Why invest in bonds when Georgia Power (stock ticker: Southern Company SO) pays a higher rate and the Public Service Commission will do whatever necessary to insure that the company maintains a certain level of profitability? Case in point: Georgia Power (and other utilities) tell the PSC how much money their fuel will cost to power their plants, and the PSC approves rate increases to pass that cost along to ratepayers instead of shareholders. The PSC essentially gives Ga Power whatever they ask for — if you ask me that kind of policy dis-incentivizes profit-driven planning by the utility, but hey that’s how it works and I guess Georgians aren’t smart enough to figure that out, or else they would elect a more consumer friendly PSC. The public gets the public service commission they deserve.
Anyway, Georgia Power had a screwed up internal forecasting model which had the utility budgeting for more capacity from lower cost fuel plants than those plants could actually yield. OK, says the PSC, it cost more than you thought so we’ll get ratepayers to subsidize that amount after the fact. But, Georgia Power has the gall to go the commission and say because of our error in forecasting we should also be compensated for the interest we had to pay. In other words, Georgia Power has their profits entirely protected by the Public Service Commission, and if they correctly do their math and tell the PSC what they need in advance, the PSC will make sure that ratepayers subsidize all of it. But now Georgia Power is saying we screwed up, we didn’t ask for the right amount in advance and we had to pay $4,000,000 interest, and now we think ratepayers should bail our shareholders out of our error.
And guess what? The PSC agreed with Georgia Power, voting down an amendment by Angela Spier 3-2. Guess who the deciding vote was? If you guessed then you are correct. I guess Chuck’s forgotten his campaign promise to require “performance based rate-making” and all of the other crap he told the gullible AJC editorial board in order to get their endorsement.
You know what the most scandalous thing of all is, though? Georgia Power screwed up a forecasting formula which cost the company $4,000,000 in interest. Thomas Fanning, an executive Vice President who is also CFO and Treasurer, got a $800,000 bonus in 2005. Raise your hand if you can make a mistake at your job that costs your company $4,000,000, get a nearly $1,000,000 yearly bonus and then have 3 government bureaucrats vote to have 9,000,000 Georgians bail you out. If only Georgia Power was in the mass transit business, we might be able to get some of our legislators attention when this stuff happens.