OKLAHOMA CITY – State Corporation Commissioners made permanent an interim rate increase for Public Service Co. of Oklahoma that they allowed to take effect last October.
PSO’s original request of $217.6 million, filed in 2023, was eventually whittled down to $119.5 million based on a return-on-equity of 9.5% and a capital structure of 51.12% equity and 48.88% debt.
The negotiated settlement increases the utility bill for the company’s “typical” residential customer to $12 per month. PSO reported that as of Dec. 31, 2023, it had 575,846 customers: 494,201 residential, 66,889 commercial, 6,193 industrial, and 8,563 “other” customers.
PSO, a Tulsa-based subsidiary of American Electric Power, is an electric utility company that serves 232 communities in eastern and southwestern Oklahoma, including Lawton, Altus, Chickasha, Duncan, Cache, Elgin, Fletcher, Porter Hill, Sterling, Apache, Cement, Cyril and Frederick.
“This is not an additional increase to what has been in effect,” Commission Chair Kim David said about the rate hike. “It is just continuing on what is in effect.”
Commissioner Todd Hiett expressed his opinion that it was “a significant increase – stacked on top of a recent increase. I’m willing to support it but I don’t like it. But it is what it is.”
Commissioner Brian Bingman, in his first meeting since succeeding veteran former commissioner Bob Anthony, did not vote on the matter since he did not participate during the rate case hearings.
PSO implemented interim rates on Oct. 23, 2024, that increased bills by $12 each month for the typical residential customer who uses 1,100 kilowatt-hours of electricity per month. However, that was offset in November 2024 by a reduction of approximately $16.93 per month “due to lower fuel costs,” said Matt Rahn, the company’s region communications manager.
Under the stipulated agreement, PSO pledged that it will not apply for another increase in base rates until Jan. 1, 2026, at the earliest. Because of Corporation Commission rules and procedures, PSO ratepayers might not see another base-rate increase for 18-19 months, Deputy Attorney General Chase Snodgrass said.
Matthew Horeled, PSO vice president of regulatory and finance, acknowledged that PSO has filed for seven increases in its base rates, along with other requests for financial recovery, since 2014. The commission approved PSO’s application for a $155 million boost in its base rates 13 months ago, and the company has two cases pending before the Corporation Commission now, Hiett noted.
• PSO inked an agreement to buy the “Green Country” natural gas combined-cycle power generation plant in Jenks for $730 million.
The retail electricity provider has applied to the Oklahoma Corporation Commission for permission to pass the purchase cost on to their ratepayers. In addition, the acquisition will require approval from the Federal Energy Regulatory Commission and must comport with anti-trust requirements.
Horeled testified that the acquisition would result in a $7.24 per month increase in the utility bill of a typical residential customer.
• PSO filed a notice on May 31, 2024, seeking approval from the Corporation Commission to bill its customers to recover $33.5 million “accumulated through October 2024” for a tax issue known as a Net Operating Loss Carryforward, “and approximately $24 million ongoing NOLC revenue requirement.” If approved, that expense would be amortized over 12 months, and during that year it would add $5 per month to the bill of a typical residential customer. The commission conducted a hearing Jan. 16 on that issue.
Assistant Attorney General Greg Matejcic opposed the utility’s latest rate increase application. He recommended the commission deny PSO’s request for a vegetation management tracker (it was omitted from the settlement) and argued against the company’s request to shorten the amortization time for storm damage recovery from five years to three (the joint stipulation and settlement extended the amortization period to seven years).
The Attorney General’s office also opposed PSO’s request to approve recovery of $326,082 or 100% of its member association fees – “because it is unclear what benefits ratepayers receive through the Company’s participation.”
Senior must choose: buy food and meds or pay the light bill Sean Voskuhl, state director of AARP Oklahoma, complained about the financial burden that persistent utility rate hikes impose on senior citizens.
AARP Oklahoma is “disappointed” by the Corporation Commission’s decision to approve PSO’s $119.5 million rate increase, he said.
“This unprecedented hike, which went into effect on an interim basis on Oct. 23, saddles residential customers with an extra $12 per month, or $144 annually, and comes as PSO seeks two additional rate increases in 2025 that would further increase rates by more than $12 per month.”
Voskuhl said seniors, those on fixed incomes, have said they must sacrifice and have to choose between food, medicine, and keeping the lights on.
The Oklahoma Attorney General’s office reported that in filings over the past 10 years, PSO’s rate base more than doubled to $4.5 billion, and during that same period, residential customers’ incomes have increased at a slower pace than PSO’s rates.
“The Company’s anticipated strong rate base growth will lead to excessive rate increases for Oklahoma households and businesses if not tempered by self-restraint and Commission action,” the AG’s office asserted.
In their exception to an administrative law judge’s report in the latest PSO rate case, the AARP tallied the impact of PSO’s rate hikes on residential customers in just the last four years.
Those existing and pending utility bill increases include: $5.07/ month from a 2021 case, $3.57/month in a 2022 case, $12/month in the latest rate case, $7.24/month if the Jenks power plant acquisition is approved as submitted, and $5/month if the NOLC case is approved as submitted. When the $4.06/month surcharge for Winter Storm Uri in 2021 is tacked on – payable for 18 more years – the total increase amounts to $36.94 per month, or $443.28 per year.
And that didn’t include a $6.25/month increase from a 2017 rate case, the AARP pointed out.
“AARP Oklahoma will continue to fight against these rate increases with no end in sight and will advocate on behalf of PSO residential customers who deserve better.”
Wind farm accepted into PSO rate base; reserve margin raised In the latest settlement agreement, state regulators authorized PSO to incorporate into its rate base the Rock Falls wind facility it acquired in Kay and Grant counties. The wind farm, which has 60 Siemens wind turbines capable of producing 154 megawatts of electricity, “is used and useful,” the commission said.
The settlement agreement also addressed a power generation cost-deferral issue.
The Southwest Power Pool (SPP) increased PSO’s power reserve margin from 12% to 15%.
Horeled testified that because of the SPP’s new directive, PSO plans to meet the new baseline by delaying the retirement date for four of its existing gas-powered units – Southwestern Units 1 and 2 and Weleetka Units 4 and 5 – from 2025 until 2030.
PSO executive Dylan Drugan, a resource planning manager for the utility’s parent company, American Electric Power Corp., testified that the new SPP directive forces the utility to maintain sufficient accredited capacity to cover 15% above its net peak load demand each year.
Consequently, PSO “expects to have to incur a significant amount of operation- and-maintenance and capital expense over the next few years.” Accordingly, the company “will be allowed to defer those costs for recovery in future proceedings,” the settlement provides.
Shorter and fewer outages predicted PSO, in a press release issued after the commission’s vote Jan. 15, said the decision enables the utility to “deliver on its commitment to provide safe, reliable, and affordable electricity for customers while modernizing and securing Oklahoma’s power grid.” PSO also said the rate hike would lead to shorter and less frequent outages.
“With the increasing challenges posed by Oklahoma weather and growing energy demands, PSO recognizes the need for a grid that can effectively withstand these pressures and continue to serve our communities without interruption,” said PSO President and Chief Operating Officer Leigh Anne Strahler.
In filings with the Corporation Commission, Horeled testified the utility had to file the application as soon as possible “because the rates approved are not adequate to provide PSO an opportunity to recover its costs and earn a reasonable return while providing safe and reliable service to our customers.”
His reference was to the Corporation Commission’s approval in late 2023 of PSO’s application for $155 million. The utility originally filed a request for $294.5 million in rate increases but the commission’s final order slashed it. As a result, the 2-1 decision raised rates by $5.35 for residential customers, but because of a fuel rate adjustment, bills also dropped by $17.08 per month.
PSO maintained it needed the additional funds for maintenance and repairs as pointed out by Kamran Ali, vice president of the utility’s Transmission Plan and Analysis.
If the utility “does not take steps to address these aging assets now, the cumulative negative impact on transmission system performance and reliability will be significant,” Ali stated in testimony filed with the commission.
Ali maintained that a “significant population” of PSO’s transmission line and station assets were constructed in the 1940s through the 1970s “and are now at or near the end of their expected life.”
He also testified that many of the company’s electric lines were built using wooden poles that need to be replaced. “Typical inspection reports indicate rot, woodpecker holes, broken or split cross-arms, ground line deterioration, loose or missing hardware, and broken or missing grounds.”
Considering the number of rate increase applications that have been filed in recent years, the SPP’s elevated sufficiency margin for electricity providers, and anticipated growth in demand for electricity to power data centers and crypto operations, “I predict a rough 10 years ahead” for Oklahoma utility customers, Hiett told Southwest Ledger.