By Joyce Lanning, Ph.D.

Huntsville is booming. Metropolitan Birmingham is growing at a fraction of Huntsville’s pace.

Electricity prices may not be the reason. But they certainly don’t help.

A Huntsville Utilities residential customer using 1,200 kilowatt-hours pays about $147 a month. An Alabama Power customer using the same amount pays about $207 — 41% more. Huntsville Utilities presented those numbers earlier this year (p 116)

And this isn’t just a homeowner problem.

A 2026 comparison of commercial electric bills found that a large business using 500,000 kilowatt-hours a month would pay about $60,526 in Huntsville versus $86,924 in Birmingham. (p 7)

That’s roughly $26,400 more every month — almost $317,000 a year. Commercial differences vary considerably according to a business’s size and power-use pattern, but for some companies the Huntsville advantage is substantial.

If Birmingham is competing with Huntsville for jobs and investment, that’s an economic-development handicap.

Why the big difference?

Birmingham and Huntsville get their electricity from very different systems.

Huntsville Utilities is owned by the City of Huntsville and buys its electricity from the Tennessee Valley Authority, a federal public power agency. Neither exists to generate profits for shareholders.

Alabama Power serves Birmingham and most of the southern two-thirds of Alabama.It is an investor-owned utility and a subsidiary of Southern Company. Its customers cannot shop for another electric company nor can customers of investor-owned utilities in most other states.

There is nothing inherently wrong with an investor-owned utility. But because there is no competition, strong regulation is essential. Regulators are supposed to balance the utility’s need to attract capital and maintain reliable service against the customer’s interest in paying no more than necessary.

That’s where Alabama is different. The amount we pay for electricity in Birmingham vs Huntsville is not just due to the for-profit vs public utility model. Our regulator, the Alabama Public Service Commission, has allowed Alabama Power to charge more than regulators allowed investor-owned utilities in other states.

I watched the process for eight years

Beginning in 2012, I drove to Montgomery nearly every month for eight years to attend Alabama Public Service Commission meetings.

In most states, regulators periodically hold formal rate cases. Utilities must justify their requested rates and return on equity, and consumer representatives can challenge the evidence.

Alabama hasn’t held a formal Alabama Power rate case since 1982. Instead, the PSC adopted an automatic formula called Rate Stabilization and Equalization.

In 2013, after consumer groups pushed for a formal rate case, the PSC instead changed Alabama Power to a novel formula called Weighted Retail Return on Common Equity.

No other state utility commission adopted it.

The result deserves scrutiny.

The Energy and Policy Institute calculated that from 2014 through 2022 Alabama Power earned about $2.1 billion more than it would have earned at the industry’s average authorized return on equity.

Alabama Power and the PSC dispute critics’ conclusions about the regulatory system. The PSC has said Alabama Power’s increased income reflects major investments to modernize its system.

But the outcome for customers is difficult to ignore: Birmingham residents pay substantially more than Huntsville residents for the same amount of electricity.

UAB political scientist Robert Blanton has gone further, saying there is strong evidence of “regulatory capture” — when a regulator becomes more responsive to the industry it regulates than to the public.

A rare opportunity for change

Alabama has just dramatically restructured the PSC.

A new state law expands the commission from three members to seven and creates a cabinet-level Secretary of Energy, appointed by the next governor. Beginning in January 2027, that secretary will direct PSC activities and set meeting agendas unless five commissioners vote to change them.

The law freezes electric base rates until January 2029. After that, a formal rate hearing can be triggered by the Secretary of Energy or five commissioners.

That makes this year’s governor’s race unusually important.

Doug Jones and Tommy Tuberville should tell voters whom they would appoint as Secretary of Energy and what they would do to lower electricity costs.

Will they insist on open rate hearings, meaningful consumer participation, understandable comparisons of Alabama Power’s profits with other utilities and public review of long-range power plans before billions of dollars are committed?

I have spent years watching this process.

Birmingham cannot change its electric utility overnight. But Alabama can change the way that utility is regulated.

When the community 100 miles north of us can offer families — and some businesses — dramatically cheaper electricity, doing nothing is not good enough.

Joyce Lanning, Ph.D., is a former assistant professor in UAB’s Graduate School of Public Health and taught economics and health policy at Birmingham-Southern College. She served for more than eight years as a pro-bono Energy Program Consultant for the Alabama Environmental Council and regularly monitored Alabama Public Service Commission meetings.

David Sher is the founder and publisher of ComebackTown.  He’s past Chairman of the Birmingham Regional Chamber of Commerce (BBA), Operation New Birmingham (REV Birmingham), and the City Action Partnership (CAP).

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