OKLAHOMA CITY – Hundreds of thousands of Oklahomans in cities and towns across the state will soon be reaching for their wallets and checkbooks to pay for increases in their utility bills.
Natural-gas providers and electric generating companies are seeking payment for astronomical fuel bills reportedly incurred during the brutal Winter Storm Uri in February 2021.
For example, Oklahoma Natural Gas Co. reported it paid $1.3 billion to keep natural gas flowing to its 895,000 customers during the two-week winter event. Wholesale natural gas prices at the Oneok Gas Transmission pricing location reportedly traded as high as $1,250 MMBtu (1 million Btu’s) during the storm.
The Oklahoma Corporation Commission gave its blessing to ONG’s application to “securitize” its debt by transferring the debt off the company’s books through the sale of bonds. Proceeds from the bond sales would be used to compensate ONG for its winter storm expenses.
The bond buyers would recover their expenses via a charge added to the monthly utility bills of ONG customers. In turn, ONG would remit those proceeds to the bondholders until the debt is retired.
For residential customers who use more than 50 dekatherms of gas per month – 75% to 80% of their customers – ONG’s extra fee has been calculated to be $7.82. That amount is to be collected every month for the next 25 years – a total of $2,346 per customer over the next two-and-a-half decades.
Of course, each customer’s bill will depend on usage and other factors.
Without “securitization,” under “traditional” financing, the average residential bill for those residential customers would be $15.32, officials reported. And if those ONG customers were billed the full amount at one time, their April billing would total $1,363.
(A dekatherm is a unit of energy used primarily to measure natural gas. One dekatherm is equal to 10 therms or one million British thermal units (Btu). The energy content of 1,000 cubic feet of natural gas measured at standard conditions is approximately equal to one dekatherm.)
Although the Corporation Commission approved the ONG plan, the next step in the process is for the Oklahoma Development Finance Authority to develop a sufficiently sized bond package and present it to the Oklahoma Supreme Court for review.
ONG serves several dozen towns and a military installation in Southwest Oklahoma. Those include Fort Sill, Elgin and Fletcher; Frederick, Grandfield, Davidson, Manitou, Tipton and Walters; Anadarko, Apache, Carnegie, Cement, Cyril and Fort Cobb; Duncan, Comanche, Marlow and Rush Springs; Duke and Eldorado; Gould and Hollis; Gotebo, Hobart, Lone Wolf, Snyder, Mountain Park and Mountain View; Waurika, Hastings, Ryan and Terral.
PSO winter storm bill
calculated at $688M
Public Service Co. of Oklahoma calculates its securitization expenses at $688 million, including “extreme” purchase costs, carrying costs and other expenses. Amortized over a period of 20 or more years.
A proposed settlement agreement in that case was signed on January 7 by Oklahoma Assistant Attorney General Jared Haines, PSO attorney Jack Fite, a representative of Walmart and of the Corporation Commission’s Public Utility Division, but not by the AARP nor by the Oklahoma Industrial Energy Consumers.
The settlement agreement has not yet been scheduled for consideration by the Corporation Commission.
PSO has more than 565,600 customers in 232 cities and towns in eastern and southwestern Oklahoma. The utility serves at least 37 communities in southwest Oklahoma, including Lawton, Altus, Duncan, Cache, Elgin, Fletcher, Porter Hill, Sterling, Hobart, Apache, Temple and Rush Springs.
The electric utility reports it has 486,566 residential customers, 64,003 commercial, 6,796 industrial and 8,283 “other.”
CenterPoint/Summit
to securitize $79M
CenterPoint/Summit wants to securitize $79 million in “extreme” costs of natural gas purchased in February 2021.
Recovering costs of that magnitude in just one year “would increase residential customers’ bills on average $44.65 per month,” Amy L. Morris, manager of rates and regulatory for CenterPoint Energy Resources Corp., informed the Corporation Commission last July.
Securitizing the debt via bonds over a 10-year period would increase the average residential bill by $5.28 per month, records reflect. The monthly cost over a 30-year period would be $2.40.
The $79 million gas bill for the two-week period of February 7-21, 2021, “was more than three times the company’s cost of gas in all of 2020,” the commission was told by Brett Jerasa, assistant treasurer of CenterPoint Energy Services Corp.
More than 90 communities in Oklahoma are supplied with natural gas by CenterPoint.
Southwest Oklahoma cities and towns served by CenterPoint include Lawton, Elgin, Fletcher, Sterling, Cache, Geronimo, Altus, Apache, Blair, Burns Flat, Chickasha, Comanche, Duncan, Mangum, Marlow, Martha, Olustee and Temple.
Other Oklahoma communities served by CenterPoint include Cushing, Ada, Blackwell, Canton, Cheyenne, Cromwell, Deer Creek, Earlsboro, Fairview, Garber, Hartshorne, Hominy, Mangum, McAlester, Medford, Nardin, Okeene, Seminole, Stringtown, Talihina, Tonkawa, Vance Air Force Base, Watonga, Weatherford, Wilburton and Wynona.
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 Corporation Commission.
During the February 13-18 period, CenterPoint saw a “dramatic increase” in the price, he said: “from $200 to $1,200 a dekatherm.”
“Some wellheads froze, and some producers didn’t have power at their production facilities,” Wagaman said.
A couple of producers declared force majeure (an event or effect that cannot be reasonably anticipated or controlled), Wagaman related. Those producers reported they wouldn’t be able to fulfill the terms of their contracts because of forces beyond their control. Subsequently CenterPoint negotiated settlements with those suppliers that breached their contracts, Wagaman said.
CenterPoint buys gas from 10 to 15 suppliers in Oklahoma, and they have five pipeline suppliers, he told the Corporation Commission.
CenterPoint’s “gas supply portfolio” and different types of contracts include:
baseload. In winter in particular, “the minimum amount we need to secure to serve our customers,” Wagaman said.
call options. “We pay a premium. We have a right but not an obligation to call on that particular packet of gas.”
spot market. It could span multiple days but never more than one month, he said.
storage. “We have storage contracts with one of our pipelines. We inject much of that gas into storage during the summer months when prices are typically cheaper. We pull that gas out of storage” when needed in the winter.
The “load profile” of their customers base (residential and commercial) varies greatly “depending on weather, and “we cannot predict what the weather is going to be for the entire five-month period of the wintertime,” Wagaman said.
“If we were to attempt to buy enough storage for every single day of the winter,” knowing that some days are going to be warmer than others and some colder, “What would happen is … we’d have too much gas, so we would end up having to offload that gas in the market at a greatly reduced rate.”
Or the company “might not be able to find buyers” for that excess gas, he said. “If it’s a warm day, who wants to buy gas on a warm day? So, we would have too much gas.”
CenterPoint relies on the spot market to supply gas “almost every day in the wintertime, to fill in the gaps.”
During the February 2021 winter storm, CenterPoint “used every component in its natural gas portfolio,” Wagaman said.
‘We maxed out’ gas
drawn from storage
Natural gas that CenterPoint draws from storage is priced at $1.50/$1.70 per dekatherm, he said. During the winter storm last year “we maxed out the amount of storage that we were pulling each day,” he said.
“For the duration of the storm, when you look at all of our supply portfolio products other than the daily spot market gas, we were able to supply our customers with 85% of the demand. The other 15% was subject to the daily market. Of that 85%, a little over half came from storage at the $1.50/$1.70 dekatherm price.”
If CenterPoint had used the spot market throughout the winter storm, “It would have cost our customers $241 million more than what we paid,” which is the $79 million proposed for securitization. “So, we saved our customers roughly three times what it would have cost” otherwise, Wagaman said.
CenterPoint Energy divested itself of its natural gas distribution utilities in Arkansas, Oklahoma, and Texarkana, Texas, last month with completion of a sale to Summit Utilities, Inc., which is based in Colorado.
The sale includes the Houston-based company’s approximately 17,000 miles of pipeline running through Arkansas, Oklahoma, and Texarkana.
The obligation to recover the costs from the winter storm was transferred to Summit as part of the sale and was included as a part of the $2.15 billion purchase price, Lizzy Reinholt, vice president of Sustainability & Corporate Affairs for Summit Utilities, told Southwest Ledger.
$749M OG&E plan
pending in court
The Corporation Commission authorized Oklahoma Gas & Electric to recover $748.9 million in extraordinary fuel costs incurred during the winter storm last February. That would add $2.12 per month, on average, to each customer’s electric bill for the next 28 years, for a total of $712.
OG&E serves more than 843,000 customers in Oklahoma and Arkansas.
Opponents argued that OG&E has not been required to prove its losses nor reveal where it bought its natural gas at exorbitant rates. They have asked why shareholders of the investor-owned utility are not required to help pay the debt, since it was utility executives who agreed to the natural gas purchases.
Critics also inquired whether state Attorney General John O’Connor has been pursuing any price-gouging investigations into the cost of extreme utility costs arising from the 2021 winter storm.
“The Attorney General has in fact been investigating these matters since shortly after the February 2021 winter storm began,” O’Connor’s Public Information Officer Madelyn Sheriff told the Ledger. “While the agency will not provide updates of its investigation, the Attorney General can confirm that it remains ongoing.”