High Power Bills Explained: Organization Reveals What Consumers Are Really Paying For

Understanding Your High Power Bill: What You’re Really Paying For

Alabamians face some of the highest power bills in the nation. A new calculator from Energy Alabama reveals how monthly bills break down, shedding light on often overlooked costs.

The tool uses Alabama Power’s filings with the Alabama Public Service Commission (APSC) to show where each dollar goes. It reveals that nearly half of your bill—47.6%—covers operation and maintenance costs.

Another significant portion, 26%, represents company profit. Infrastructure and construction expenses make up 20.9%, while 7.2% includes non-income-related taxes. Finally, 6.1% covers Alabama Power’s taxes on profit, which are passed on to consumers.

Daniel Tait, Executive Director of Energy Alabama, says the tool empowers consumers with transparency. “Most people might be shocked to learn that it’s not just about running the grid,” he said, highlighting that operational and infrastructure costs account for over half of the bill.

Profit margins combined with profit taxes form more than a third of the monthly cost. For instance, a $300 bill includes nearly $100 related only to profit and associated taxes. Tait points out that many customers don’t realize their payments also cover the utility’s income taxes.

Alabama Power is a monopoly regulated by the APSC, which supervises rates. Unlike other states where rate cases reset prices, Alabama uses a formula—Rate RSE—that adjusts rates automatically based on operational costs and profit ranges. This method has been in place since the 1980s.

Despite this oversight, Tait notes gaps in transparency about certain expenses. Lobbying, political activities, and civic spending might be hidden within general operations costs. “We don’t see that level of detail in the state filings,” he emphasized.

The industry standard for utility profitability is Return on Equity (ROE). Alabama’s Public Service Commission instead uses a weighted measure, complicating direct comparisons. Utilities typically average about 9% ROE, while Alabama Power’s figures can run higher, increasing costs passed to consumers.

Following the investigation, Alabama Power proposed and received approval to freeze power rates for two years. It remains important for consumers to understand what drives bill increases and where their money goes, especially amid rising energy costs.

The calculator offers an estimate based on Alabama Power’s current filings, but some local taxes included in bills are not reflected. Energy Alabama plans to update the tool with new data as it becomes available.