The state Public Service Commission approved a plan Thursday that would see bills for Alabama Power customers decrease starting next week.

The state Public Service Commission decided Tuesday to decrease the cost of 1,000 kilowatt-hours for homes and apartments by $2.72, starting June 9. The reduction from $130.29 to $127.57 represents a drop of 2.1 percent.

Alabama Power spokesman Pat Wylie said the decrease comes from the fact the company has been able to recoup some of the nearly $328 million in losses from previous years due to droughts and increased fuel costs.

In October, the PSC approved a 13.35 percent increase to power rates to help the company reduce the loss, but because of recent rains and lower fuel costs, the company is well ahead of its plan to cover the costs.

“When we first put forth the plan to work down those losses, our goal was to recover that amount in 24 months,” Wylie said. “Just six months into this plan, we have already recovered half of the amount.”

Over the past few years, Alabama Power had been forced to generate power by using more coal and natural gas to meet demands rather than relying heavily on the company’s hydroelectric production dams.

The droughts had lowered lake levels to the point the company was forced to cut back power generation to slow the drawdown on the lakes. The use of coal and natural gas was more expensive.

According to the Associated Press report, Alabama Power serves the southern two-thirds of the state. The Tennessee Valley Authority, which serves the northern third, raised rates 20 percent last year due to higher fuel costs. But TVA has now rolled back most of that increase due to declining fuel prices.

When the PSC raised Alabama Power’s rates in October, the prices for coal and natural gas had been climbing. Coal and natural gas generate 80 percent of Alabama Power’s electricity, and fuel expenses account for half of the cost of electricity, Wylie said.

At the time, the power company had spent $307 million more on fuel for its power plants than it had recovered through its utility rates.

The rate reduction approved Tuesday is good through October 2010, when the PSC will again review prices.

– The Associated Press contributed to this report.