OKLAHOMA CITY – Public Service Company of Oklahoma finds itself in a struggle with the state Attorney General, who wants the Corporation Commission to nearly cut in half PSO’s $218 million rate hike request.
The request was an almost immediate reaction to last fall’s decision by regulators to give PSO only about half of an original request of more than $294 million. PSO has filed for seven base rate increases along with other requests for recovery since 2014.
If approved, the latest request would see residential rates for its nearly 494,000 residential customers go up by 7% or another $10 a month. The utility also has 79,000 commercial and 600 industrial customers. The overall average increase for all customers would be 11%.
PSO, based in Tulsa, is an electric utility company that serves customers in 232 communities in eastern and southwestern Oklahoma. They include Lawton, Altus, Duncan, Cache, Elgin, Fletcher, Porter Hill, Sterling, Apache, Cement, Cyril and Frederick.
PSO lined up a long list of supporters last month who presented statements of support before Corporation Commissioners Bob Anthony and Todd Hiett. Commissioner Kim David was not present for the hearing. No vote was taken during the meeting.
The list of supporters included Clarence Fortney, superintendent of Great Plains Technology Center in Lawton; Nate Maraz, superintendent of Elgin Public Schools; Broken Bow City Manager Vickie Patterson; Antlers City Manager Mike Taylor, Dr. Robert Steeber, superintendent of McAlester public schools; Bob Firth, dean of the School of Engineering at the OSU Institute of Technology in Okmulgee; Debbie Lawson, head of economic development for Idabel; and Clint Hardison with AmeriState Bank in Atoka.
All praised PSO for its maintenance and support of their schools and cities.
Rates are inadequate, PSO exec contends In filings with the Corporation Commission, Matthew Horeled, vice president of Regulatory and Finance for PSO, testified the utility had to file the hike as soon as possible “because the rates approved are not adequate to provide PSO an opportunity to recover its costs and earn a reasonable return while providing safe and reliable service to our customers.”
His reference to “as soon as possible” was to the Corporation Commission’s approval last November of PSO’s application for $155 million. PSO originally filed a request for $294,497,000 in rate increases but the commission’s final order slashed it. As a result, the 2-1 decision raised rates by $5.35 for residential customers, but because of a fuel rate adjustment, bills also fell by $17.08 per month.
In his testimony Horeled maintained that last fall’s Corporation Commission ruling was wrong.
“Any time a Commission order prohibits PSO from recovering millions of dollars of reasonable expenses which are necessary for PSO to provide the adequate and reliable service that customers expect, then it is out of balance.”
PSO maintains it needs the additional funds for maintenance and repairs as pointed out by Kamran Ali, vice president of the utility’s Transmission Plan and Analysis.
If the utility “does not take steps to address these aging assets now, the cumulative negative impact on transmission system performance and reliability will be significant,” Ali stated in testimony filed with the commission.
Ali contends that a “significant population” of PSO’s transmission line and station assets were constructed in the 1940s through the 1970s “and are now at or near the end of their expected life.”
He also noted that many of the lines were built using wooden poles and need to be replaced. “Typical inspection reports indicate rot, woodpecker holes, broken or split cross-arms, ground line deterioration, loose or missing hardware, and broken or missing grounds.”
SPP directs PSO to raise reserve margin PSO also is asking regulators to incorporate into its rate base the Rock Falls wind facility it acquired after EDF Renewables built the 154.58 megawatt project in Kay and Grant counties. It became operational in 2017, but the Corporation Commission excluded the wind farm from PSO’s rate base issue last year.
The utility contends it is critical to the transmission demands directed by the Southwest Power Pool. The SPP took steps in 2023 to increase PSO’s reserve margin from 12% to 15%. Now the utility contends, “Rock Falls was a prudent business decision to meet a near-term SPP capacity need, while simultaneously providing a fuel-free generation resource to benefit customers for the next 25 years.”
Horeled testified that because of the SPP’s new directive and disallowance of the wind farm, PSO plans to meet the new 15% reserve requirement by delaying the retirement date for four of its existing gas powered units – Southwestern Units 1 and 2 and Weleetka Units 4 and 5 – from 2025 until 2030.
A PSO filing explained the Corporation Commission admitted the benefits to customers “but disallowed the facility in rate base due to a mechanical timing issue.”
Another PSO executive, Dylan Drugan, a resource planning manager for PSO’s parent company, American Electric Power Service Corp., testified that the new SPP directive forces the utility to maintain sufficient accredited capacity to cover 15% above its net peak load demand each year.
“If PSO fails to meet its capacity obligation, it could be subject to significant deficiency payments,” Drugan said.
Despite the claims and explanations of the rate hike request, they face opposition from state Attorney General Gentner Drummond.
PSO base rates doubled, 7 rate hikes in 10 years The AG’s office pointed out that in filings over the past nine years, PSO’s rate base more than doubled to $4.5 billion, and during that same period, residential customers’ incomes have increased at a slower pace than PSO’s rates.
“The Company’s anticipated strong rate base growth will lead to excessive rate increases for Oklahoma households and businesses if not tempered by self-restraint and Commission action,” the AG’s office asserted.
The Attorney General recommends the commission reduce the requested rate increase of $217.6 million by $104.4 million to a base rate revenue deficiency of $113.2 million.
Todd Bohrmann, regulatory analyst with the Attorney General’s office, testified, “This adjustment will allow PSO an opportunity to earn a fair return on invested capital while keeping electric rates affordable for its customers.”
Assistant Attorney General Greg Matejcic also testified against the utility’s request. He recommended the commission deny PSO’s request for a vegetation management tracker and argued against a reduction of the amortization time for storm damage recovery from five years to three years. He said the commission should increase the amortization time to seven years.
The Attorney General’s office also came out against PSO’s request to recover $37,607 or 50% of the money it spent on Chamber of Commerce fees, and opposed PSO’s request to approve recovery of $326,082 or 100% of its member association fees – “because it is unclear what benefits ratepayers receive through the Company’s participation.”