In a brief filed recently with the Oklahoma Supreme Court, State Rep. Tom Gann reiterated his challenge to $250 million in recent rate increases and more than $1 billion of bond payments approved by the Oklahoma Corporation Commission currently being collected from customers of Public Service Company of Oklahoma.
PSO, a Tulsa-based electricity provider, serves 575,800 customers (residential, commercial, industrial, and “other”) in 232 cities and towns in eastern and southwestern Oklahoma, primarily in Tulsa, McAlester, Lawton and surrounding areas.
Gann’s appeal before the Supreme Court argues that the OCC failed to perform legally required audits of expenditures incurred during February 2021’s Winter Storm Uri, making the OCC’s orders void and requiring refunds.
Gann, R-Inola, also argues the OCC violated PSO customers’ due process rights by allowing Corporation Commissioner Todd Hiett to participate in cases involving witnesses of Hiett’s alleged conduct.
Hiett has been publicly accused of alleged sexual harassment and drunk driving at a 2023 party hosted by PSO attorneys Thompson Tillotson PLLC. Gann says state ethics rules require Hiett to disqualify himself from cases in which a reasonable person might question his impartiality, including cases involving those attorneys.
In October, Attorney General Gentner Drummond, the OCC, PSO, and Oklahoma Industrial Energy Consumers all filed briefs defending Hiett. “Parties to legislative rate cases are not entitled to due process,” the attorney general wrote. That sentence sharpened debate over procedural protections in utility ratemaking.
In its brief, the OCC specifically asked the court to dismiss the appeal claims against Hiett. Gann has been joined by State Reps. Kevin West and Rick West in five similar appeals brought in cases for Oklahoma Gas & Electric Co. and Oklahoma Natural Gas Co.
The attorney general and OCC filed a joint motion Oct. 17, asking the court to suspend the other the utility appeals. The court’s Oct. 29 response denying that request was unequivocal: “This appeal shall proceed.”
The AG, OCC and PSO defended allowing the utility to internally audit its own Winter Storm Uri costs, as well as the OCC’s subsequent one-page “audits” of the ratepayer- backed bonds issued to pay for them. Gann argues none of those audits was lawful because they were not performed by independent CPAs. Independent review standards sit at the heart of Gann’s reading of the statute. In their briefs, the AG, OCC and PSO all argued the audits were lawful because licensed CPAs were not required. Gann asserted that their reading of the law “would permit OCC janitors and AG security guards to give financial testimony in OCC cases.”
“To allow State Agencies to make up their own standardless definition of ‘audit’ is absurd,” Gann wrote. He predicts that this interpretation of the law will lead to “financial chaos across state government if it is allowed to stand.”
Those warnings frame potential ripple effects far beyond a single rate case.
2021 utility fuel bills were unusually high Oklahoma utilities PSO, OG&E, ONG, and CenterPoint/ Summit paid some of the highest natural gas prices in U.S. history during two weeks in February 2021, incurring some $2.8 billion in debt. Interest and other expenses added another $2 billion, bringing the total cost of the winter storm bonds being paid by Oklahoma utility customers close to $5 billion.
ONG, for example, calculated its Winter Storm Uri fuel costs at $1.28 billion – and that was after using almost 50% of the natural gas it had in storage. With “securitization” and financing costs, the Corporation Commission in January 2022 authorized ONG to recover $1.357 billion from its customers. The debt will continue to be collected at a monthly rate of $5.15 to $7.82, depending on each residential customer’s usage, for the next 22 years.
ONG serves Fort Sill, Duncan, Frederick, Apache, Carnegie, Cement, Cyril, Elgin, Fletcher, Walters, Marlow, Rush Springs, Chickasha, Duke, Eldorado, Gotebo, Hobart, Comanche, Grandfield, Manitou and Tipton.
PSO testified that its fuel bill for 2021 – excluding Winter Storm Uri – was $701.28 million. In comparison, fuel and purchased power costs for the two-week winter storm totaled $675.2 million.
PSO serves Lawton, Altus, Duncan, Cache, Elgin, Fletcher, Porter Hill, Sterling, Apache, Cement, Cyril and Frederick.
CenterPoint/Summit’s $79 million gas bill for the 14-day period of February 7-21, 2021, “was more than three times the company’s cost of gas in all of 2020,” Brett Jerasa, assistant treasurer of Center-Point Energy Services Corp., informed the Corporation Commission.
Prices charged for daily gas on the spot market increased “well beyond anything we had seen before,” Brian Wagaman, CenterPoint’s vice president of gas supply, told the commission. During the February 13-18 period, CenterPoint saw a “dramatic increase” in the price, he said: “from $200 to $1,200 a dekatherm.”
More than 90 communities in Oklahoma are supplied with natural gas by CenterPoint Energy based in Houston, Texas. Southwest Oklahoma cities and towns served by the CenterPoint include Lawton, Elgin, Fletcher, Sterling, Cache, Geronimo, Altus, Apache, Blair, Burns Flat, Chickasha, Comanche, Duncan, Mangum, Marlow, Martha, Olustee, and Temple.
The magnitude of the storm expenses for purchases of natural gas and supplemental electricity remains unprecedented for many residential and industrial customers.
Payments for PSO’s bonds have been collected as “Winter Storm Cost Recovery Rider” charges on the monthly bills of its customers since the bonds were issued in September 2022. They are scheduled to continue for another 17 years. The securitization law required those bond charges to be audited as part of the utilities’ subsequent rate cases. Gann says that hasn’t happened.
Gann’s appeal is in the hands of the Supreme Court Justices. He wrote that he has “full confidence in this court’s ability to read and offer first-impression interpretations of the plain language of unambiguous laws, and to properly determine their applicability to the OCC.”
A ruling could reset audit expectations for future storm cost recoveries.
Gann’s legal brief can be read here: https://www.oscn.net/dockets/ GetDocument.aspx?ct=appellate& bc=1063629140&cn=- CU-122861&fmt=pdf.