May 20 - Knight Ridder/Tribune Business News - Margaret Newkirk The Atlanta Journal-Constitution

The "death spiral" speech is a given in fights over proposed utility price increases -- usually made by a grocery chain mad that its light bill could go up.

This week's Public Service Commission hearings on a $556 million Georgia Power fuel charge increase were no exception.

But this time it was a regulator -- not a grocer -- that raised the alarm about higher energy prices leading to lower energy use leading to even higher prices, and spinning out of control.

"Right now, I feel like we're in a death spiral," Commissioner David Burgess said.

"Ultimately, we're creating a situation here that's not good for anybody -- the company, the customers, the commission, everybody involved."

He said the fuel price crisis that began hitting Savannah Electric in the 1990s -- and led to its pending merger with Georgia Power -- now appears to be hitting Georgia Power, too.

"Do we look down the road and eventually it's Georgia Power coming in here saying we need to merge with somebody else to survive?"

"It just seems like we don't want to be truthful enough to ourselves and say that something seriously is wrong."

Georgia Power comptroller Ann Daiss answered that the company's rising fuel costs, and the now-continuous fee increases required to pay for them, are a problem across the industry nationally and that Georgia Power's bills are 13 percent below the national average.

"The company does share your concern," she said. "We have no desire to continue this cycle of appearing here and asking for rate increases."

The exchange came in a two-day hearing on Georgia Power's fuel request, which includes both reimbursements for fuel already purchased and an increase in what the company will charge for fuel going forward.

The fuel charge is a pass-through charge for the cost of the coal, nuclear rods and natural gas used to produce electricity. It does not include profit.

The charge is supposed to roughly match what the company spends, but has been stubbornly off-base for several years running.

The company's last huge fuel charge increase was just last summer, and it was inadequate within a couple of months, after back-to-back hurricanes blew up the price of natural gas.

The commission has little leeway to deny Georgia Power recovery of fuel costs it's already incurred: By law, the company is entitled to recoup them as long as they were prudent.

PSC staff, the Governor's Office of Consumer Affairs and large industry, represented by the Georgia Industrial Group and the Georgia Textile Manufacturers Association, have targeted about $210 million in forward costs, though, in their efforts to reduce the increase.

They want Georgia Power to delay adding in about $95 of million fuel costs it expects to incur because of a pending merger with Savannah Electric, which has more expensive fuel rates. The merger takes place in July.

Ratepayers would save another $115 million if the PSC requires Georgia Power to use lower estimates of wholesale fuel prices in the future.

The company filed for its increase at a time when fuel prices were still recovering from hurricane season. Prices have fallen sharply since then.

The commission will vote on the fuel increase on June 15.