OKLAHOMA CITY — A divided Oklahoma Supreme Court ruled against state regulators in their refusal to allow the state’s largest electric company to provide power to a facility in the service territory of an electric cooperative.
The court ruled 5-3, with one Justice disqualifying himself, over the 2018 decision of the Corporation Commission to prevent Oklahoma Gas & Electric Co. from extending its retail electric service to the Binger II Pump Station built by ONEOK in an area served by CKenergy Electric Cooperative.
Justices Yvonne Kauger, James R. Winchester, Douglas L. Combs, Noma Gurich and Dana Kuehn ruled the Corporation Commission’s interpretation of state law to prohibit OG&E from extending its retail electric service to the pump station was in error. Chief Justice M. John Kane IV, Vice Chief Justice Dustin P. Rowe, and Justice Richard Darby dissented.
The legal dispute began when ONEOK Arbuckle II Pipeline LLC started construction in 2018 of a 530-mile pipeline to transport liquefied natural gas produced in Oklahoma’s SCOOP regions to Mont Belvieu, Texas, and the interstate market.
The project required electricity to operate a series of pump stations, including the Binger II Pump Station in the certified territory of CKenergy Electric Cooperative based in Mustang. CKenergy had the exclusive rights to provide electricity in the area, based on the Retail Electric Supplier Certified Territory Act.
The RESCTA, enacted in 1971, divides Oklahoma’s unincorporated areas into territories which are served by retail electric suppliers that maintain the “exclusive right to furnish retail electric service to all electric-consuming facilities located within its certified territory.”
However, the Act provides a large-load exception that allows a retail electric supplier (such as OG&E) to enter the territory of another supplier (such as CKenergy) “if the connected load for initial full operation” of an electric-consuming facility is 1,000 kilowatts or more.
The Binger II has a “connected load greater than 1,000 kilowatts of electricity,” the court related.
Relying on the “one megawatt” exception, OG&E submitted a bid to provide service to the Binger II. OG&E planned to extend a high-voltage line from Western Farmers Electric Cooperative’s transmission lines to a new substation that OG&E would construct, then run low-voltage distribution lines to the Binger II.
OG&E “intended to use this method because its own distribution lines were at least nine miles from the Binger II,” the court was told.
ONEOK accepted OG&E’s bid, which was “at least $5 million below CKe’s,” the court wrote, and the two companies signed a contract.
CKenergy lodged a protest with the Corporation Commission.
OG&E urged the commission to dismiss the complaint, and an administrative law judge concurred.
But the commission issued an order in 2019 forbidding OG&E from “serving or furnishing retail electric service” to the Binger II “directly from third-party transmission facilities…” The commission also decreed that although state law allows a retail electricity provider to “extend” its distribution system, the commission interpreted that term to mean “the lengthening of a retail electric supplier’s own distribution system.”
The regulators agreed with CKenergy and barred OG&E from providing the electrical service. OG&E appealed to the state Supreme Court.
While the Corporation Commission “may be given deference” when it is “acting in its area of expertise,” the Court’s majority said they owe no such deference when a statute is being interpreted.
The OCC has not
applied law uniformly
Furthermore, the commission’s “construction and application” of the statute in question “is not longstanding and has not been applied uniformly,” the Supreme Court majority wrote.
In the CKenergy case, the Corporation Commission held that “extending its service” as used in the large-load exception “means that OG&E must physically extend their own distribution lines and may not utilize open-access transmission lines to provide service to the Binger II in CKe’s certified territory,” the Supreme Court noted.
Yet records provide evidence that more than once the Commission previously allowed OG&E to extend its service in certified territories via third-party transmission lines, the Court pointed out. In a 2020 case, for example, one official testified, “OG&E and other suppliers have been tapping into nearby transmission lines and building dedicated substations to serve such loads for decades.”
OG&E argued that ‘extending its service’ “is synonymous with furnishing service and it should be entitled to use transmission lines to service the Binger II, just as it would in an incorporated territory.”
CKenergy maintained that OG&E’s substation would be “a wasteful duplication of distribution facilities” and therefore would violate the RESCTA, because CKenergy has a substation “already in place in the vicinity of the Binger II.
But the Court pointed out that even CKenergy “would be utilizing WFEC’s transmission lines” and “would have to upgrade their current facilities in order to property service the large load.”
Therefore, the majority wrote, “a facility would not be useless, nor would the expenditure of costs or materials, as each would be necessary regardless of the company awarded the contract.”
Accordingly, the Supreme Court overturned the Corporation Commission ruling that enjoined OG&E from “serving or furnishing” retail electric service to the Binger II directly from third-party transmission lines.
In his dissenting opinion, Chief Justice Kane wrote that the Corporation Commission correctly applied the law, and said the statute was not designed to allow large outside utilities to “cherry pick” electrical loads through the use of third-party transmission lines in certified territories.
Justice James E. Edmondson recused himself from participating in the case. His brother, former Oklahoma Attorney General Drew Edmondson, was one of the attorneys representing ONEOK Arbuckle II Pipeline LLC.
A host of other high-powered attorneys and law firms representing Oklahoma Gas & Electric Co., ONEOK, CKenergy Electric Cooperative, Public Service Co., the Oklahoma Association of Electric Cooperatives, the Grand River Dam Authority, the Oklahoma Agricultural Cooperative Council, the Oklahoma Rural Water Association, the Oklahoma State Union of the Farmers Educational and Cooperative Union of America, and the Oklahoma Farm Bureau Legal Foundation, weighed in on the case.