OKLAHOMA CITY – The Alliance for Electrical Restructuring in Oklahoma has urged both the state Legislature and the utility-regulating Corporation Commission to pursue any and all options to lower electricity costs in Oklahoma, which have risen dramatically since 2021.
Data from the U.S. Energy Information Administration showed that as of July 2022, Oklahoma’s electricity costs across all sectors (residential, commercial, industrial and transportation) were 11.34 cents per kilowatt hour, a 24% increase since July 2021. By comparison, the national average across all states for electricity price increases was 6%.
Price increases in Oklahoma have been driven by rate hikes lobbied for by monopoly utilities such as OG&E and PSO, Tulsa-based AERO complained.
OG&E, for instance, offloaded onto consumers $1.4 billion in expenses incurred in response to Winter Storm Uri in February 2021; $30 million in rate hikes for “cost of service” increases; and now proposes a “fuel cost adjustment” hike of $424 million as well as another increase of $43 million in January 2023.
If all of these increases are fully implemented, the average residential OG&E consumer will experience an annual rate hike of approximately $181 per year, AERO declared.
The Corporation Commission was unable to reach an agreement on the fuel cost adjustment issue.
The commission sent a letter Nov. 22 that formally notified state leaders of the regulatory body’s failure to act within a constitutionally required deadline on OG&E’S request to increase its fuel adjustment collections by $9.73 per month for 24 months. At least one customer in northwest Oklahoma City paid a “fuel adjustment factor” of a little over $16 in November.
Commissioner Dana Murphy supported a three-year period to collect the underpayment, while Commissioner Todd Hiett favored a 48-month payoff. Commissioner Bob Anthony supported neither plan.
The vote was 2-0 with Murphy and Hiett supporting Murphy’s proposed letter that was sent to Governor Stitt, Speaker of the House McCall and Senate President Pro-Tempore Treat.
Anthony replied “dissent” when asked for his vote. He filed a lengthy dissent in the case, complaining about “nearly $500 million” in uncollected OG&E “fuel and power purchases.”
OG&E began collecting the additional payments for a two-year period on Oct. 1.
“The cost of fuel for electric companies like OG&E, electric cooperatives and municipal providers has increased significantly over the last year across the nation, including Oklahoma,” OG&E said in a prepared statement.
Because the cost of fuel has increased so much, OG&E is adjusting its fuel factor 7.4% for the average residential customer, or $9.73 per month. “This reflects the increased cost of natural gas that fuels our power plants and is necessary to cover fuel costs incurred by OG&E through August 2022 which have not yet been collected from customers.”
OG&E’s authorized return-on-equity is 9.5%.
Anthony has been critical of the bonds used by OG&E, Oklahoma Natural Gas Co., PSO, and CenterPoint Energy/Summit Utilities to offload their winter storm 2021
extraordinary fuel expenses onto utility customers.
OG&E has already saddled its customers with a billion-dollar ratepayer-backed bond debt obligation from the 2021 Winter Storm Uri plus another recent rate hike, and now wants them to pay a half a billion dollars for unexpected fuel costs that occurred after the arctic freeze of 2021.
“An astonishing $504 million in under–collected fuel costs, to be paid by customers, was reported by OG&E on September 20, 2022,” Anthony said. “This distressing news pancakes on top of a recent $30 million rate increase, as well as a $1.4 billion ratepayer-backed bond debt obligation from the 2021 winter storm – almost half of it interest and expenses – that must be paid by OG&E customers over the next 28 years,” the veteran commissioner said. “All told, that comes to an unbelievable $2 BILLION hit to ratepayers.”
PSO wants $173M more
Meanwhile, Public Service Co. of Oklahoma has asked the state Corporation Commission for permission to increase its net revenues by $173 million annually, to reflect current levels of investment and costs incurred to serve customers.
If the Corporation Commission approves the requested rate-base increase, the bill for the average residential customer who uses 1,100 kilowatt-hours per month would go up about $14.11 a month, or 10%, said Wayne Greene, PSO’s region communications manager. For commercial accounts the increase would be 8.1%; for industrial customers, 8.9%, he said.
PSO customers have already experienced two rate hikes in the last 11 months that have raised the “average” residential customer’s utility bill by almost $10 a month.
Late last December the commission approved new base rates that boosted bills for the average residential customer by $5.07 per month. That increase allowed the electricity provider to recoup approximately $700 million in investments made in its service grid since March 2019, according to the Corporation Commission.
Earlier this year the Oklahoma Development Finance Authority sold $696.6 million in “securitization” bonds to pay for fuel and purchased-power expenses PSO incurred in February 2021 during Winter Storm Uri, along with associated financing costs. PSO customers will be paying on those bonds for a projected 20 years.
For the average residential customer, the surcharge earmarked for those bonds is “about $4.72 a month,” Greene said, adding, “Your actual cost will depend on your usage.”
“AARP Oklahoma will intervene in this rate case on behalf of residential customers in Oklahoma,” Sean Voskuhl, state director of the association, said in a statement. “We are extremely concerned about another electric rate hike’s impact on Oklahomans, who are once again asked to shoulder the burden.
“These back-to-back rate increases come on the backs of hardworking Oklahomans whose budgets are stretched and making difficult choices between food, prescription drugs and keeping the lights on. Oklahomans are tightening their belts. It’s time PSO does the same thing.”
‘Lack of competition driving up power prices’
Oklahoma is a monopoly state where all customers served by PSO and OG&E must purchase their electricity exclusively from those utilities, AERO pointed out.
“Lack of competition is driving up power prices,” AERO said. Studies show that in monopoly states like Oklahoma, electricity costs have increased by about 21% since 2008, AERO reported. In the 14 competitive states, which represent one-third of U.S. electricity consumers, electric bills have decreased by 7%. “That difference represents billions of dollars saved by consumers,” AERO said.
Restructured, competitive states include Texas, Illinois, Ohio, Pennsylvania, New York, Maryland, Delaware, New Jersey, Connecticut, Massachusetts, Maine, Rhode Island, New Hampshire and Washington, D.C.
Partially restructured states include California, Michigan, Arizona, Oregon, Nevada, Virginia, Montana, and Washington state.
However, electric industry competition is not a guaranteed panacea. Houston-based Enron manipulated the California electricity market in 2000-01, and thousands of customers in the deregulated Texas market were without electricity for days and even weeks after Winter Storm Uri in 2021.
AERO Executive Director Mike Boyd said the rate hikes show the current system is broken and hurts Oklahoma families and businesses.
“OG&E and PSO are part of multibillion-dollar enterprises reporting astounding profits,” he said. “They don’t need ratepayer funded bailouts, but that is exactly what they have gotten repeatedly. Our current system, where a few companies are rewarded government-backed monopolies on electricity sales, is failing Oklahomans. Families and businesses are facing crippling rate hikes in the middle of a recession while these monopoly utilities and their shareholders rake in billions in cash.”
Mark Argenbright, director of the Corporation Commission’s Public Utility Division, recently told The Oklahoman newspaper he was “concerned that if nothing is done, the future implications and layering of the increased fuel costs to consumers could result in significant future increases.”
Boyd said it was a positive development to see a public official acknowledge that current utility rate hikes are unsustainable.