Price hike
OG&E customers will see higher bills starting this month because of higher natural gas prices and what the utility calls grid congestion costs.
Electricity customers of Oklahoma Gas and Electric Co. will see higher bills starting this month because of higher natural gas prices and what the utility called grid congestion costs related to wind generation in the region.
The typical residential customer will see an increase of about $9.60 per month from the higher fuelrelated costs. The increase will be reflected in the fuel adjustment factor portion of customer bills, which is reported as a long decimal as a rate per kilowatt hour.
Under Oklahoma law, regulated utilities can’t profit on fuel and purchased power costs. Those pass-through costs are tracked by the utility and regulators at the Oklahoma Corporation Commission and adjusted periodically.
OG&E said because of higher fuel and related costs, the utility had an undercollection amount of $86 million by May. Fuel costs will be reviewed again in the fall.
“We could wait and do it outside of the summer months, but what we’d see is that undercollection would continue to grow and create a much higher bill impact,” OG&E spokesman Brian Alford said Thursday. “Doing this now limits that impact to customers.”
The latest market report from the Southwest Power Pool showed natural gas prices about a dollar higher than spring 2016. Average natural gas prices were $2.70 per thousand cubic feet in the first part of this year, compared to $1.68 per thousand cubic feet in spring 2016.
Alford said customers benefited from historically low natural gas prices for about 18 months. Summer bills are now returning to levels seen in 2015, he said. OG&E did not provide a breakdown on how much of the fuel adjustment could be attributed to higher fuel costs versus higher grid congestion costs.
“We’re not unlike other energy companies in our region that have already made adjustments to their fuel recoveries,” Alford said. “Like them, we’re seeing prices for fuel and purchased power remaining at higher-than-planned levels for the foreseeable future.”
AARP Oklahoma said it questioned the timing of the fuel adjustment.
“Now, it’s concerning that OG&E is back again increasing rates during the time of year that is costliest to its customers,” said Sean Voskuhl, AARP Oklahoma state director. “The commission should ensure the review of these changes is transparent and supported by verifiable information.”
Wind generation grows
Wind generation continued to increase its market share in the Southwest Power Pool, rising to 28 percent in the spring, up from 22 percent in spring 2016 and 15 percent in 2015. Coal accounted for 40 percent of generation in the spring, down from 57 percent in spring 2015, SPP said.
Alford said wind, which is intermittent, must be absorbed into the grid regardless of need. He said congestion costs are part of the “locational marginal prices” paid to generators and passed through to customers as part of the fuel-adjustment clause.
“The centralized location of much of Oklahoma’s wind resources creates grid bottlenecks that must be alleviated on a real-time basis,” Alford said. “That often requires the Southwest Power Pool to use higher-cost generation to mitigate the congestion. We and other utilities in the region are taking steps to reduce the impact of congestion, which should benefit the market as a whole.”
Grid congestion has been acute in northwestern Oklahoma near Woodward and was among the reasons SPP brought forward plans for the Windspeed II transmission line being built by OG&E.
The project, a 126-mile line between Woodward and a substation northwest of Oklahoma City, is expected to be complete by early 2018. The 345-kilovolt transmission line will parallel the existing right of way of OG&E’s Windspeed line, which was built in 2010.
“Given the large increase in wind coming online, Windspeed II will not eliminate congestion but merely mitigate what might have been otherwise,” Alford said.
Others, though, took issue with OG&E blaming grid congestion for higher fuel costs. Jim Roth, a former Oklahoma Corporation Commissioner who now represents renewable energy clients, said various groups have encouraged OG&E to add low-cost wind to its system in different parts of the state. Those groups include renewable advocates, industrial customers and commission staff. OG&E last added wind to its system in 2012.
“There is high-quality wind in more than just the northwest part of the state,” Roth said. “Developers have moved into areas without congestion. Because it’s been so long since OG&E added wind, they are locked into their old neighborhood. If they would add new wind to their portfolio, they could achieve the benefit of geographic diversity.”
OG&E’s fuel adjustment follows an increase in May by Public Service Co. of Oklahoma. PSO’s residential customers saw a monthly bill increase of about $6 from that fuel hike, which the utility attributed to higher natural gas prices.