OKLAHOMA CITY – Fort Cobb Fuel Authority recently became the first utility in the state to finalize arrangements to recover extraordinary energy expenses incurred during the extreme winter weather that froze Oklahoma for several days in February.
The State Corporation Commission approved a final order June 24 that allows the FCFA to equalize the base rate among its residential and commercial customers, to impose a stiff disconnection fee from now through 2023, and to assess its residential and commercial customers a monthly fee known as a “rider” of 7-2/3 cents per 100 cubic feet of natural gas consumed over the next 33 months.
Several major utility companies are preparing to “securitize” their energy expenses from February – perhaps totaling as much as $4.5 billion – through the issuance of bonds.
The Fort Cobb Fuel Authority (FCFA) absorbed $550,000 in additional natural gas purchase costs in February – particularly Valentine’s Day through Feb. 19 – when Oklahoma was nearly paralyzed by unusual weather that included snow, freezing rain, and wind. A typical bill for gas buys in February is approximately $200,000 to $250,000, attorney Ron Comingdeer of Oklahoma City told Southwest Ledger. The company took out a loan to pay that extra $550,000, he said.
FCFA buys gas from third-party non-affiliated gas suppliers and distributes the fuel to its customers, Comingdeer said. A document filed with the Corporation Commission in a separate case says FCFA provides natural gas to approximately 4,000 rural customers at various locations throughout Oklahoma. The agreement approved by the commission authorizes FCFA to recoup $485,292 in expenditures that included purchased gas adjustment costs of $426,356, late charges of $24,895, labor and equipment bills of $10,041, and legal fees totaling $24,000.
Fort Cobb Fuel Authority is a privately held company owned and operated by Navitas Utility Corp., which is based in California. The Navitas website says it serves 17 Oklahoma counties.
FCFA is comprised of two divisions. Its LeAnn Division serves Kay, Logan, Nowata, Osage, Pawnee, and Washington counties, while its Fort Cobb Fuel Authority Division includes Caddo, Greer, Harmon, Jackson, Stephens, and some other counties, according to Navitas.
Navitas Assets acquired the Fort Cobb Fuel Authority in 2007 and the LeAnn Gas Co. in 2009.
The Navitas website says it serves Alma, rural Carnegie, Eakly, rural Fort Cobb, and the rural Fort Cobb Lake area, Gracemont, Lookeba, Sickles, and Velma in southwest Oklahoma. The principal office of the Fort Cobb Fuel Authority is in Eakly, in Caddo County near Fort Cobb Lake.
‘RIDER’ WILL BOOST FCFA MONTHLY BILLS BY $2.33 TO $3.16
Brenda Bott, a regulatory and compliance affairs associate of the Navitas companies, said an FCFA residential or commercial customer using the average cubic feet of gas each month will experience a temporary utility bill increase of $2.33 because of the rider.
The monthly impact on a LeAnn Division residential or commercial customer using the average monthly cubic feet of gas will be $5.16, Bott said.
That will include a $2 increase in the LeAnn Division monthly customer charge (currently $16 for LeAnn residential customers and $14 for LeAnn commercial customers, compared to $18 for FCFA residential customers and $16 for FCFA commercial customers). It also will include a temporary rate increase of $3.16 per month from the rider.
The rider will be collected “only until FCFA “has recovered the extraordinary cost determined by the Corporation Commission to be prudently incurred” as a result of the February “winter weather event,” Comingdeer told the Ledger.
John Givens of the Corporation Commission’s Public Utility Division said the LeAnn system “was more heavily impacted than other areas” were by substantially higher natural gas prices during the bitter winter storm. “For this reason, it is reasonable that a portion of the costs should be recovered only from LeAnn customers, as opposed to recovering costs equally … from all of Fort Cobb’s customers,” he said.
Demand for natural gas “escalated radically in area markets, particularly in the company’s LeAnn Division operating area,” FCFA reported in a document filed in March with the Corporation Commission. Pricing for natural gas, “which began the month at $3 per MCF [thousand cubic feet], increased ten-to one-hundred-fold, exceeding $300 per MCF.”
FCFA’s customers include irrigation farmers and crop dryers. They won’t be billed for the additional gas expenses because the company’s industrial customers “significantly curtailed their usage” during the winter storm, and the agricultural customers “did not take service at all” during the freezing weather, Givens said.
If the agricultural customers hadn’t been exempted from the monthly rider, the FCFA would “risk losing them to alternatives such as propane or diesel,” Ms. Bott testified.
The Corporation Commission also agreed to stout disconnection charges for the next two and a half years for all Fort Cobb Fuel Authority residential and commercial customers: $150 for the remainder of 2021, declining to $100 in 2022, falling to $50 in 2023, and returning to $0.00 in January 2024.
The disconnection fees are “a reasonable disincentive against customers leaving the system and switching to an alternative energy source” during the period the FCFA recovers its extraordinary costs, Ms. Bott testified.
The agreement among the Corporation Commission and its Public Utility Division, the Attorney General’s Office, and Navitas requires FCFA to file a motion in the latter half of 2022 for a “true-up” and reconciliation of the rider recovery and expenses, and a “prudency review” of the company’s legal expenses and financing arrangements. Adjustments, if any are necessary, will be made during that phase of the case “to prevent any over-or under-recovery of extraordinary expenses deemed prudent” by the Corporation Commission.
A “true-up” is “a final accounting between projected and actual costs,” commission Public Information Manager Matt Skinner said.
OTHER UTILITIES ‘SECURITIZING’ ENERGY EXPENSES
Meanwhile, several other utility companies are preparing to “securitize” as much as $4.5 billion in energy bills from February through the issuance of bonds backed by ratepayer revenues. This practice is designed to spread the cost over a period of time and reduce the financial impact on their customers of the exorbitant costs related to the winter storm.
A pair of measures approved by the Legislature and signed by Governor Stitt this year authorizes the Oklahoma Development Finance Authority (ODFA) to provide a pooled loan program for the financing of qualified, abnormal energy expenses incurred by regulated and unregulated utilities. Funding for the program will be provided through the issuance of utility revenue bonds issued by the ODFA.
“No bonds have been packaged or sold yet,” Michael Davis, president and CEO of the Oklahoma Finance Authorities told the Ledger on June 15. “It is not anticipated that any will be until spring of 2022. Each of the utilities must first file cases through the Oklahoma Corporation Commission.”
In a filing with the U.S. Securities and Exchange Commission (SEC), American Electric Power, the parent company of Public Service Co. of Oklahoma, reported that between Feb. 9 and Feb. 20 PSO spent $175 million on natural gas expenses and $650 million on electricity purchases from other entities, for an estimated total of $825 million.
PSO, based in Tulsa, serves more than 562,000 customer accounts in eastern and southwestern Oklahoma. It provides electricity to more than three dozen cities and towns in southwest Oklahoma, including Lawton, Altus, Duncan, Hobart, Apache, Cache, Cement, Cyril, Elgin, Fletcher, and Porter Hill.
Summit Utilities of Centennial, Colo., signed a definitive agreement to acquire the Arkansas and Oklahoma gas distribution assets of CenterPoint Energy, the two companies announced in May. CenterPoint President and CEO Dave Lesar said in a news release that the deal will allow the Houston company to eliminate $425 million in winter storm-related incremental natural gas costs in Arkansas and Oklahoma.
CenterPoint served almost 100,000 residential, commercial, industrial, and transportation customers in western and southeastern Oklahoma as of Dec. 31, 2020. Cities and towns in southwest Oklahoma supplied with natural gas by CenterPoint include Altus, Apache, Blair, Burns Flat, Chickasha, Comanche, Duncan, Elgin, Fletcher, Lawton, Mangum, Marlow, Olustee, Sterling, and Temple.
Oklahoma Natural Gas, which serves nearly 900,000 residential, commercial and industrial customers in Oklahoma. estimated its additional energy costs at $1.5 billion.
Oklahoma Gas & Electric Co. indicated its winter storm bill was at least $1 billion. Its bill for natural gas during the February winter storm “significantly exceeded the Company’s entire fuel cost for calendar year 2020,” the utility reported.
OG&E is Oklahoma’s oldest and largest investor-owned electric utility. It serves more than 858,000 customers in 267 towns and cities, including Oklahoma City, in a 30,000 square-mile area of Oklahoma and western Arkansas.
OG&E was the first utility company to file an application with the Corporation Commission to have its unusual winter weather costs addressed via the securitization plan.
Utility companies weren’t the only ones clobbered with extraordinary bills from the February weather.
The natural gas bill for Comanche County Memorial Hospital in Lawton for the month of February was “around $400,000,” CEO Brent Smith said. In comparison, he said, the hospital’s gas bill for all of last year was about $210,000.
The town of Yale, a Payne County community of approximately 1,200 residents, was stunned when it received a natural gas bill of $1.4 million for February, Acting City Manager Phillip Kelly said. The city’s gas bill is normally $20,000 to $30,000, he said.
City Hall buys the gas and resells it to the town’s residents.
Yale’s gas supplier, BlueMark Energy, issued a statement on its website that attributed the dramatic increase in pricing to freezing conditions and a reduced supply during a time of high demand for heat.
BlueMark, based in Tulsa, is a retail provider of natural gas to commercial and residential customers, its website shows. It buys and markets natural gas for more than 100 producers in the Mid-Continent region.