OKLAHOMA CITY – Public Service Co. of Oklahoma’s application for approval of its “energy efficiency and demand response” programs was endorsed by the three-member state Corporation Commission.
Kim David, who chairs the commission, concurred with approval of the joint stipulation and settlement agreement, but dissented over the panel’s approval of a waiver that incentivizes fuel switching for heat pump technology.
The monthly “rate impact” on the average PSO residential customer will be approximately $3.27 in 2025, $3.34 in 2026, $3.40 in 2027, $3.47 in 2028, and $3.49 in 2029, according to testimony of Jeff Brown, PSO’s Energy Efficiency and Consumer Programs manager.
The “average” PSO residential customer uses 1,100 kilowatt-hours of electricity each month, company officials say. Average household electricity usage in 2023 was 12,420 kilowatt hours, the company reported.
PSO’s “demand portfolio” – which contains “energy efficiency” and “demand response” programs – was approved once again. The Tulsa- based electricity provider has implemented “EE” and “DR” programs since 2008, company officials said.
The goals of the demand portfolio are “to minimize the long-term cost of utility service; avoid or delay the need for new generation, transmission, and distribution investment; and encourage and enable utility customers to make the most efficient use of utility capacity and energy and reduce wasteful use of energy,” said Michael Hixson, PSO external affairs manager in Lawton.
Those programs include home weatherization, HVAC tune-ups, Power Hours, conservation voltage reduction, and rebates of up to $5,000 to homebuilders who construct energy-efficient houses.
The Power Hours program is a voluntary direct load control program for residential electric customers who have eligible “smart” thermostats connected to their central air conditioning. The program pays the customer for reducing energy use when energy demand is high.
Conservation voltage reduction refers to the installation and maintenance of technology that optimizes and lowers delivered voltages, “creating energy savings for customers,” Brown said. It uses a centralized intelligent control system to continuously monitor and automatically control substation and line voltage regulating devices.
PSO previously implemented CVR on 24 distribution circuits in 2016-18, on 62 distribution circuits in 2019-21, on 107 circuits in 2022-24, and plans to implement CVR on 253 more circuits and 82 substations over the next five years, Brown testified.
The upfront capital investment cost of CVR will be $57 million spread over the next five years, he said.
The joint stipulation limits PSO’s recovery of “lost” net revenues from the conservation voltage reduction program to 40% for the next five years. That limit “has been in place since the CVR program began” in about 2016, Hixson said.
Corporation Commission rules define “lost net revenue” as “income from the retail sale of electricity forgone by a utility, directly resulting from the success of its demand portfolio…” The commission rule “clearly supports the recovery of lost net revenue resulting from the demand portfolio,” Brown testified.
A company “would not logically make an investment that would reduce its sales potential and reduce its ability to recover its fixed costs,” he said. Therefore, a policy that allows the utility to “fully recover its fixed costs while at the same time offering valuable energy efficiency products and services to its customers” is “essential.”
The “desired effect” of demand programs is “to reduce energy consumption as well as demand,” Brown said.
Commissioner objects to fuel-switching waiver Commissioner David voted for the joint stipulation and settlement agreement but dissented on the limited waiver of fuel switching for heat pump technology.
The waiver allows customers to choose to replace equipment with “the fuel of their choice while still providing a net reduction in energy use,” Hixson told Southwest Ledger.
“Customers have expressed frustration in the past when advised their new equipment is not eligible for rebates because the existing equipment is natural gas,” Hixson said. PSO’s request “will help to minimize or eliminate those complaints” to PSO and the Corporation Commission, he said.The purpose of the limited waiver is “efficiency and choice, not to encourage switching,” Hixson said.
PSO requested continuation of a limited waiver of the rule enacted in 2021 that prohibits fuel switching for a limited annual number of residential and small business air source heat pumps (150 units), heat pump water heaters (50 units), and mini-split air source heat pumps (100 units), Hixson said.
A “unit” is a single heat pump equipment, he said. “A typical home generally has one unit such as a heat pump, but larger homes may have two or more units,” Hixson said.
In total, “across all fuel types (electric, dual fuel natural gas or propane),” PSO rebated 411 units in 2022 and 495 units in 2023, Hixson told the Ledger, “so the waiver is minimally used to-date.”
The 300-unit waiver includes a rebate of $750 per unit, a PSO official told the commission.
“I do not believe it is in the public interest to continue this fuel switching waiver and allow these incentives,” David said. “At its core, it is bad public policy,” she declared.
Oklahoma is “a natural gas state!” she wrote. Last year, Oklahoma was the sixth-largest producer of marketed natural gas and accounted for 7% of the U.S. total, according to the U.S. Energy Information Administration.
The natural gas industry is “profoundly critical to our economic well-being,” David said. Providing an incentive to encourage lower natural gas usage “directly harms Oklahoma’s natural gas industry.”
Customers who want to use electric heat pump technology “may choose to pay for this on their own and use any available federal rebates,” but “funding for this program should not be at the expense of all ratepayers,” the commissioner asserted.
Furthermore, she continued, “it does not make sense to dissuade customers from using natural gas when it is already three times cheaper than electricity.”
Signatories to the joint stipulation and settlement agreement in the PSO case included Mark Argenbright, director of the Corporation Commission’s Public Utility Division; Jack Fite, attorney for PSO; Deputy Attorney General Chase Snodgrass, and attorney Eric Davis, representing the Oklahoma Sustainability Network.
Oklahoma Industrial Energy Consumers did not sign the document but did not oppose the joint stipulation, attorney Thomas Schroedter said. About PSO Public Service Co. of Oklahoma is based in Tulsa and is a subsidiary of American Electric Power.
PSO serves a little over 575,800 customers (residential, commercial, industrial, and “other”) in 232 cities and towns in eastern and southwestern Oklahoma, including Lawton, Altus, Duncan, Cache, Elgin, Fletcher, Porter Hill, Sterling, Apache, Cement, Cyril and Frederick.
The “energy mix” PSO employs to generate electricity includes natural gas (25%), coal (10%), wind (27%), and electricity purchased from other sources (38%). Power Purchase Agreements are “a significant part of the Company’s generation portfolio,” said Matthew Horeled, PSO’s vice president of regulatory and finance.