Hidden power: Groups seek release of Alabama Power's 20-year plan
by Tim Lockette
Jan 12, 2014 | 7536 views |  0 comments | 40 40 recommendations | email to a friend | print
Alabama Power Company's Gadsden plant. (Anniston Star photo by Trent Penny)
Alabama Power Company's Gadsden plant. (Anniston Star photo by Trent Penny)
MONTGOMERY — No matter what the state's environmentalists do, coal companies will face an uphill climb in the next few years.

The state’s biggest utility, Alabama Power, doesn't plan to build a new power plant until 2030, spokesman Michael Sznajderman said last week. Some existing coal plants have been converted to use either natural gas or coal, whichever is cheaper. And for years, Sznajderman said, use of gas has been growing.

"The price of gas has come down," Sznajderman said. "The bottom line is that gas is becoming more competitive than it used to be."

Alabama Power is a big operation, bringing in $5.5 billion a year, and when it makes plans to build power plants, convert them, or buy fuel, it uses a mound of data. Much of that data — potentially hundreds of pages it — is on file at the state's Public Service Commission, but the public isn't allowed to see it.

It's called the Integrated Resource Plan, a 20-year projection of fuel prices, construction plans and electricity demand that Alabama Power files with the PSC every three years. Most states require power companies to file IRPs, and most make significant portions of those plans public. Many states hold hearings to take input on the plans. In Alabama, only a brief summary of the IRP has been released to the public.

Over the years, activists — environmentalists and transparency advocates — have hounded the state to make the Integrated Resource Plan public. Alabama Power has opposed the idea, and so have some advocates of the state's coal industry. The fight over this single document, little known to most of the state's residents, might be the real reason Alabama has spent the last year talking about a "war on coal."

Managing risk

More than half the states have some sort of process to review utilities' Integrated Resource Plans, said Ron Binz, an energy consultant and former chairman of Colorado's Public Utilities Commission. Binz was also President Barack Obama's nominee to head the Federal Energy Regulatory Commission, but withdrew his name after opposition from energy industry lobbyists.

The idea caught on in the 1980s, Binz said, after the 1970s’ energy crises and cost overruns at nuclear plants led some utilities into bankruptcy. By reviewing utilities' detailed plans for a 10- to 20-year period — projected energy needs, the fuels a company expects to use and its plans to build new power plants — states could head off the risk of a planning disaster that could cause electrical costs to swell.

"These are pocketbook issues, and the theory behind IRP was that the decision-making should be done in the open," Binz said.

Some states, Binz said, have the power to approve the IRP, or send a power company back to the drawing board for another try. In other states, the public service commission merely votes to "receive" the power company's plan, usually after a hearing to discuss its contents.

In Colorado, where Binz worked, the IRP often took up multiple volumes, discussed in weeks of sworn testimony.

"In our case in Colorado, it would be strung out over six or seven months of hearings," he said. "But that's what we did. It was our most important function."

Georgia Power, Alabama's sister company across the state line, makes a detailed plan available to the public, including a main planning document more than 170 pages long, along with studies and data supporting the main document.

In Alabama, there's no law requiring hearings on the IRP. So far, the PSC has released only a nine-page summary of the document to activists who requested it.

"It's really just a description of the IRP process," said Keith Johnston, a lawyer for the Southern Environmental Law Center, an environmental group.

Environmental groups such as the SELC have asked for access to more IRP documents, as have the anti-poverty group Alabama Arise and the League of Women Voters. For the environmentalists, IRP hearings are a chance to have a look at the power company's projected costs for environmental compliance — and a chance to advocate for adding more "clean" fuel sources to the mix.

But environmentalists say a more public 20-year plan also makes good business sense for the state, helping alternative energy companies decide if they should come here.

"In a lot of states, it's driving new jobs and new economies," said Michael Churchman of the Alabama Environmental Council. "Companies that want to locate in a state need to know if there's a need for that type of energy."

‘Open book’

Alabama Power doesn't see the closed IRP as a problem. In addition to generating its own electricity, company officials say, Alabama Power buys and sells power on the grid. Making a more detailed IRP available to the public, company officials say, would cost Alabama Power a certain advantage in that market.

Company spokesman Ike Pigott compared it to buying a house when the seller already knows how much you've been approved to borrow.

"You can be so transparent in your forecast that you arbitrarily end up setting prices," he said.

Sznajderman said there have been hearings on the company's 20-year plan. Alabama Power devoted an entire day to discussing its power generation plans at a public PSC meeting in December, he said.

"Our generation plans are essentially an open book," he said. "Environmentalists and other groups were there. They could ask questions at those meetings."

Advocates for a more open IRP process say that's not enough. The December meeting wasn't part of an official IRP review process, they said, and was more a presentation than a hearing.

"Alabama Power took up most of the time," Churchman said.

Sznajderman said the general public hasn't shown a lot of interest in details of the 20-year plan.

"We don't have people banging on our doors here, except for a few advocacy groups," he said.

War drums

While few Alabamians have heard of the IRP, the document may be connected to a better-known issue — the state’s heated debate over formal hearings on Alabama Power’s electric rates.

Public Service Commissioner Terry Dunn first called for hearings on the power company's rates in late 2012. The state hadn't held formal rate hearings since 1982, opting instead for a system that allowed Alabama Power a pre-set rate of return on its investment.

The call for hearings generated sharp criticism of Dunn, an Etowah County Republican once endorsed by Karl Rove.

Fellow Republicans accused Dunn of being in league with environmentalists who wanted to use the rate hearings to hobble Alabama's coal industry. The Alabama Coal Association, an advocacy group funded by the state's largest coal companies, launched a website dedicated to the "war on coal," complete with a 17-minute documentary film alleging that environmental and anti-poverty advocates were involved in the rate hearings issue because they wanted to kill coal, not because they wanted to lower utility bills.

The "war on coal" concept caught fire in conservative circles. Dunn — who has always maintained his call for hearings is about rates alone — has drawn four opponents for June’s Republican primary. All four have touted their support for the coal industry.

Johnston, Churchman and other environmentalists did take part in the less-formal rate hearings held last year. Environmentalists also say they never hid their desire to also push the state toward more clean sources of energy.

That generally means pushing for more restrictions on coal, disfavored by environmentalists because of carbon dioxide and mercury emissions from coal-fired plants.

“Coal is not about to go away,” SELC’s Johnston said. “But if you're going to mine coal or burn coal in the state, we think you ought to have the toughest regulations possible.”

Environmental groups have also acknowledged that they've accepted grants from the San Francisco-based Energy Foundation to promote clean energy or speed the retirement of the state's coal-fired plants. In December, the Alabama Coal Association called for a formal congressional investigation into those grants; shortly afterward, Sen. Richard Shelby, R-Tuscaloosa, asked the Department of Energy to hold an inquiry on the matter.

But coal advocates have struggled to answer a basic question about: How would hearings on utility rates lead to action against the coal industry? The power company passes the cost of fuel on to the customer, while utility rates reflect additional charges to pay the company's other costs, and to provide it with a profit.

Multiple attempts to reach the Coal Association for comment last week were unsuccessful. But Patrick Cagle, executive director of the pro-coal group JobKeeper Alliance, said the link between rate hearings and coal regulation is simple. It’s all about the the Integrated Resource Plan, he said.

In states with formal IRP hearings, Cagle said, environmentalists use the hearings to advocate for alternative energy sources and agitate against coal. Because they can’t get formal hearings on the IRP, Cagle said, Alabama's environmentalists would try to use formal rate hearings to launch an investigation into the power company's 20-year plan.

"The call for increased transparency from each of these groups is directly tied to their desire to gain access and input in the IRP process," Cagle wrote in an email to The Star.

Equal time

In states with formal IRP hearings, coal companies would get their turn to talk, along with everyone else, said Binz, the former Colorado PSC president.

"It's not just the environmentalists," he said. "Typically you see a wide range of interests involved, including the fuel producers."

Cagle, however, claims coal advocates would be at a disadvantage in hearings. Thanks to grants from big environmental groups, he claims, Alabama activists have the money to hire experts that business groups can't afford.

"Effective regulation should not be determined by which third-party interest group has the deepest pockets," he wrote in an email to The Star.

David Schlissel, of the Institute for Energy Economics and Financial Analysis, a Massachusetts think tank, said it's "absurd" to think fuel companies, or the utility itself, would be outgunned by activist groups.

"The companies far outspend the other intervenors," said Schlissel, who has worked with the anti-poverty group Alabama Arise, which was involved in last year’s rate hearings.

Cagle cites the grants Alabama's environmentalists got from the San Francisco-based Energy Foundation as evidence that environmentalists are well-funded. According to the Energy Foundation's website, the group gave $640,000 last year to the Southern Environmental Law Center, a group with offices in multiple states, with similar donations in earlier years. It also gave $40,000 to the Alabama Rivers Alliance in 2013, with similar donations to other Alabama environmental groups in the past.

But it's clear that coal companies also have money to spend. The Drummond Company, a coal producer, gave more than $490,000 to PACs and political candidates in 2013. The Alabama Coal Association lists Drummond and 17 other coal companies as its members, and dozens of non-mining companies, including Alabama Power, are listed as associate members.

Cagle wouldn't comment on JobKeeper's sources of funding.

Leonette Slay, of the League of Women Voters, bristles at the idea that her organization has a plan to shut down coal production. The League has long held that the IRP should be made public as a matter of government transparency. The League has also called on the state to study IRP processes in other states, with an eye toward emulating their best practices.

"If it had been called the Tic Tac Toe Document, and if it affected public policy, we would have been trying to get it," Slay said of the IRP document.

Waning coal

Dunn, the public service commissioner who proposed rate hearings in 2012, hasn’t taken a position on the topic of IRP hearings, according to his spokesman David Rountree.

"He hasn't studied the issue yet," Rountree said.

Attempts to reach PSC president Twinkle Cavanaugh, who was out of work sick according to PSC staff, were unsuccessful last week. The Star requested a copy of the IRP last week, and the PSC on Thursday sent a 15-page summary of the plan. In less than an hour of searching on the Internet, The Star found detailed IRP documents for utilities in 21 other states.

For years, the trend at Alabama Power has been a move away from coal. Sznajderman said nearly 80 percent of the company's power was produced with coal in the late 1990s. Today, the number is around 50 percent.

Environmental regulations have increased the cost of using coal, he said, and the boom in domestic gas production has made gas a cheaper option. Barring a change in current trends, he said, the share of gas used by the company is likely to rise for at least a few years.

The same thing is happening across the country. A study released last year by the firm Goldman Sachs shows that coal, as a percentage of fuels used in electric production nationwide, has declined since 1990. Use of gas grew during the same period.

Asked if an IRP hearing might be a good place for coal producers to argue for more coal use, Cagle said no.

"It's not really an interest of ours," he said in a telephone interview. He said he had confidence in the PSC, and wouldn't want to open their deliberations to other groups.

"It's a Pandora's box," he said.

Capitol & statewide reporter Tim Lockette: 256-294-4193. On Twitter @TLockette_Star.

Editor's note: This story has been modified to note that the Public Service Commission on Thursday sent a 15-page summary of Alabama Power's Integrated Resource Plan in response to The Star's request.

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