It's not automatic... but here's how Rated 2 out of 5 stars
Given the absence of instructions in the extension or at developer's website, here's what to do:
1) Download & install, restart Firefox.
2) Open the drop-down menu of search engines
3) Scroll to the very bottom of the list, where you'll see the 'Manage Search Engines' menu. Select it. A control window should pop up.
4) You should see two buttons on the control window: A->Z and Z->A. Click on either.
5) The list should now be alphabetised.