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'Power choice' effort gains steam in Oklahoma

Ben Felder - The Oklahoman August 1, 2022

When Scott Pilgrim added up the annual electricity costs for one of his nursing homes in Oklahoma City, the figure startled him.

Pilgrim, the CEO of the Diakonos Group, which operates several nursing homes across the state, said his power costs had increased by $7,000, or around 20%, compared to the previous year, despite little change in usage.

The possibility of another significant increase next year is a scary thought. “We need a level of confidence on how much we need to budget for energy costs, and right now I don’t have that confidence,” Pilgrim said.

Pilgrim believes one solution is to “break up” Oklahoma’s electric monopolies and follow the path of at least 14 other states where multiple electricity providers compete for the business of commercial customers.

Often called “retail power choice,” the idea has been floated by businesses and consumers for decades, including a strong push about 20 years ago. But an advocacy group says it plans to intensify its efforts over the next year to convince the state Legislature to make the switch.

An organized lobbying campaign would likely draw the ire of the state’s major utility companies, which are politically powerful and positioned to fund their own marketing campaigns in an attempt to defend their bottom line.

But Mike Boyd, executive director of Alliance for Electrical Restructuring in Oklahoma (AERO), the group pushing for “retail power choice”, believes his effort could gain support from major retailers and business associations who are intrigued at the idea of comparative shopping for electricity in a similar way to natural gas.

“When a legislator asks, ‘Who wants this?’, I’m going to have a list of people in his district who wants this,” Boyd said.

While Boyd’s group first began promoting the idea to the Oklahoma Corporation Commission years ago, he said the timing is right to start lobbying state lawmakers.

Electrical rates have gained renewed scrutiny in recent months after the state issued billions in customer-backed bonds to cover high costs from a 2021 winter storm. Add in a recent rise in fuel costs during a time of inflation, along with growing consumer demand for “green energy”, and Boyd believes there's interest in Oklahoma.

"It's almost like a perfect storm," Boyd said.

Competition among power providers produced the 'California Problem'

When Jeff Cloud first ran for the Oklahoma Corporation Commission in 2002, he heard a lot of talk about electricity choice on the campaign trail.

“It was a very hot issue at the time,” Cloud said. “But the California problem had just occurred ... so the people of Oklahoma basically told the Legislature to leave (the system) as it is.” The “California problem” Cloud referred to was a shortage of electricity that caused numerous outages and high costs.

The state was the first to introduce competition to its electricity marketplace in the mid 1990’s and several years later it experienced an energy crisis that dealt a blow to the “power choice” movement, pausing similar efforts in many states.

Cloud, who served on the Oklahoma Corporation Commission for eight years and is now the executive director of the Alliance for Secure Energy, said introducing choice into the electricity marketplace would hinder the state’s ability to regulate costs.

“Right now you’ve got the commission that is charged with accountability and oversight,” Cloud said. “What is deregulation trying to fix if we’ve already got low rates and reliable service?" Supporters of "retail choice" scoff at the idea it would be an unregulated market, pointing to the many state and federal regulations that exist in states with choice systems in place.

But officials with the Oklahoma Corporation Commission have said the state's current system provides a level of transparency that would not exist in a choice marketplace.

"It is important to note that all utility fuel purchase expenses are subject to audit and potential disallowance by the Oklahoma Corporation Commission in public hearings," wrote Brady Wreath, director of the commission's Public Utility Division, in a report this year that objected to claims that "retail choice" would have prevented the high prices of the 2021 winter storm. "This is a far more transparent process than would be experienced through a closed-book process of for-profit marketers operating outside of the regulatory environment."

The push for green energy

Opponents of electric choice point to the state’s relatively low cost of electricity and say the reduction of regulations would change that.

While it’s true Oklahoma's electricity rates have been some of the lowest in the nation, the average rate for all sectors increased by nearly 27% last year, pushing the state out of the bottom 10, according to the U.S. Energy Information Administration.

While supporters of choice see lower prices as the driving factor, others want more options for purchasing electricity made through environmentally friendly methods.

“The current heat wave pushes us to use more power (with air conditioning), but if we are sourcing power from someone that is not green we are only contributing to our own problem,” said Stephen Tyler, the CEO of Oklahoma City’s Tower Theatre.

Tyler, who supports "retail choice," said if there were options in the electricity market he would prioritize providers with the most environmentally friendly production methods.

Boyd, the director of AERO, said he hopes large corporations, like Walmart, might support electricity choice partly out of a desire to significantly decrease their carbon footprint, which is a goal many large companies are setting.

Mirroring the natural gas market

Both sides of the debate point to studies that show lower customer prices with their preferred method, along with polling that supports their position.

In a poll conducted by Amber Integrated, an Oklahoma City-based firm that is representing AERO, 78% of Oklahomans said they support a system that allows them to show for electricity suppliers. While AERO's proposal is to first bring "retail choice" to the commercial sector, the group sees the poll results as proof there is public appetite.

In its own poll, opponents say 68% of Oklahomans support the current system when the alternative was described as a "Deregulation of the electric industry so companies compete but do not have strong regulatory oversight," according to a poll conducted by CHS and Associated for the Alliance for Secure Energy.

But AERO says electric "retail choice" would be similar to the state's natural gas marketplace, which allows commercial customers to choose their provider.

“One of the reasons I chose to mirror the natural gas model is I think it's easier for our legislators to understand a system that is already in the works," Boyd said.

But Cloud, the executive director of the Alliance for Secure Energy, said comparing the natural gas and electric markets is difficult to do.

"It is kind of apple and oranges because the electric grid and infrastructure that is needed for generation is much more elaborate than natural gas," Cloud said.

Besides, Oklahoma's utility companies already benefit from competition because the Southwest Power Pool operates a wholesale power market to buy from, Cloud added.

Ken Miller, vice president of state regulatory and legislative affairs at OG&E, said the electricity they produce is offered to the pool, with the lowest cost provider selected from a 14-state region. "I think the record shows that our customers are benefiting from a regulated market that actually does have competition," Miller said.

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