This excerpt taken from the SO 10-K filed Feb 27, 2007.
In December 2004, the Georgia PSC approved the 2004 Retail Rate Plan for the Company. Under the terms of the 2004 Retail Rate Plan, the Companys earnings are evaluated against a retail return on equity (ROE) range of 10.25 percent to 12.25 percent. Two-thirds of any earnings above 12.25 percent will be applied to rate refunds, with the remaining one-third retained by the Company. Retail rates and customer fees increased by approximately $203 million effective January 1, 2005 to cover the higher costs of purchased power, operating and maintenance expenses, environmental compliance, and continued investment in new generation, transmission, and distribution facilities to support growth and ensure reliability. In 2007, the Company will refund 2005 earnings above 12.25 percent retail ROE. No refunds are anticipated for 2006.
In connection with the 2004 Retail Rate Plan, the Georgia PSC approved the transfer of the Plant McIntosh construction project from Southern Power at a total fair market value of approximately $385 million. This value reflected an approximate $16 million disallowance and reduced the Companys net income by approximately $9.5 million. The Georgia PSC also certified a total completion cost not to exceed $547 million for the project. In June 2005, Plant McIntosh units 10 and 11 were placed into service at a total cost that did not exceed the certified amount. Under the 2004 Retail Rate Plan, the Plant McIntosh revenue requirements impact is being reflected in the Companys rates evenly over the three years ending December 31, 2007.
In May 2005, the Georgia PSC approved a new three-year rate plan for the former Savannah Electric ending May 31, 2008. Under the terms of the plan, earnings were evaluated against a retail ROE range of 9.75 percent to 11.75 percent. Retail base revenues increased in June 2005 by approximately $9.6 million.
The Company is required to file a general rate case by July 1, 2007, in response to which the Georgia PSC would be expected to determine whether the 2004 Retail Rate Plan should be continued, modified, or discontinued. In connection with this case, the former Savannah Electrics base rate tariffs will be combined with the Companys.
Under the terms of the 2001 Retail Rate Plan, earnings were evaluated against a retail return on common equity range of 10 percent to 12.95 percent. The Companys earnings in all three years were within the common equity range. Under the 2001 Retail Rate Plan, the Company amortized a regulatory liability of $333 million, related to previously recorded accelerated amortization expenses, equally over three years beginning in 2002. Also, the 2001 Retail Rate Plan required the Company to recognize capacity and operating and maintenance costs related to certified purchase power
Georgia Power Company 2006 Annual Report
contracts evenly into rates over a three-year period ended December 31, 2004.