Interim rates, new EPA chief discussed in OGE Energy earnings call
Interim rates, the new Environmental Protection Agency administrator and regulatory delays at the Oklahoma Corporation Commission were among the issues discussed by OGE Energy Corp. executives and analysts Thursday as the company released its earnings for the fourth quarter.
Several “shell” bills at the Legislature have proposed reforms at the Corporation Commission, although it’s early in the session and there aren’t many details at this time. Meanwhile, at least two bills — Senate Bill 282 and House Bill 1891 — would stop regulated utilities from implementing interim rates if their rate cases aren’t resolved within 180 days.
Both Oklahoma Gas and Electric Co. and Public Service Co. of Oklahoma put in higher interim rates last year as they waited for a final decision in their latest rate cases. In PSO’s case, the commission approved a $14 million rate increase, but the utility already collected $65 million in higher interim rates. PSO customers are getting monthly refunds until October.
On an annualized basis, OG&E customers have been paying $69 million in higher interim rates since July. An administrative law judge recommended a rate increase of $40.7 million, meaning OG&E customers could be due a refund if the commission agrees when it issues a final order.
OGE Energy Chairman and CEO Sean Trauschke told analysts the interim rate bills at the Legislature show a general frustration with the pace of regulatory reviews and weren’t necessarily targeting the utilities.
“I would say this isn’t personal; no one is to blame,” he said. “We’ve talked many times to other companies, including us and including the commissioners and their staff. There is a lot of frustration for the delays that are occurring here. And we’ve done better in the past, and I think we’re all focused on trying to get better.”
One analyst asked executives about environmental policies under new EPA Administrator Scott Pruitt, Oklahoma’s former attorney general. Trauschke said the utility was looking for more consistency from the agency.
“I think Scott will be good for the EPA, and I think he’ll be good for the country,” Trauschke said on the analyst call. “And one thing that I really appreciated about Scott was he
was focused on the rule of law . ... And from my standpoint, I think just having a little more consistency so you’re not having a compounding flood of regulation on top of regulation coming at us — it’s helpful.”
As attorney general, Pruitt joined with OG&E and a group of industrial consumers in a challenge to the EPA’s plan for regional haze regulations for sulfur dioxide emissions. The challenge managed to secure a court stay to delay implementation, but it was ultimately unsuccessful.
Earnings
OGE Energy reported net income of $57.9 million, or 29 cents per diluted share, in the fourth quarter of 2016. That compared to earnings of $29.4 million, or 15 cents per share, in the year-earlier quarter. The company attributed the quarterly increase to higher transmission revenues and more favorable weather at OG&E.
For the year, OGE Energy had net income of $338 million, or $1.69 per share, compared to net income of $271 million, or $1.36 per share, in 2015. Total operating revenues for the year were $2.26 billion, up from $2.20 billion in 2015.
Trauschke said OG&E is adding customers at the historical rate of about 1 percent a year. The utility has more than 833,500 electric customers in Oklahoma and western Arkansas.
“On a statewide basis, as energy prices rebound, we are beginning to see economic activity pick up,” he said. “With commodity prices improving, oil-field load is returning with 141 new oil-field customers in 2016.”
OGE Energy’s investment in Enable Midstream Partners LP made cash distributions to OGE Energy of about $141 million in 2016. That’s up slightly from cash distributions of $139 million in 2015.
OGE Energy holds a 26.3 percent limited partnership interest in Enable. The majority owner, CenterPoint Energy Inc., is looking to sell its stake, and has received offers from OG&E and an unnamed third party. After a round of offers and counteroffers, OG&E and a third party put in another offer last week to acquire the CenterPoint stake. A response is due in June.
OGE Energy shares rose 80 cents to $35.75 in Thursday trading on the New York Stock Exchange.