Alabama Power customers were owed a refund. The PSC let the company keep it.
Alabama Power overcollected from ratepayers in 2025. Under state rules, that triggers a customer refund. Then the utility hand-delivered a proposal — one day after a news investigation aired — and the money went somewhere else.
Alabama Power overcollected in 2025, which under Rate RSE rules should have triggered a customer refund. In December 2025 the PSC approved redirecting that refund to the company's own Natural Disaster Reserve fund. A two-year rate freeze runs through 2027. No check is coming. Legislation (HB475) introduced in 2026 aims to change how this works going forward — track it at alison.legislature.state.al.us.
#1
highest total bills in the US
40+ yrs
without a public rate case
$0
refund disclosed to public
Alabama Power customers pay some of the highest electric bills in the country. An Inside Climate News analysis found Alabama Power residential customers paid the highest total electric bills in the nation in a recent year, combining usage and rate levels. A WBRC investigation published in November 2025 surfaced this finding and sparked a rare public debate about how the utility gets regulated.
One day after that investigation aired, Alabama Power hand-delivered a proposal to the Alabama Public Service Commission. The proposal was for a two-year rate freeze. It sounded like good news. It was more complicated than that.
How Alabama Power's rates work
Alabama Power is a regulated monopoly — customers can't switch providers. In exchange, the company's profits are supposed to be capped. The Rate Stabilization and Equalization formula (Rate RSE) is the key mechanism: if Alabama Power earns more than its allowed rate of return in a given year, the excess comes back to customers. In 2025, Alabama Power's projections showed the company on track to exceed that return — which under normal operation would trigger a customer refund in 2026.
What the rate freeze actually did
Alabama Power's proposal offered to freeze several rate components — fuel costs, plant operating costs, compliance expenses, and the Rate RSE profit factor — through 2027. In exchange, it asked the PSC to redirect the 2025 customer refund to its Natural Disaster Reserve, a fund used to restore power after storms that had a negative balance.
The PSC voted to approve the proposal on December 2, 2025.
Two sides of the argument
Traditional utility regulation involves public hearings where a utility justifies its costs and return. Alabama Power hasn't gone through that process in more than four decades. The formula rate system allows adjustments without that transparency — which is exactly what HB475, introduced in early 2026, aims to fix.
What Alabama Power customers can actually do
Customers paying some of the highest electric bills in the country were owed a refund under the rules that govern their monopoly utility. That refund was redirected before it could reach them, in a vote that happened within days of a news investigation drawing attention to the issue. The dollar amount was never disclosed publicly.
The rate freeze may turn out to be a genuine benefit if costs stay flat. Or it may be a transfer of risk from the company to the customer, with the bill arriving in 2028. Legislation that would require more transparency is active. Whether it passes is worth paying attention to.
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