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Journal Record: Debate heats up over deregulation of electricity

By: Janice Francis-Smith The Journal Record July 20, 2022 0

Right on the heels of back-to-back increases for some Oklahoma utility companies, a group advocating for altering the state’s utility structure announced it is stepping up its efforts. Legislation is coming in 2023 that would allow businesses the opportunity to choose their electric utility provider.

But such a change would not make sense for Oklahoma, utility officials said – particularly after they’ve provided some of the lowest rates in the country and during what promises to be Oklahoma’s hottest summer on record.

The Alliance for Electrical Restructuring in Oklahoma, or AERO, highlighted that Oklahoma Gas and Electric, which services much of central Oklahoma, and Public Service Co. of Oklahoma recently were granted rate increases totaling $1.575 billion. The companies are recouping costs from the February 2021 winter storms while increasing rates in order to maintain and upgrade their systems.

“This is despite OGE reporting annual net income of $360 million in 2021 and American Electric Power (PSO’s parent company) reporting well over $2 billion,” said Mike Boyd, executive director of the Alliance for Electrical Restructuring in Oklahoma.

“They (Oklahoma’s electricity utility companies) cannot serve the interests of their investors by seeking to maximize profits while also serving the interests of Oklahoma’s ratepayers, who need affordable and reliable power,” Boyd said. “We can fix this system by injecting choice and competition into the market and allowing ratepayers to choose who they purchase their power from.”

AERO is advocating for a system that would allow commercial consumers to choose their provider. While a deregulated market may pose some risks for residential consumers, businesses are better able to negotiate a contract with providers, Boyd said. The ability to secure a fixed cost for a period of time helps businesses plan budgets and helps manufacturers more accurately manage production costs, he said – especially in these times of rapidly rising inflation.

AERO’s coalition includes dozens of nursing homes all over the state, health care organizations like the Bethany Children’s Center, entertainment venues like Tower Theatre and Cain’s Ballroom, bars and restaurants, and more. During hearings at the Oklahoma Corporation Commission, the Oklahoma Restaurant Association, the Oklahoma Hotel and Lodging Association, Care Providers Oklahoma and other businesses also offered comments in support of altering Oklahoma’s utility structure.

The winter storms of February 2021 cast a different light on the discussion around utility deregulation. Some customers in Texas received five-digit utility bills for the month, as the weather created a perfect storm of high demand for heating and low supply of the fuel used for heating systems.

Customers in Oklahoma, however, were not subjected to the high bills inflicted on customers in Texas who had contracts with utility providers that did not provide any protection against fluctuating fuel costs. Oklahoma customers are likewise not protected from fluctuating fuel costs, as fuel costs are passed straight through the customer and are not part of utilities’ rate structures. However, customers were saved from having to pay five-digit bills when the Oklahoma Corporation Commission, the Legislature and the utilities came up with a plan to allow the companies to finance fuel costs and pay off the debt with decades of small bill increases.

“Thanks to the Oklahoma Corporation Commission and its regulation of utilities, Oklahomans continue to experience energy costs that are well below national averages and utilities are held accountable for grid performance as well as continuous upgrades and maintenance to generations facilities and the grid,” reads a statement OG&E provided The Journal Record.

Some 14 states have deregulated their utility markets over the last two decades, with varying results. “Deregulation of retail energy over the last 20 years has not proven to save customers money or improve the grid,” reads OG&E’s statement. “Numerous studies point to deregulated jurisdictions having among the highest average retail electricity prices in the United States. Oklahomans today benefit from the Southwest Power Pool’s Integrated Marketplace ensuring the lowest cost energy each day is available on the grid to customers.”

Boyd said states with higher utility rates typically have higher housing costs, average wages and other indicators. Though Oklahoma’s rates are low, that is not proof that they are providing the best deal for Oklahomans, Boyd said.

Oklahoma Corporation Commissioner Bob Anthony, one of the three members of the panel, did not support the plan to finance fuel charges from the 2021 storms. On Monday, Anthony filed a dissent after discovering that the estimates for how much it would cost to finance the fuel costs were a bit lower than the bonds actually sold for.

“The much-touted ‘low’ 2.58% bond interest rate actually topped out at 5.087% near the end of the bonds’ ridiculously-long, mult-decade term,” Anthony wrote. The commission’s “open-ended financing order failed to protect consumers and left all the risk for rising interest rates on ratepayers.” OG&E’s statement highlighted that the company has a track record for keeping the lights on and will continue to provide great service for its customers despite the challenges.

“We are in the middle of a heat wave that may turn out to be Oklahoma’s hottest summer on record, which means all generating facilities available across the SPP are putting electricity on the grid,” the statement reads. “OG&E is committed to providing the life-sustaining and life-enhancing electricity our customers need.”

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