Alabama Power Co. customers are going to see their rates drop on Jan. 1, which should provide the typical residential customer with nearly $55 in savings throughout 2010.
The Public Service Commission voted unanimously Tuesday to enact a 4 percent rate cut for residential customers of the utility, which is a subsidiary of Southern Co.
Overall, Alabama Power's rates are going down by $350 million, or 7.4 percent. Commercial customers, such as retail stores, will see a 5 percent drop and industrial customers, 16.3 percent.
"This is the largest dollar amount decrease in the history of the Alabama Public Service Commission," veteran Commissioner Jan Cook said.
The rate reduction for the state's largest electric utility, which serves most of the southern two-thirds of the state, coincided with Mobile Gas dropping rates, effective Tuesday, by 13.3 percent for residential customers. Alabama Gas reduced its rates last month.
"What a good Christmas present for a lot of people," PSC President Lucy Baxley said.
Alabama Power's rate cut will lower monthly bills from $125.34 to $120.77 for the utility's typical residential customer who uses 1,000 kilowatt-hours each month.
That rate cut of $4.57 per month totals $54.84 in savings for the year.
Mobile Gas spokesman Wes Phillips said its typical residential customer should save about $111 over the course of the year with its rate reduction.
The decreases are due primarily to declining prices for natural gas and coal, which Alabama Power uses to run its generating plants. It has also benefited from heavy rainfall that increased output from its hydroelectric plants, which are the cheapest to operate.
Alabama Power's rates would have declined even more, company officials said, if not for increased costs to comply with federal environmental regulations, including installing equipment to reduce emissions from its power plants.
Utility rates in Alabama and elsewhere climbed in 2008 as natural gas and coal prices went up. They have been dropping this year due to lower fuel prices. Alabama Power's rates were cut 2.5 percent in June.
The two rate cuts combined should save the utility's typical residential customer about $86.40 per year, said Judy McLean, director of the PSC's advisory staff.
Richard Hutto, Alabama Power's manager of regulatory affairs, told the PSC that the Birmingham-based company expects another 1 percent rate drop in April.
Alabama Gas, based in Birmingham, dropped its residential rates 5.9 percent last month. That cut, combined with similar cuts earlier in the year, should amount to annual savings of about $129 for the typical residential customer, company officials said.
The gas companies' rates are adjusted periodically to reflect changes in the price of natural gas.