Originally created 09/01/01

CEO awaits chance to seek rate increase



ATLANTA - Perched along the edge of the Downtown Expressway that bisects Atlanta is an architectural oddity in black glass, a 23-story tower that is wider at the top than at the bottom, almost as if the builders were holding the blueprints upside down during construction.

On the top floor, David Ratcliffe occupies a corner office that could be called modest when compared with the offices of other chief executives of companies with $4.8 billion annual revenues.

Mr. Ratcliffe's 30-year career with Georgia Power Co. began on the ground floor when he was hired as a young Valdosta State College graduate with a degree in biology. A law degree and a series of promotions brought the 52-year-old in June 1999 to the presidency of the company, the hot seat, as he describes it.

Later this month, he will face the five members of the Georgia Public Service Commission - and several adversarial attorneys and a handful of reporters - to argue why the company needs a $103 million increase in its base rate charged to all 2 million customers across the state.

He'll also argue for the company to be allowed to keep more profits.

He says he's looking forward to testifying.

"I don't see how this story is a tough sale," Mr. Ratcliffe said. "I haven't raised your rates in 10 years. I gave back $286 million in 1998."

More power is being generated while air-pollution emissions are being reduced, he said.

It's rare for CEOs of regulated utilities to testify before the rate-setting commission. Mr. Ratcliffe acknowledges that he would have sent an underling had he considered the request controversial.

He might have misjudged the reaction. Consumer advocates have said publicly what some commissioners have said privately, that instead of raising rates, Georgia Power will most likely end up reducing them. And they use words such as stunning, audacious and unbelievable to describe the proposal Mr. Ratcliffe is trying to sell.

The net effect of the plan, critics charge, is to generate cash for Georgia Power's parent, the Southern Co., and its stockholders.

"David, I think, is trying to do the job he corporately needs to do," said Payton Hawes Jr., counsel for the Georgia Textile Manufacturers Association, a trade group opposing the rate increase. Textile mills are among the largest users of electricity in the state.

Georgia Power persuaded the commission in 1998 to allow it to keep a return on equity of up to 12.5 percent and split anything more than that with customers in the form of a refund. Last month, it refunded $44 million.

Warmer summers and colder winters have boosted company earnings in recent years, including an 11.8 percent rise in the first half of this year compared with the same period in 2000.

Mr. Ratcliffe says as weather returns to normal patterns those earnings will decline, but that the company still needs to be able to keep a greater share in order to persuade investors to lend the company money for building new plants and stringing transmission lines.

Co-workers consider the soft-spoken Mr. Ratcliffe unassuming, dedicated to his employees and highly competent.

"He seems to have concern for employees' interests. Always seemed to have a grasp of the technical concerns," said Les Preiss, an Atlanta-based engineer with Xenergy Consulting Inc. of Burlington, Mass.

Mr. Ratcliffe counts debating points on his fingers as he talks unapologetically about legal battles the company faces. In one, the utility is fighting federal pollution regulations on three older coal-fired generating plants.

In another, former and current black employees are seeking to sue the company on behalf of all black employees, alleging Georgia Power systematically discriminated against minority workers.

Environmentalists and discrimination attorneys, including Johnnie Cochran, plan to ask the commission to reject any rate increase until Georgia Power settles both suits.

The commission is not likely to consider either suit because they are allowed to evaluate only the costs to generate and distribute electricity, not social-policy issues.

Mr. Ratcliffe confronts the issues head-on.

"I don't have any doubt over the course of our history, with 8,500-plus people, I'm absolutely certain that I have people who do things wrong from time to time," he said. "When we find them doing things wrong, we will move aggressively to correct the situation and correct the people."

Still, he acknowledges that he is offended by the criticism, especially from environmentalists. As a biologist, he says he shares the company's long commitment to adhering to regulatory limits on emissions.

But he said he also has a commitment to 500,000 shareholders and 2 million ratepayers that prohibits him from lowering emissions beyond the required amounts when huge costs would be incurred.

One environmentalist gives him credit for making an effort.

"We have not yet seen a major shift with the company with issues that we're concerned about," said Rita Kilpatrick, the executive director of Georgians for Clean Energy. "However, we have observed an interest on the part of the company to start developing more environmentally friendly projects. That is good."

When he sits in the witness seat at the commission Sept. 10, the former teacher who once headed public relations for his company is likely to make observers listen.

Power proposal

Georgia Power's rate increase proposal, which will be voted on by state regulators in December, would allow the utility to keep more of its profits. Specifically:

Weather-related profits above 13.5 percent would be split one-third to the company and two-thirds as a refund to customers.

Nonweather-related profits above 13.5 percent would be split evenly, half to customers, half to the company.

Starting in June, rates would increase 1.2 percent annually for five years to pay for power plant construction, about $30 million the first year.

About $380 million in customer money held by the company to cushion the costs of electric deregulation would be applied to pay down company construction loans because deregulation is unlikely soon.

Source: Georgia Power Co.

Reach Walter C. Jones at (404) 589-8424 or mnews@mindspring.com.