MONTGOMERY, Alabama --- Alabama Power Company has filed for a rate increase that will cost the typical residential customer $6.78 a month starting Jan. 1.

The company filed its request with the Public Service Commission on Monday, spokesman Michael Sznajderman said.

It's the company's first rate increase since October 2011, he said.

The 4.9 percent increase is to cover increased costs.

A little less than one third of the increased costs are from upgrades to coal fired power plants to meet environmental regulations.

The Public Service Commission in 2013 voted to change the formula it uses to regulate Alabama Power's rates, a move two of the three commissioners hailed as a victory for consumers. The PSC said the change would lower the company's earnings potential.

Alabama Power said the change would put downward pressure on rates.

Sznajderman said that had the change not been made, Alabama Power would have been allowed to recover an additional $41 million in costs as part of its new rate increase.

He said that would have cost the average customer about $1 more per month, on top of the $6.78 increase.

The average bill calculation is based 1,000 kilowatt hours per month.

Sznajderman said Alabama Power's overall retail rates will still be below the national and southeast averages.

Michael Churchman, executive director of the Alabama Environmental Council, said Alabama needs more transparency in the way it sets utility rates. He said the public gets little chance to review how rates are set and what costs are compared.

The AEC was one of the groups that participated in a series of public hearings before the 2013 change.

This story was updated at 5:32 p.m. to make a change in the sixth paragraph, which initially said the PSC voted to lower the company's rate of return.