OKLAHOMA CITY – Customers of Public Service Co. of Oklahoma and CenterPoint/Summit can expect to be invoiced more than three-quarters of a billion dollars to pay for the utilities’ purchases of electricity and natural gas during the “winter storm from hell” a year ago.
A divided Oklahoma Corporation Commission, which regulates public utilities, approved plans to securitize $775 million in expenses the two utilities incurred during a frigid two-week period last February. That includes $688 million for PSO and $87 million for CenterPoint/Summit Utilities.
Utility companies borrowed millions of dollars to buy natural gas and/or supplemental electricity to keep their customers warm during the February 2021 cold snap.
Securitization allows a utility to transfer that debt off the company’s books through the sale of bonds issued by the Oklahoma Development Finance Authority. Proceeds from the bond sales would compensate the utility for its winter storm expenses.
Bond buyers would recover their investment via a charge added to the utility company’s monthly bills. In turn, the utility would remit those proceeds to the bondholders until the debt is retired.
However, legislation that authorized the winter storm debts to be securitized stipulates that ODFA must first get approval from the Oklahoma Supreme Court before the bonds can be sold.
PSO’s bill was calculated at $675.2 million in “extreme” purchase costs of natural gas and supplemental electricity during that two-week storm. The company’s fuel bill for all of 2020 was $520 million, according to Region Communications Manager Wayne Greene.
Ongoing financing costs for the first year after issuance of the PSO bonds are estimated at $750,000. Issuance costs are limited to no more than $700,000, and the financial adviser estimated “non-utility issuance costs” at $6.32 million.
A PSO residential customer who typically uses 1,100 kilowatt-hours of electricity each month will pay an extra $4.06 per month for the next 20 years to retire those debts. Without securitization, the customer would receive a one-time bill for $476.53, or pay $39.73 extra each month for a year, or pay an extra $6.45 per month for 20 years if PSO financed the debt itself, officials reported.
CenterPoint calculated its winter storm expenses at $75.67 million for “extreme” purchase costs and $411,781 in “extraordinary” costs. Carrying costs and upfront securitization costs boosted the total to $87,678,000.
CenterPoint’s gas bill for the two-week period of Feb. 7-21, 2021, “was more than three times the company’s cost of gas in all of 2020,” the Corporation Commission was told by Brett Jerasa, assistant treasurer of CenterPoint Energy Services Corp.
The typical CenterPoint/Summit natural-gas customer will be charged an extra $4.36 each month for the next 15 years. Without securitization, CenterPoint/Summit residential customers would receive a one-time bill of $538, pay an estimated $44.61 extra each month for 12 months or be charged $6.37 monthly for 15 years if the company carried the debt itself.
CenterPoint customers who were enrolled in the company’s fixed-price billing plan, and low-income customers who receive financial assistance with their heating bills, won’t have to pay the additional fee.
The securitization legislation enacted last year defined “extreme” and “extraordinary” costs.
Ÿ “Extreme” purchase costs means “expenses incurred for the purchase of fuel, purchased power, natural gas commodity or any combination thereof, whether at spot pricing, index pricing or otherwise, with delivery beginning February 7, 2021, and ending February 21, 2021.”
Ÿ “Extraordinary” costs are those a regulated utility incurred that were related to the February 2021 winter storm. Such expenses include, but are not limited to, “fuel-related storage and associated costs, emergency compressed or liquified natural gas supplies, contracts for services providing additional pressurization on lines, and transportation pipeline penalties.”
Commission split 2-1
on both proposals
Commission Chair Dana Murphy and Commissioner Todd Hiett endorsed the PSO and CenterPoint/Summit measures. Commissioner Bob Anthony dissented on the PSO plan and announced, “I will not participate in the signing of the order” on the CenterPoint/Summit proposal.
State law allows regulated utilities to recover their fuel costs, at no profit, through a separate monthly charge on the bill, Murphy noted.
Both commission orders resulted from “an exhaustive review of the evidence, testimony, and proposals … and will allow unprecedented costs” from the February 2021 storm to be recovered “over a longer period of time, rather than being billed all at once,” she said. “This means that the monthly impact to ratepayers will be far less than it otherwise would have been.”
The fuel costs authorized in the commission’s orders “have been carefully scrutinized and audited,” Hiett said. Although the new securitization law “lessens the blow for customers, there is no getting around the fact that bills are going to increase,” he continued.
Debts were incurred and must be paid, Hiett said.
“It is painful for all of us to bear the additional costs from the storm, but loss of heat leading to home damage and possibly loss of life is what would have resulted if these audited purchases had not been made.”
Anthony contended that the financing arrangements violate the Oklahoma Constitution because they authorize public debts “without a vote of the people”; the “extreme, extraordinary and excessive” natural gas and purchased power costs authorized by his two colleagues were “based on black-box settlement agreements instead of completing the thorough investigations required by law”; and claiming that securitization ultimately will save utility customers a lot of money is bogus, because millions of dollars in interest, fees, commissions and financing obligations will be added to customer bills “to pay for non-consensual ratepayer-backed bonds” for years to come.
CenterPoint/Summit, PSO
serve SW Oklahomans
PSO has more than 565,600 customers in 232 cities and towns in eastern and southwestern Oklahoma.
The utility serves more than three dozen communities in southwest Oklahoma, including Lawton, Altus, Duncan, Cache, Elgin, Fletcher, Porter Hill, Sterling, Temple, Hobart, Apache, Temple, Rush Springs, Carnegie, Cement, Cyril, Davidson, Duke, Elmer, Fort Cobb, Frederick, Gotebo, Gould, Grandfield, Granite, Headrick, Hollis, Lone Wolf, Manitou, Martha, Mountain Park, Mountain View, Roosevelt, Snyder, Terral, Tipton and Waurika.
CenterPoint served almost 100,000 residential, commercial, industrial and transportation customers in 90 communities in western and southeastern Oklahoma as of Dec. 31, 2020.
Cities and towns in southwest Oklahoma served by CenterPoint include Lawton, Elgin, Fletcher, Sterling, Cache, Geronimo, Altus, Apache, Blair, Burns Flat, Chickasha, Comanche, Duncan, Mangum, Marlow, Martha, Olustee and Temple.
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 part of the $2.15 billion purchase price, Lizzy Reinholt, vice president of sustainability and corporate affairs for Summit Utilities, told the Southwest Ledger.