OKLAHOMA CITY – Companion measures intended to ease the financial burden facing ratepayers from extreme price spikes in utility and energy bills in the wake of the February winter storm emerged Tuesday from the state Senate and were endorsed Wednesday in a brief meeting of a joint House/Senate committee.
Through the process of “securitization,” Senate Bills 1049 and 1050 would allow ratepayers to lower their monthly costs associated with the weather event and lengthen the period of time the increased costs could be paid out, said Sen. James Leewright, R-Bristow. He chairs the Senate’s Business, Labor and Commerce Committee, and is chairman of the Senate Select Committee created to study this issue.
Leewright said it’s estimated that Oklahoma utility ratepayers are obligated for approximately $4.5 billion in increased energy costs associated with the February winter storm. Without action, utility customers would face dramatic increases in their energy bills, and those bills would be due immediately in four-figure sums or even higher.
“Doing nothing to help ratepayers manage that debt load is not an option,” Leewright said. “If we do nothing, families and seniors on fixed incomes could be faced with choosing between paying their February energy bill or paying for food and medicine. If we do nothing, small businesses could be forced to make layoffs or cutbacks to pay their energy bills.”
Securitization is “the best path forward to help families manage the extreme costs related to the storm, and help small businesses manage the impact as they continue to recover from the pandemic,” Leewright said.
The two bills offer “different financing options,” said Rep. Garry Mize, R-Guthrie, chairman of the House Utilities Committee.
“We’ve been working with the Governor’s office, the Attorney General’s staff, and the Corporation Commission on how to avoid surprising consumers with crippling utility bills,” Mize said.
“We’ve been looking at what other states have done in this area,” he said. The concept is not new. “This has been around for perhaps 30 years, and at least 20 other states have used this concept to recover from extreme weather events, for example.”
The bills crafted by the Legislature “strike a good balance between protecting the interests of Oklahomans while also ensuring utility companies receive what is due to them,” Mize said. “Our proposed legislation spreads out the costs from Oklahomans’ February bill without adding unnecessary or high financing costs.” The legislation would “allow customers to pay their utility at lower rates and over longer periods.”
The two bills breezed through the Joint Committee on Appropriations and Budget by unanimous votes, 33-0.
Both measures would allow increased costs arising from the February 2021 winter storm to be securitized via the issuance of bonds backed by ratepayer revenues, reducing the financial impact of extreme costs related to the winter storm.
The legislation would create a property right based on the customer charges for the securitization, which guarantees the holder of the bond would be repaid.
The Oklahoma Development Finance Authority (ODFA) would be authorized to issue ratepayer-backed bonds. The ODFA would be required to report regularly on the bond activity until the debt was retired.
The maturity period of those bonds would be limited to no more than 30 years.
Ratepayer-backed bonds would have to be reviewed by the Council of Bond Oversight and approved by the Oklahoma Supreme Court.
The Supreme Court would be directed by the legislation to consider “as speedily as possible” the ODFA’s application for approval of such bonds.
The bonds “shall not be an indebtedness” of the State of Oklahoma nor of the ODFA, the legislation decrees. Further, the face of the bonds would be required to bear a statement that, “Neither the full faith and credit nor the taxing power of the State of Oklahoma is pledged to the payment of the principal of, or interest on, this bond.”
The amount “necessary to service, repay and administer” the bonds would have to be identified in a separate line-item on the customer’s monthly bill.
Legislation Highlights
Regulated Utility Consumer Protection Act
• The Oklahoma Corporation Commission would consider a utility company’s “qualified costs” in determining whether those expenses “should be mitigated by the issuance of ratepayer-backed bonds.”
Qualified costs are defined in the legislation as fuel-related storage and associated costs, emergency compressed or liquefied natural-gas supplies, contracts for services providing additional pressurization on lines and transportation pipeline penalties, as well as expenses incurred for the purchase of fuel, purchased power, natural-gas commodity “or any combination thereof,” between Feb. 7 and Feb. 21, minus any insurance proceeds, governmental grants or other funding sources.
Additional relief from high utility bills could be provided if the state receives federal aid to help offset a portion of the abnormal gas bills, Mize told the Ledger.
• The Corporation Commission would be instructed to consider several factors when deciding whether a regulated utility’s “qualified costs” would warrant issuance of ratepayer-backed bonds.
Unregulated Consumer Protection Act
• Provides for the issuance of loans made pursuant to notes, bonds, revenue bonds, or other forms of indebtedness to reduce, for unregulated utility customers, the extreme financial impact of costs related to the February 2021 winter storm.
• Directs the ODFA to: receive and review applications for the determination of utility costs related to the February winter storm; issue written approval or disapproval of an unregulated utility’s application; issue bonds necessary to fund the Unregulated Utility Customer Protection Fund from which loans are issued; and issue loans to unregulated utilities for the amount approved in the application process.
• Requires reporting to the governor and legislative leaders on the status of loan applications, when a loan is issued to an unregulated utility, and provide regular updates to those leaders until the debt is retired.
• Securitization of debt allows ratepayers to spread repayment over an extended period of time and thus pay a smaller, monthly amount for the February energy costs rather than paying for February usage in one lump sum.
• Does not increase bond indebtedness of the state or cause any harm to the state budget.
• Provides many avenues of oversight through timely audits, extensive vetting and analysis by several state entities, and requires regular reporting to the executive and legislative branches.