POWERGRAMS

HISTORY More than a decade of turmoil T Wallace's fiery rhetoric shifted from race to rates in the 1970s. PAGE 4 he old-timers remember the conference table. The year was 1979. One of Alabama Power's most trying decades was slipping into history, and the company's worsening finances made some people, including employees, wonder whether it was, too. Relief – from politicians who exploited for their own gain Alabama Power's need to increase rates, from an angry public that had been persuaded it paid too much for electricity, from a Public Service Commission (PSC) that had abdicated its rate-making responsibilities – was more than three years away. Help finally came in late 1982 with a system that stabilized rates and reduced the role of politics in rate-making. Rate Stabilization and Equalization (RSE) set the company on what former President and CEO Joe Farley called "an even keel" for three decades. In 1979, though, Alabama Power had been ravaged by more than a decade of controversy over rate increases and was sinking under the weight of bills it couldn't pay. The conference table, laden with invoices, sat in then-Comptroller Jack Minor's office on the 11th floor of the company's historic 1925 building. The table taunted Alabama Power officials, a constant reminder the company owed $45 million to vendors and faced financial ruin unless the PSC and/or courts granted it some relief. Minor, dubbed the "Administrator of Austerity," piled the invoices in groups – 30, 60, 90 and 120 days due. He had orders not to pay any of them unless someone demanded their money, wrote Alabama historian Leah Rawls Atkins in "Developed for the Service of Alabama," her award-winning 2006 history of Alabama Power. "The bills stacked on Jack Minor's table, that was no joking matter," remembers retired Rates and Regulatory Manager Oscar Walker. "Bankruptcy is when you can't pay your bills. We could not pay our bills." Bruce Hutchins, who retired in 2005 as chief financial officer, was directly involved in rate cases from 1974 to 1982. He said 1979 "might have been the worst year." "I guess by '79 there was kind of a 'what can happen next?'" Hutchins said. "So many bad things had happened." Among those "bad things": Gov. George Wallace, whose fiery rhetoric had shifted from race in the 1960s to utility rates in the 1970s, fought an almost decade-long war of words against Alabama Power. During Wallace's two terms as governor from 1971-1979, he continually incited a public battered by high inflation, interest and jobless rates into believing electricity rates were too high. He used the media to inflame the public against Alabama Power. He fought the company's proposed rate increases and appealed any the PSC allowed. Higher demand for electricity in the late 1960s and early 1970s triggered a robust construction program, including new generation facilities. The company had to borrow money to finance the projects. With the increasing financial pressures and inability to raise revenue came lower bond ratings. PSC orders repeatedly denying Alabama Power's rate requests, or granting only a fraction of what was needed, forced the company to continually appeal rate cases to the courts and roll over the amount denied into new rate requests. When the court's decisions finally led to long-sought rate increases, customers often faced doubledigit percentage increases to their bills. From 1968 through 1982, Alabama Power filed 10 separate rate cases, with virtually all of them ending up in lengthy litigation, according to a 2011 Edison Electric Institute case study of RSE in Alabama. The cumulative impact was devastating. The company's worsening financial health in the mid- to late 1970s led to drastic measures such as delaying and shutting down construction projects, curtailing its tree-trimming program, laying off construction, contract and company employees, cutting travel and selling office buildings. Years of political demagoguery about supposedly exorbitant electricity rates had persuaded the public that Alabama Power didn't need any more money, no matter the evidence to the contrary. Farley led company through hard times. People grew furious over the company's repeated requests for rate increases. Employees often found themselves in the crosshairs of an angry public. Walker recalled returning from one of his many trips to Montgomery. "My neighbors knew who I was and what I did," he said. "They even – I think somewhat in jest – had their little kids out with signs picketing around my house." Hutchins said it was easier not to tell people where he worked. He learned the hard way to tell them only that he was an accountant, and leave it at that. Hutchins' worst experience with the public was the January 1977 PSC hearing in Montgomery's Garrett Coliseum, an event etched into company lore. Thousands of angry people had packed into the arena, which seats 10,500. Atkins in her company history described the crowd as "wild and disorderly, as if someone were going to be fed to the lions." Hutchins worried that "someone" was him and other Alabama Power officials. "That deal at Garrett Coliseum, the first thing I looked for were the nearest exits," he said. "It really was a frightening situation. There was booing, hissing, it was just really unbelievable." There had to be a better way to regulate a public utility, a conclusion the PSC reached more than five years later, in late 1982. To get to that point, though, took a series of events that changed the political climate and the public's view of Alabama Power. Among the events that laid the groundwork for a new system: In 1978, as part of an effort to repair the company's image with the public, Alabama Power went on

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