How Earnings and Rates Work

Usually, they mean the "allowed return" – what regulators permit the company to earn. That return is a component of the financing cost of building and maintaining the infrastructure that delivers your power: poles, wires, substations and power plants.

No. Alabama Power does not earn a percentage of your bill. The PSC sets a fair, weighted return range of 5.75% to 6.15%, regardless of individual bills. That range is not a guarantee – if earnings fall short, the company cannot bill customers for the difference. If earnings exceed the range, the framework includes mechanisms to address the overage.

Oversight rules, commission orders and company filings are posted for public view on the PSC website.

In the early 1980s, after years of contentious rate cases and court battles, the state of Alabama adopted a formula-based approach called Rate Stabilization and Equalization (Rate RSE) to create a more stable and predictable regulatory environment for both customers and the utility. The goal: replace large, unpredictable rate swings with smaller, measured annual adjustments tied to a published earnings range, with ongoing PSC oversight.

PSC commissioners and staff routinely review Alabama Power’s financial records and discuss summaries in monthly meetings open to the public. The PSC posts its public meeting schedule on its website. 

No. The allowed return range applies regardless of bill amounts. When your bill rises, it's usually because your home used more energy, not because the company's allowed return changed.

Even with a fair return range in place, your bill can climb when usage climbs. Heating and cooling can account for more than 40% of a home utility bill.

Electric systems are built to last for decades. That requires significant upfront investment, and the return is what makes that investment possible – at borrowing costs that stay reasonable for customers.  

The PSC framework establishes guidelines that allow Alabama Power to invest in long-term upgrades to maintain reliable service without placing too much burden on customers’ rates.

The Rate RSE return range and company filings are publicly available on the PSC website.