The PSC voted 4-1 in December to approve the $844.6 million rate increase to be phased in incrementally through 2013. A settlement was reached by the commission reducing corporate profits by more than $100 million. The original request was for a rate increase of more than $1 billion.
Georgia Power enacted the rate changes on Jan. 1 raising the average residential customer bill by about $10 a month. Critics opposing the increase decry the decision for its timing as Georgia's unemployment remains above 10 percent.
Tuesday's presentation was an intimate opportunity for McDonald to express to members of the public why he chose to approve the rate increase. Summarizing the arguments, McDonald expressed to members and guests the importance of maintaining profit levels for future needs.
"It's not just basing it on what's best today, it's best down the road. It's not based on what's best for me because what's best for me [politically] would have been to say no," McDonald said. "We're making a pre-payment on tomorrow's future.
"I've got three grandchildren, the oldest now is 8 years old, and I hope that 10 to 15 years from now as they start out and become productive in life I hope they say 'my grandfather was on the Public Service Commission in 2010 and look what we've got today because of the leadership he projected at that time.'"
Several variables currently affecting Georgia Power played into their decision to file a request for a rate increase. Among those emphasized by McDonald are the laws and regulations imposed by government to control environmental factors. Retrofits have been mandated at plants across the state including carbon dioxide scrubbers at Plant Bowen costing more than $1 billion.
"What drives this is approximately half of the increase in this case was due to environmental laws and regulations," McDonald said. "Almost 50 percent of the initial rate case is environmental laws from the [Environmental Protection Agency] out of Washington, some out of the state of Georgia with [Environmental Protection Division], which the power company has no control over and which the Georgia Public Service Commission has no control over. That's why you have to watch very closely what's happening in Washington. ... If Cap and Trade passed as we see it today, our power bills would be astronomical."
In addition to environmental concerns is the pursuit of capital projects for expansion and upgrades including two nuclear reactors being built at Georgia's Plant Vogtle doubling its nuclear output. With this and other projects to be completed, Georgia Power's rating with Nationally Recognized Standardization Organizations has recently fallen. Both Moody's and Fitch have lowered their credit ratings for Georgia Power. A higher rate of return was needed to bring ratings back up and ensure financing for future projects.
"I'm a businessman too, I've got two businesses that my son runs and we're a consumer of significant power and this increase will significantly [impact] each of those businesses in excess of $200 to $300 dollars a month. But you can't build a generation system overnight. You can't just do things like that at the spur of the moment," McDonald said.
McDonald added that many Georgia Power customers may take their service for granted with rates which he said remain below national energy cost averages. Referring to the recent snow storm which paralyzed much of the South, McDonald emphasized the relatively small number of outages experienced and the impact that had on the state economy.
"Of the more than 2 million Georgia Power consumers, over that time we had 40,000 outages. Out of those 40,000 outages, 98 percent were back in service within less than two hours," McDonald said. "The economic impact with the loss of electricity we have seen experienced in California and in the iron belt in the Northeast did not exist in the state of Georgia. We just sometimes take it for granted and forget the benefits we do have."