Oklahoma would join more than a dozen other states that have total or partial choice of electricity providers if House Bill 1602 were to be enacted.
“It is in the public interest to permit customers of investor-owned electric utilities that serve more than 100,000 customers” – Public Service Co. and Oklahoma Gas & Electric – to obtain direct access to a competitive retail electric market,” HB 1602 states.
Electric utilities generate, transmit and distribute electricity via bundled rates. To promote competition, HB 1602 mandates that separate rates would be charged for generation, transmission and distribution.
In essence, HB 1602 would break generation, transmission and retail distribution into separately operated businesses, former Oklahoma Corporation Commissioner Jeff Cloud said.
Commercial and industrial customers would have the option of choosing an electricity provider starting Jan. 1, 2025, and residential customers would be phased in afterward but by no later than Jan. 1, 2027, the bill provides.
“All customers of electric utilities shall have direct access to a competitive market for the generation of electricity, enabling them to choose the entity that supplies electric generation service,” HB 1602 says.
The proposal was authored by state Rep. Ryan Martinez, R-Edmond, and assigned to the House Rules Committee.
OG&E, PSO, ASE oppose choice bill
Both of the major electricity providers and a former Oklahoma Corporation Commissioner quickly defended the status quo, while the Alliance for Electrical Restructuring in Oklahoma expressed support for the Martinez bill.
“Deregulation would lower reliability, remove consumer protections and result in higher costs for our customers,” PSO told the Southwest Ledger. “We look forward to working with lawmakers to assure our customers continue to have affordable, reliable power.”
OG&E defended the state’s existing regulatory system.
“Any proposal to deregulate the electrical market in Oklahoma is a solution in search of a problem,” Aaron Cooper, manager of corporate communications at OG&E, wrote in a statement to OK Energy Today.
“It has been nearly 20 years since any state has decided to deregulate its electricity system because of the negative financial and operational impacts it brings on consumers, which were displayed last summer and again in recent weeks with grid instability in a number of deregulated markets,” Cooper said.
While Cooper said Martinez’s bill is being weighed by OG&E, he defended the electricity regulatory framework Oklahoma has had for more than a century.
“In a deregulated model, there is no regulatory oversight to ensure costs are prudent or benefit customers, leaving open the opportunity for businesses to take advantage of hard-working Oklahomans through deceptive marketing and predatory market practices,” Cooper said.
He said the existing regulatory method protects Oklahomans by ensuring every investment in electric power generation and grid reliability paid by customers is reviewed and approved through the process.
Former Corporation Commissioner Cloud, who now heads the Alliance for Secure Energy, also turned thumbs down on HB 1602.
“We know from polling that Oklahomans remain overwhelmingly opposed to deregulation,” Cloud said in a statement provided to OK Energy Today.
“Today’s OG&E rates are among the lowest average electricity prices in the country — 21% lower than the national average, according to the U.S. Energy Information Agency report from November 2022,” Cooper said.
Through the utility’s membership in the Southwest Power Pool, he said, OG&E customers enjoy the benefit of competition through a wholesale energy market.
Oklahoma Gas & Electric is regulated by the Oklahoma Corporation Commission. As a result, Cooper said, the company’s rates are 13% lower than the regional average and 17% lower than rates in Texas, where the electricity market is deregulated.
AERO points to price increases
On the flip side, the Alliance for Electric Restructuring in Oklahoma praised Martinez, saying his bill seeks a solution for “skyrocketing electricity prices.”
OG&E imposed five price hikes in 10 months, from March 2022 through January 2023, that raised the average residential customer’s electricity bill by $28.71 per month. One was a $2.07 per-month increase because of a $30 million cost of service increase in OG&E’s base rates, while the other four price increases were pass-through fuel cost adjustments.
Oklahoma Gas and Electric Co. posted a profit of $439.5 million last year – 22% greater than its $360 million profit in 2021. OG&E earned profits of $339 million in 2020 and $350 million in 2019.
The average residential customer of PSO experienced a $4.72 per-month utility bill increase, attributed to extraordinary expenses for natural gas and supplemental electricity purchases during Winter Storm Uri in February 2021.
Public utilities are forbidden from reaping a profit on their fuel expenses.
AERO Executive Director Mike Boyd said that Oklahoma no longer has some of the most affordable electricity rates in the nation.
“It’s unfair to deny Oklahoma families and businesses the chance to shop for better deals and lower prices,” Boyd said. “Kudos to Representative Martinez for recognizing that a free-market system is going to deliver better outcomes then one controlled by monopoly utilities.”
Cloud was critical of AERO. He said AERO promotes the financial interests of third-party gas marketers who are underwriting the deregulation effort because they stand to profit from reducing Oklahoma’s regulation of the electric market and uncoupling transmission and distribution.
“In seeking to dismantle our state’s cost and reliability protections for electricity consumers, these niche interests make plain they want all of the rewards without any of the operating responsibilities and related risks,” Cloud asserted.
“As legislators consider this most recent proposal, we should learn from the failed experiments by other states, including Texas, California and New York. Residents in these deregulated states have lived through a volatility reflected not only in unpredictable costs but in life-threatening protracted outages.”
Cloud contended that the deregulated markets would receive less oversight on investments utilities make to the electric grid, as well as less oversight on rates.
Contacted Saturday by the Ledger, Tom Schroedter, executive director of Oklahoma Industrial Energy Consumers, declined to comment about HB 1602.
Jerry Bohnen contributed to this report.