BIRMINGHAM, Ala. (WBRC) – A WBRC investigation revealed Alabamians pay the third-highest power bills in the country. A new tool released by Energy Alabama allows customers to see how their bill breaks down by the dollar, according to Alabama Power’s public filings with the Alabama Public Service Commission, or APSC.
The calculator allows customers to enter their monthly bill amount to show how much is going toward power and the company’s profit.
According to findings:
- 47.6% covers operation and maintenance costs
- 26% is profit
- 20.9% covers infrastructure and construction
- 7.2% includes non-income related taxes
- 6.1% covers Alabama Power’s taxes on profit, passed on to consumer
Daniel Tait, Energy Alabama’s Executive Director, believes this information will empower consumers.
“I think most people might be shocked to learn that it’s not the overwhelming majority of your bill actually going towards running the grid,” Tait explained, referencing the operations and maintenance and infrastructure and construction aspects of the bill, which account for more than half the costs.
According to the calculations, profit and subsequent taxes account for more than a third of the overall monthly costs. For a $300 power bill, the profit and subsequent taxes add up to nearly $100.
Energy Alabama’s calculator uses Alabama Power’s public filings to show consumers how their monthly bill is broken down.
“It’s not just the profits, it’s the fact that Alabama Power pays income taxes on that profit, which customers also pay,” Tait explained. “I think a lot of people don’t understand that when they’re paying their utility bill, it’s not just the poles and wires or power plants, but also the income.”
Alabama Power is a monopoly for-profit electric utility in Alabama. Utilities are allowed to recoup operational costs and earn a profit, which is regulated by the APSC.
Generally, for-profit utility rates in most states are set through a rate case. That means if a utility wants to raise rates, they must make their case by opening the books and showing state regulators why the increase is needed. This practice hasn’t happened in Alabama since 1982.
In the 1980s, the APSC switched to formula rates, which adjusts Alabama Power’s rates without a rate case. One of the rates is called Rate RSE, or Rate Stabilization and Equalization Factor, which covers operational costs and profit. The formula has a set range. If Alabama Power’s projected profit is higher than the range, rates could go down. If it’s lower than expected, rates could go up. Using this method of operation allows the PSC to have increased supervision of Alabama Power’s operational and financial records and requires Alabama Power to submit updated information to the PSC throughout the year.
Tait says Alabama Power’s public filings fall short of showing whether certain non-energy related costs are passed through to consumers.
“There are other types of expenditures, for instance, that could be embedded in these numbers that we simply don’t know,” Tait stated. “How much of Alabama Power’s lobbying or political expenses and things of that nature are actually getting caught in, say, operations and maintenance? We may see, for instance, that sometimes when [Alabama Power] files with federal regulators, that they’re spending tens of millions, upwards of almost $50 million on civic and social activities. Where is that being charged? Are customers paying for that? Are they not? We don’t see that level of detail in the state filings, unfortunately.”
The industry standard for measuring equity for investor-owned utilities is ROE, or return on equity. In simple terms, this is a profit margin on an investment. The APSC does not use this metric. In 2013, the APSC transitioned to a Weighted Return on Average Retail Common Equity, or WRRCE. This creates a challenge comparing Alabama Power’s ROE to other for-profit utilities.
During our initial investigation, The Price of Power, Alabama Power declined to confirm its ROE; instead pointing us to their financial statements on file with the Securities and Exchange Commission (SEC) and the Federal Energy Regulatory Commission (FERC).
“What this tool really does is it pulls that curtain back and says, what’s the true cost, the true impact of a really high ROE over time – and that’s what you see here,” confirmed Tait. “That you could have a return on equity of, say, 11%, 12%, 13% but over time, that balloons into a profit portion of your bill, where more than a third is running to profit and income taxes.”
Average ROE for electric utilities is around 9%, according to S&P Global publications.
WBRC reached out to Alabama Power for comment – we had not received a response at the time of publication.
The day after WBRC’s investigation, Alabama Power hand-filed a proposal to freeze power rates for the next two years. It was quickly passed by the APSC.
You can read more about this topic here.
It’s important to note: this calculator is an estimated breakdown of your power bill. Some local governments charge taxes through your power bill, which are not reflected in these numbers. The calculations are based on APC’s 2025 filings, but Energy Alabama says the calculations will soon be updated with Alabama Power’s 2026 RSE filing.
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