Institute||The 11-22 year climate responses||2004, 2005||$50,178||Smithsonian FOIA|
|American Petroleum Institute||Understanding Arctic Climate Change||2005, 2006||$50,000||Smithsonian FOIA|
|American Petroleum Institute||The solar influence of arctic climate change||2006, 2007||$55,000||Smithsonian FOIA|
|Charles G. Koch Foundation||Koch/Mobile Charitable foundation||2005, 2006||$110,000||Smithsonian FOIA|
|Charles G. Koch Foundation||Understanding Solar Variability and Climate Change||2010||$65,000||Smithsonian FOIA|
|Charles G. Koch Foundation||Understanding Solar Radiation and Climate Change||2010-2012||$55,000||Smithsonian FOIA|
|Charles Koch Foundation Total||$230,000|
|Donors Trust||Understanding Solar Radiation and Climate Change||2011||$50,000||Smithsonian FOIA|
|Donors Trust||A Circum-global Teleconnection View of Regional Sun-Climate Connections||2011-2012||$64,935||Smithsonian FOIA|
|Donors Trust||Wavelet Analysis And Solar Dynamo Theory of Solar Activity Variations||2013||$70,000||Donors Trust 990|
|Donors Trust||Wavelet Analysis And Solar Dynamo Theory of Solar Activity Variations||2013||$49,864||Donors Trust 990|
|Donors Trust||Wavelet Analysis And Solar Dynamo Theory of Solar Activity Variations||2013-2015||$209,864||Smithsonian FOIA|
|Donors Trust||2014-2015||$90,000||Two 2013 grants subtracted from 2013-15|
|Donors Trust Total||$324,799|
|Mobil Foundation||1995-1997||??||Acknowledged in Soon's published papers|
|ExxonMobil Foundation||listed by Exxon as a grant to SAO||2005||$105,000||ExxonMobil Worldwide Giving Report 2005|
|ExxonMobil Foundation||Listed by Exxon as "project support" to SAO.||2006||$105,000||ExxonMobil Worldwide Giving Report 2006|
|ExxonMobil Foundation||Exxon-Arctic Climate Change||2007, 2008||$55,000||Smithsonian FOIA/Exxon Giving Report|
|ExxonMobil Foundation||"Exxon - Soon - Solar Variability" "Understanding Solar Variability and Climate Change: Signals from Temperature Records of the United States"||2008-2010||$70,106||Smithsonian FOIA/Exxon Giving Report|
|ExxonMobil Foundation Total||$335,106|
|Southern Company||Understanding Arctic Climate Change||2006, 2007||$110,000||Smithsonian FOIA|
|Southern Company||Solar variability and Climate Change signals from temperature||2008, 2009||$120,000||Smithsonian FOIA|
|Southern Company||Understanding Solar Radiation and Climate Change||2011||$60,003||Smithsonian FOIA|
|Southern Company||Understanding Solar Radiation and Climate Change||2011-2012||$59,942||Smithsonian FOIA|
|Southern Company||A Study of Solar Activity Variation on Multiple Timescales||2013-2015||$59,809||Smithsonian FOIA|
|Southern Company Total||$409,754|
|Electric Power Research Institute||1994-1999||??||Acknowledged in Soon's published papers|
|Texaco Foundation||1996||??||Acknowledged in Soon's published papers|
|Free to Choose||The sun's influence on climate change||2008||$19,383||Smithsonian FOIA|
|Total known grants 2001-2015||$1,573,270|
|Total known Fossil grants||$1,248,471|