OKLAHOMA CITY – The Fort Cobb Fuel Authority received permission Tuesday from the state Corporation Commission to maintain its purchased gas adjustment price temporarily, to avoid the sudden imposition of unusually high fuel costs on its customers as a result of the severe winter freeze this year.
The company requested special regulatory treatment for “abnormal” gas supply costs arising from the “extreme” weather conditions experienced over a five-day period in February starting on Valentine’s Day.
Subfreezing temperatures “curtailed energy production due to equipment outages as well as dramatically increased usage,” wrote Ron Comingdeer, attorney for Fort Cobb Fuel Authority (FCFA). Comingdeer is the managing attorney with Crowe & Dunlevy law firm in Oklahoma City and formerly was the deputy general counsel of the Corporation Commission.
The combination of those effects “precipitated spikes in energy prices throughout the region,” he wrote. “Pricing for natural gas, which began the month at $3 per MCF” [thousand cubic feet] multiplied to more than $300 per MCF, Comingdeer noted.
The “dramatic increase” in spot prices “significantly impacted” purchased gas costs for the Authority, he said. Simultaneously, market demand on the company’s distribution system “escalated dramatically because of the persistent cold weather.”
To provide the “necessary quantities” of gas needed by the company’s utility customers, FCFA “incurred extraordinary costs to maintain gas supply, line pressure and adequate operating conditions on its system.”
The Fort Cobb Fuel Authority absorbed $550,000 in additional natural gas purchase costs in February, Comingdeer said during a Corporation Commission hearing March 25. A typical bill for gas buys in February is approximately $200,000 to $250,000, he told the Ledger. The company has had to borrow money to be able 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 related.
The company’s tariffs approved by the Corporation Commission “provide for a dollar-for-dollar pass-through of the actual cost” of the natural gas it buys, “without markup,” Comingdeer wrote. The company “does not make a profit on the cost of the natural gas; it only recovers its costs to procure the commodity and the transport of it through the interstate grid” to its customers, he wrote.
To minimize the financial impact on its customers, the FCFA received a waiver from state regulators to continue to charge customers its purchased gas adjustment price at the March 1 level through the April 1 billing cycle. Otherwise, those higher costs would have “flowed through” to consumers with the April invoices, Comingdeer said.
“That will prevent a significant impact” on FCFA’s customers in southwest and northern Oklahoma “starting with the April 1 billings,” said Jared Haines, chief Assistant Oklahoma Attorney General, Utility Regulation. Haines noted the “extraordinary nature of the natural gas emergency” and the “extreme fuel costs that the utility experienced” in February.
Temporarily maintaining the status quo will defer recovery of the extraordinary natural gas purchase expenses until the utility-regulating Corporation Commission can conduct a hearing on the matter, perhaps sometime this month, Comingdeer told the Ledger.
Besides the unusually high costs of natural gas, FCFA has experienced ad valorem tax hikes and increases in other costs, “resulting in less cash flow available to pay” for the natural gas, Comingdeer wrote.
Fort Cobb Fuel Authority proposes to recover its natural gas outlays by boosting its purchased gas adjustment charge an additional $0.0872 per 100 cubic feet of gas “for an approximate period of 33 months” beginning May 1.
The company also expects to “equalize” its residential and commercial customer charges for its LeAnn division (northern Oklahoma) and Fort Cobb division (southwestern Oklahoma) customers during that 33-month period.
Company officials estimated that those modifications would result in “less than a $6 per month increase in customers’ bills,” on average.
FCFA’s customers include irrigation farmers and crop dryers; they won’t be billed for the additional gas expenses because they didn’t use any natural gas in February, Comingdeer said.
Fort Cobb Fuel Authority is a privately held corporation that is a subsidiary of Navitas Utility Corp., which is based in California. The Navitas website says it serves Alma, rural Carnegie, Eakly, rural Fort Cobb and the rural Fort Cobb Lake area, Gracemont, Lookeba, Sickles, Velma, and several other communities in 17 Oklahoma counties, including Caddo, Greer, Harmon, Jackson and Stephens.
The principal office of the Fort Cobb Fuel Authority is in Eakly, in Caddo County near Fort Cobb Lake.
The FCFA also has asked the Corporation Commission for permission to quadruple its collection/shutoff fee to $200 for the remainder of this year, “and then phase down by $50” at the beginning of calendar years 2022 (to $150), 2023 (to $100), and 2024, “when the charge will return to the current $50.
Company officials believe “this will discourage customers from leaving the system during the time of recovery of the increased gas costs,” Comingdeer wrote. “If customers were to leave the system, it would result in increased costs to be borne by the remaining customers.”
Increasing the PGA charge, equalizing the company’s customer charges and raising the shutoff/collection fee will be addressed by the Corporation Commission during one or more subsequent hearings.