OKLAHOMA CITY – A division of the Oklahoma Corporation Commission blamed Corporation Commissioner Bob Anthony and former state lawmaker Mike Reynolds for more than a quarter of a billion dollars in additional costs to ratepayers from the 2021 Winter Storm Uri “securitization” bonds.
Reynolds (R-Oklahoma City) said he was “astounded,” and Anthony condemned it as a “disgrace to the agency” by people “engaging in efforts to cover up their own wrongdoing.”
The Public Utility Division of the Oklahoma Corporation Commission claimed the protests filed with the state Supreme Court, challenging the constitutionality of the securitization law, led to ratepayers of major public utilities paying millions more for the bonds used by those companies to extend the recovery period of their storm costs for as long as 28 years.
The PUD compiled the final costs to issue the “securitization” bonds that paid for “extreme” and “extraordinary” fuel costs incurred in just two weeks during Winter Storm Uri in February 2021.
The final costs were $1.4 million under the approved estimates, according to PUD Director Mark Argenbright.
The abnormal weather event left ratepayers facing exceedingly high utility costs when the natural gas spot market price jumped from around $3 per thousand cubic feet to a record high of more than $1,200 per thousand cubic feet.
“Publishing this data is not any entity’s statutorily mandated role,” Argenbright said. “Regardless, we have worked with all parties, the utility companies and the Oklahoma Development Finance Authority, to keep ratepayers abreast of the actual costs related to the sale of these bonds.”
PUD began compiling preliminary cost estimates based on a range authorized by the commission, the calculated impact from protests that were lodged with the state Supreme Court, and the final numbers. That information has been posted on the OCC webpage.
The commission’s director of administration, Brandy Wreath, who has tangled publicly with Anthony over the storm costs, did not name the commissioner specifically but referred to him obliquely in a statement.
“I believe it’s important for the public to understand the negative impact of the unsuccessful protests and constitutional challenge supported by one commissioner and the increased bond costs for ratepayers,” Wreath said.
“It looks like the delay in selling the securitization bonds, caused by these protests, cost ratepayers, conservatively, $277,349,544 due to the 75 basis-point interest rate increase by the Federal Reserve during the protests’ timeframe at the Supreme Court. We will never know exactly what might have been. We do know ratepayers will pay more because of the protests.”
It was reported in July 2022 that the Corporation Commission staff “projected a weighted average interest rate of 2.5% when the bonding process was approved,” but Oklahoma Gas & Electric’s securitization bonds commanded an average interest rate of 4.97% – almost twice as high as the commission staff ’s estimate.
Although Wreath attacked the constitutional challenges, they were legally allowed under state law and were intended to afford ratepayers an opportunity to object to the securitization bond plans approved by the Legislature and the Corporation Commission.
The delays mentioned by Wreath and the PUD also were caused in part by the Supreme Court and then-Attorney General John O’Connor. At the time, O’Connor did not intercede in the case that Reynolds, a former state Representative, filed in January 2022. The Court chastised O’Connor and the Justices gave him nearly a month to respond.
Another delay occurred when the Corporation Commission spent time preparing a financing order involving the bonds, which offloaded the debts from Oklahoma Gas & Electric Co., Public Service Co. of Oklahoma, Oklahoma Natural Gas Co., and CenterPoint Energy (which subsequently sold its Oklahoma assets to Summit Utilities) onto their customers. Interest rates rose during that time.
2021 storm bonds ‘a license to steal’ Reynolds and several other protestors insisted that the winter storm costs were not properly investigated before being passed through to consumers. They also argued that the ratepayer-backed bonds would be more expensive for customers than other, simpler alternatives.
For example, in December 2021 Commissioner Anthony suggested an alternative proposal to use the 10-year Treasury rate, which was then at 1.44%, to spread out the winter storm costs over four to five years. But his proposal was dismissed by Commissioner Todd Hiett and then-Commissioner Dana Murphy.
“I wonder if the commission staff would have given me credit for $8 billion in savings had the Supreme Court ruled in my favor or had interest rates gone down,” Reynolds told OK Energy Today.
He also contended that the securitization bonds were “unconscionable” and unconstitutional. However, the Oklahoma Supreme Court approved all of those bond issues.
Senate Bill 1050, the Regulated Utility Consumer Protection Act, and a companion measure, Senate Bill 1049, the Unregulated Utility Consumer Protection Act, allowed the extreme energy price spikes arising from the subfreezing February 2021 winter storm to be “securitized” via the issuance of bonds backed by ratepayer revenues. That reduced the immediate financial impact of the enormous costs related to the abnormal weather event.
Both measures passed the Legislature and were signed by Governor Kevin Stitt in April 2021.
One protest filed in the case described SB 1050 as “a license to steal from ratepayers.”
In Minnesota, state regulators disallowed almost $60 million in public utilities’ natural gas costs related to the February 2021 winter storm. They said Minnesota utilities didn’t plan properly for extreme cold and had an expectation that higher fuel costs would just get passed on to customers.
“One of the reasons the utilities failed to mitigate the extraordinary costs was that they lacked the incentive to do so,” Minnesota attorney general’s office asserted in a March 2022 filing arguing for a reduction in fuel charges.
“The pass-through mechanism by which the cost of gas is normally recovered results in less incentive for utilities to control the cost of natural gas than exists for utility expenses recovered through other mechanisms, such as base rates,” the Minnesota attorney general wrote.
Fuel bills are a “passthrough” utility expense in Oklahoma, too.
Two-part process, OCC official says There were two parts to the OCC’s role in the securitization process, Argenbright related.
Part One consisted of the origination cases where parties reviewed, “and heavily litigated,” storm expenses for prudency and recommended alternatives for long-term treatment leading up to the commission- approved financing orders utilizing securitization. “Numerous projected costs were reviewed by all parties, with ranges recommended for long-term interest charges and lineitem expenses,” Argenbright said. Those expenditures, itemized in the linked reports, covered expenses such as legal work, financial firms who serviced the bonds, and other related activities, he said.
Part Two is “the ongoing statutory audit of utility collections from ratepayers for debt repayment to the bond servicing agent.”
PUD prepares a summary of its audit of utility company collection and payment compliance to be provided to the Governor, Speaker of the House, and Senate President Pro-Tempore. The statutorily required “onepage” compliance report “has been maligned and mischaracterized in multiple case filings and news releases as the totality of the work, rather than the summary thereof,” Argenbright said.
“The numbers now posted to the web page are the final costs to issue the bonds that were originally litigated in Part One,” he said. “ The commission initially received estimates as to w hat various elements would cost. The actual costs – now final because all invoices have been processed – show that, in total, all four utilities came in $1.4 million below approved estimates.”
“These expenses came in below estimates even with the increased issuance costs due to litigating the protests at the Supreme Court,” Wreath said.
In addition to posting the final numbers, PUD included links to the recently received Report of Independent Accountants from each utility’s independent third-party accounting firms. Visitors to the website can scroll down the page to see each third-party review under the utility ’s tab.
Bond payoff periods taking 15 to 28 years Anthony said “it’s obvious” why “a completely independent, outside evaluator” should have been employed to evaluate the utilities’ invoices from Winter Storm Uri – because those expenses for ONG, OG&E, PSO and Summit in Winter Storm Uri totaled $4.5 billion. Oklahomans will be paying on “securitized” utility bonds for years to come.
The extreme conditions produced by Uri, coupled with the alleged “life-threatening greed” of manipulative marketers currently being investigated by Attorney General Gentner Drummond, left Oklahoma ratepayers with monthly utility surcharges that will continue for 15 years to 28 years.
This long-term repayment method created by state lawmakers was designed to reduce the monthly financial impact on Oklahoman’s already struggling to make ends meet.
Despite the potential profiteering by some marketers, the utility companies “kept the gas flowing and the lights on,” Argenbright said. “More importantly, unlike the situation in neighboring states,” such as Texas, “nobody in Oklahoma died because of a lack of utility services,” he noted.
“I am beyond proud of the work done by PUD,” Commissioner Todd Hiett and then-Commissioner Dana Murphy, ODFA, the Office of the Attorney General, and numerous other stakeholders “that worked together to turn this potentially deadly storm into a manageable outcome,” Wreath said. “In Oklahoma, the public utilities preserved life and provided safe and reliable service in the face of intractable fuel prices.”