Power play
A $32 million rate decrease or a $56 million rate increase separates the two sides arguing a pending OG&E rate case before the Corporation Commission.
A $32 million rate decrease or a $56 million rate increase are at the extreme ends of a range of what the Oklahoma Corporation Commission will have to decide in a pending rate case for Oklahoma Gas and Electric Co.
The three-member commission heard arguments Thursday over objections to a $40.7 million rate increase recommended by an administrative law judge in December. The commission has not yet set a vote on a final decision in the case.
On an annualized basis, OG&E customers have been paying $69 million in higher interim rates since July. Interim rates are subject to refund, with interest, if the commission decides they were too high.
OG&E filed for the rate increase in December 2015, and the case attracted 13 other parties. They weighed in on issues ranging from billing components, rooftop solar, vegetation management and the optimal return on equity rate for the utility. Hearings lasted over 16 days in May.
Meanwhile, OG&E plans to file another rate case in November to recover costs for an estimated $400 million replacement of its Mustang natural gas plant in far western Oklahoma City. The first unit at the plant is expected to be in operation by September, with the project complete by June 2018.
Representing ratepayers
The attorney general’s office, which represents consumers in utility cases at the Corporation Commission, recommended rate decreases between $9.8 million and $28.8 million. The Oklahoma Industrial Energy Consumers group wants a rate reduction of $32 million, while the commission’s public utility division said OG&E should have either no increase or an increase of about $5.3 million.
“If the parties in opposition to OG&E’s requested rate increase are correct, OG&E’s customers were already being charged excessive, albeit legal, lawful rates before this case even began,” Assistant Attorney General Dara Derryberry told commissioners in Thursday’s hearing.
With the pending rate case and another one expected later this year, Derryberry said OG&E customers must be feeling like they are in the movie “Groundhog Day.” She said the commission is charged with approving fair, just and reasonable rates and isn’t bound to the recommendation from the administrative law judge.
“Now, we find ourselves before you to decide what rates should be charged to OG&E’s customers,” Derryberry said. “I’m here on their behalf today, but with the arrival of this Feb. 2, Groundhog Day hearing, customers are wondering whether the long winter of excessive rates to which they have been subjected will now be ended by this commission.”
Representing shareholders
Bill Humes, an attorney for OG&E, said the utility has invested more than $1.6 billion in new infrastructure since its last rate case in 2012. OG&E first filed for a $92.5 million rate increase in December 2015, but revised that figure downward to a $56 million increase after Administrative Law Judge Ben Jackson came out with his recommendation.
In a rare show of unity, all the parties in the case — except for OG&E and the OG&E Shareholders Association — came together in a settlement agreement in May. The agreement covered billing changes, cost of service and fuel charges. It didn’t cover other complex issues of depreciation rates or return on equity, which is the amount regulated utilities are allowed to earn in return for their monopoly status.
Attorneys for the parties in that settlement told the commission Thursday they were willing to stick with the agreement.
Humes told the commission that it should weigh all the evidence in the case and avoid a “simple tally of witnesses.” He said the commission should instead balance the competing interests of ratepayers and shareholders.
“There were a large number of parties in this case, and for the most part, those parties are aligned against the utility on almost every issue,” Humes said. “If you simply weigh the evidence based on majority rules, OG&E automatically loses, in this case and in future cases. I’ve never seen a major rate case where an increase was requested and all the intervenors came in and said they agreed with that.”
Humes said utility rates should be low and reasonable. But he said most people realize in their daily lives that the lowest-cost items aren’t always the most reliable.
“All of us have the type of life experience where we know it is rarely valuable in the long run to buy the cheapest of anything,” Humes said. “That’s certainly what we’re dealing with here: lowest and reasonable. Reasonable denotes the need for safety, reliability and other concerns. That’s part of your balancing function.”