Alabama AG Steve Marshall asks state to change how it sets electric rates

An Alabama agency is considering changes to how it regulates power for data centers, at a time when many residents have questions about the fast-moving projects.Alabama Power and industry groups have asked the Public Service Commission to stick to a narrow implementation of a new state law that says data centers need to carry the costs of their buildout.But a series of other parties, including Birmingham residents and Attorney General Steve Marshall, asked the commission to make bigger changes to how it reviews and sets utility rates.“There must be a procedure developed to allow for public participation,” Marshall wrote in a filing with the commission. “Many Alabama citizens believe that electricity rates will be higher because of data centers.”Marshall and staff attorney Olivia Martin wrote that for decades, the commission has used a flexible contract rate docket process when it reviews large customers.The commission has not held a formal hearing on electricity rates since 1981. And since 1996, according to Marshall, the commission has relied on its staff to review and approve contracts.Marshall said state attorneys, legislators and members of the public should have more input and insight into how rates are set.“Ultimately, the PSC has the responsibility to protect ratepayers and there must be a procedure in place for commissioners to understand the impact of large load electric contracts on ratepayers,” Marshall wrote.Marshall’s office did not respond to a request for comment from AL.com.In Alabama, local governments decide whether to build data centers. But changing the electricity rate review process could make life harder for both utilities and data center companies.A new state law adds seats to the commission, freezes electric rates through 2029 and requires an annual public hearing for utilities regulated by the agency, including Alabama Power.Under current rules, the commission gets 10 days to review some contracts between power companies and data centers. Under new rules, the process could be extended to 60 days or longer.Two seats on the commission will be up for election in November.State Sen. Lance Bell, who sponsored the legislation, said he just wants to make sure the commission’s existing process is codified into law. In a filing, he asked the commission to avoid “any form of administrative or regulatory drift.”“Some of these comments went too far,” he told AL.com about requests to overhaul the rate process.Jim Zeigler, who is running for one of the seats on the commission, filed a submission asking the commission to stick to implementing the new law.Alabama Power, the state’s largest energy utility, has estimated that by 2029 it may not have enough supply to meet demand. In a filing, a group of Birmingham residents who are fighting a data center in their neighborhood said they don’t want to bear the cost of an infrastructure buildout to meet demand from data centers and industry.In other filings, industry organizations argued that the commission’s basic rate process works and should hold.Alabama Power said it already ensures that data center costs aren’t passed on to regular consumers.“Large load data center customers pay for their cost of service and do not shift those costs to other customers,” the company wrote, adding that it has made that effort since at least 2024.The utility said one-size-fits-all regulations don’t make sense for different companies and locations.The company told AL.com it did not have any additional comment on its filing.Manufacture Alabama, which represents large industrial companies in the state, said most of its members have built factories and made commitments under the commission’s existing rate structure. Changing the rate process and asking companies to open up contracts would set a “dangerous precedent,” the group wrote.Energy Alabama, which advocates for more consumer protections, was one of several organizations that asked utilities to share more information with the public.“The law calls for a specific framework for data centers and requires the commission to take more active steps to protect consumers,” Daniel Tait, with Energy Alabama, told AL.com.Some organizations said they worried that changing regulations would hurt the state’s large manufacturers and cause them to be considered large-load energy consumers under new regulations.In its filing, Energy Alabama said Alabama’s new law explicitly puts data centers into their own process and shouldn’t impact manufacturers.The commission is expected to adopt new rules at its Sept. 1 meeting.