OKLAHOMA CITY – Although a Public Service Co. of Oklahoma (PSO) rate hike application was slashed by 48%, Sooner State retirees contend a “cap” should be imposed on any increase for residential customers.
The American Association of Retired People (AARP) filed exceptions to the recommendation of Administrative Law Judge (ALJ) Kenneth B. Behrens that the Oklahoma Corporation Commission (OCC) approve a proposed joint settlement agreement in the PSO rate case.
The public utility filed an application with the Oklahoma Corporation Commission late last year, seeking $217.6 million more annually. The request quickly grew to $231.2 million and would have raised residential customer rates by an average of $16 more per month.
Matthew Horeled, PSO’s vice president of Regulatory and Finance, testified that between Dec. 31, 2022, and Aug. 31, 2023, the public utility invested $239.7 million in its physical plant. That included $168.5 million in its power distribution system, $33.5 million in its transmission system, and $37.7 million in generation equipment.
A subsequently negotiated joint settlement supported by the state attorney general’s office and a number of consumer groups, and agreed to by PSO, whittled down the requested rate increase by nearly half: to $119.5 million.
Horeled said there would not be an increase to residential customers because PSO’s proposed fuel factors would lower their average monthly bill by $16.93. Horeled also said that since January 2024, changes in the fuel factors have reduced the average residential monthly bill by $13.32.
Also, PSO accepted a “stay-out provision” which stipulates that it would not seek another base rate increase until Jan. 1, 2026. Consequently, because of Corporation Commission rules and procedures, PSO ratepayers might not see another base-rate increase for 18-19 months, said Deputy Attorney General Chase Snodgrass.
Signatories to the joint settlement agreement included PSO, the Corporation Commission’s Public Utility Division, the office of the Attorney General, Walmart Inc., the Petroleum Alliance of Oklahoma, the U.S. Department of Defense and other Federal Executive Agencies, and Oklahoma Industrial Energy Consumers.
The Corporation Commission has not yet voted on PSO’s latest rate hike application.
However, PSO implemented interim rates on Oct. 23 that increased bills by $12 per month for the “typical” residential customer, Matt Rahn, the company’s regional communications manager, confirmed for Southwest Ledger. “This will be followed shortly by a reduction of approximately $16.93 due to lower fuel costs,” he added.
Interim rates are “temporarily put into place until a final order from the commission is issued,” Rahn explained. Customers would receive a refund if the rates approved by the commission are lower than the interim rates.
In his report and recommendation to the Corporation Commission, ALJ Behrens noted that Horeled conceded that PSO had filed seven applications in the last 10 years for base-rate increases. The attorney general’s office pointed out in September that in filings over the past nine years, PSO’s rate base more than doubled to $4.5 billion.
In fact, the AARP asserted that “repeated and substantial increases” in PSO electric rates “could be as high as $36.94/ month since December 2021.”
In addition, PSO has two other cases pending before the Corporation Commission: • A “net operating loss carryover” tax case. If that’s approved, PSO will bill its customers for $33.5 million that will be amortized over 12 months, adding $5 per month to the utility bill of a “typical” residential customer who uses 1,100 kilowatt hours of electricity each month.
• An application to pass on to PSO customers the $730 million cost of buying the 22-year-old, 795-megawatt Green Country gas-fired electric generation plant. In testimony filed with the Corporation Commission, Horeled said that PSO’s acquisition of the Jenks facility would result in a $7.24 per month increase in the utility bill of a “typical” residential customer.
Commissioner Todd Hiett said he previously questioned the logic of including the Rock Falls wind farm in PSO’s rate case, but now believes it will “wind up being a prudent investment.”
PSO bought the wind farm – which is located in Grant and Kay counties and has 60 Siemens turbines that produce a maximum output of 154.45 megawatts of electricity – in March 2023. According to SEC filings, PSO paid approximately $146 million to acquire an ownership interest in the wind farm during its development and construction. 15% base rate increase The joint settlement agreement would benefit PSO customers in two ways, Hiett said: PSO’s rate increase would be shaved by $111.7 million, and the stay-out provision would grant ratepayers a reprieve from base rate increases for perhaps a year and a half.
“But what’s really, really bothering me,” Hiett said, is that “within this proposed settlement agreement is a 15% base rate increase on residential consumers. That’s huge. It’s extreme.”
“AARP has valid concerns,” Commission Chair Kim David agreed, adding, “It’s happening nationwide.”
If the commission approves the settlement agreement, PSO residential customers will be “shouldering the biggest share of the rate increase,” AARP attorney Adam J. Singer said.
Deputy A.G. Snodgrass recalled that in PSO’s last rate case, which was decided in November 2023, “there was runaway inflation.” Consequently, the Corporation Commission approved a request from the attorney general’s office to limit Public Service Co.’s rate hike to 2.5% for residential customers.
That cap lowered the impact of the rate increase for the average residential customer from $5.35 a month to $3.57 a month.
The final order the Corporation Commission approved on Nov. 3, 2023, authorized a base rate revenue increase of $131.2 million, which was less than half of the “revenue deficiency” of $293.9 million that PSO applied for, noted Tom Schroedter, a Tulsa attorney who represents Oklahoma Industrial Energy Consumers.
Hiett supported the original PSO order but later agreed, reluctantly, to the motion to impose the limitation on residential rates. “When you go down the road of artificial caps, that does not mean those rates are reduced and all others stay the same,” he said. “Someone has to pay for that.”
“Now the bill has come due” for the cap that was imposed in last year’s rate case, Snodgrass said. In the proposed settlement agreement, “We’re moving away from the discount to what the actual cost of service is for all customers, not just residential customers.”
Tulsa-based Public Service Co. of Oklahoma is a subsidiary of American Electric Power based in Columbus, Ohio.
PSO has a little over 575,800 customers (residential, commercial, industrial, and “other”) in 232 cities and towns in eastern and southwestern Oklahoma, including Lawton, Altus, Duncan, Cache, Elgin, Fletcher, Porter Hill, Sterling, Apache, Cement, Cyril and Frederick.