Judge won't sidetrack OG&E rate case

The Sierra Club tried unsuccessfully Thursday to convince an administrative law judge at the Oklahoma Corporation Commission to require Oklahoma Gas and Electric Co. to prove its 2016 decision to install scrubbers at its Sooner Plant coal-fired units was prudent.

Attorneys representing the organization made their arguments in a hearing before a judge considering the utility's pending rate increase request.

The environmental organization's representatives argued the case, which includes a request to recover costs for that work, shouldn't be allowed to proceed without that information. The judge denied the request.

The Sierra Club had argued in a previous rate case the utility should have added wind power — either by building it or acquiring it through power purchase agreements — to its generating fleet to keep costs reasonable and affordable for customers, rather than undertake the scrubbers work.

The current case, filed Dec. 31, asks the commission to allow the utility to boost its rates by$77.6 million per year, or 4.4 percent. The company is seeking the request in part to recover $534 million it spent to install the coal scrubbers at Sooner and $75 million it spent to convert two other coal units at its Muskogee power plant from coal to natural gas. Beyond recovering those costs, the rate increase also would give the utility an improved return on equity, better depreciation rates and compensation for costs it incurred to dismantle aging plants.

The rate hike would cost the average residential customer about $7.60 per month.

Improvements at the Sooner and Muskogee plants initially were proposed in 2014 by OG&E as part of a larger, $1.1 billion package of work

— including construction of the Mustang Energy Center — that the utility planned to both improve its efficiencies and to comply with stricter federal rules.

In 2015, Commissioners Todd Hiett and Bob Anthony rejected the utility's request for preapproval to recover costs for all of those projects, while Commissioner Dana Murphy dissented.

In 2016, OG&E brought a second request to commissioners, asking them to find its proposal to install the scrubbers at the Sooner Plant “reasonable,” but didn't ask for cost recovery at the time. Anthony and Hiett approved that request, while Murphy opted not to sign the order, citing legal concerns. Oklahoma's Supreme Court, based on an appeal by the Sierra Club and others, invalidated the second order after work already was well underway.

Then, as part of a rate case OG&E filed in 2017 that was approved last summer, commissioners authorized OG&E's request to recover its costs to do the Mustang project.

On Thursday, Sierra Club attorney Matthew Miller said the group's goal remains to convince the commission that OG&E should be required to provide data on whether it considered other alternatives before beginning the scrubbers work in 2016.

He said the utility included no such information in its pending rate increase request.

“The prudence test has a straightforward and important function,” Miller said. “It is to ask what a reasonable utility manager do in the interest of the ratepayers over which it enjoys a monopoly. The test is, what is the reasonably least-cost way to provide reliable service to your customers, choosing from a reasonable range of alternatives based on the facts that were known or knowable at the time you made you made the investment.

“We just want a full, fair opportunity to respond in written testimony to whatever OG&E'sview was in 2016.”

Brian Alford, a spokesman for OG&E, said the utility maintains its decision to install the scrubbers was right for its customers, saying data backs that assertion.

“We have a strong track record of managing costs for our customers, as our rates, which are 31 percent below the national average, demonstrate,” Alford said. “It is important to add that OG&E has invested $5.5 billion in its generating and distribution system since 2011.

“Rates are lower today than they were when that investment started.”