Mike Boyd: Guest columnist 7.24.2022 Mike Boyd is the executive director of the Alliance for Electrical Restructuring in Oklahoma.
In the Sermon on the Mount, Jesus tells his disciples that “no man can serve two masters,” or “he will be devoted to one and despise the other.” Divided loyalties, in other words, end with one party being ignored and neglected.
That truth is just as applicable in the world of business, where corporations must clearly understand whom they serve, or risk being hopelessly entangled in conflicts of interest. That kind of conflict is occurring today in Oklahoma’s electricity market, which is dominated by Oklahoma Gas and Electric Co. (OG&E) and Public Service Corp. of Oklahoma (PSO), two government-backed monopolies with competing priorities.
On the one hand, their parent companies (OGE Energy Corp. and American Electric Power) are publicly traded corporations that exist to maximize profit for their investors. On that front, they are doing quite well. OGE reported annual net income of $360 million in 2021, while American Electric Power (PSO’s parent company) reported well over $2 billion. These are undeniably profitable companies with happy shareholders.
Beyond their fiduciary duty to investors, however, OG&E and PSO serve an entirely different role: that of providing the public with access to reliable and affordable electricity. In exchange for being handed a government-backed monopoly in their respective service areas, both utilities agree to allow the Corporation Commission to dictate the price of the electricity they sell to the public. Consumers, that is, Oklahoma families and businesses, are prevented from shopping for better prices.
It is by examining OG&E and PSO’s performance as public utilities, however, we can see that shareholders and profit are the true masters of these two corporations, while the public good and Oklahoma ratepayers have largely been cast aside and ignored. In 2021, during a historic winter chill, both OG&E and PSO wildly overpaid for the natural gas they use to produce their electricity. They did so, without fear or hesitation, knowing that the system is designed to allow them to pass on those costs to consumers. And indeed, as expected, the Corporation Commission approved an historic rate increase of over $1.5 billion between the two utilities. Less than a year later, OG&E has again increased its rates by an additional $30 million.
The fact that Oklahomans are looking at skyrocketing energy costs is unfortunate, but it is a predictable result of the “two masters” OG&E and PSO have been asked to serve. They cannot simultaneously exist to maximize their profits and enrich their shareholders, while also acting as quasi-public, monopoly energy vendors serving the public good.
In much of the rest of the country, policymakers have caught on to this conflict of interest and the way in which it hurts consumers and businesses. In 14 states, state legislatures have uncoupled the work of public utilities — like servicing power lines — from the sale of electricity, allowing businesses, individuals or both to contract with independent power producers. In those states, electricity costs have been reduced by 7 percent since 2008. In the other monopoly states, costs have increased by 20 percent, according to a study released by the Retail Energy Supply Association.
In the coming legislative session, the Alliance for Electrical Restructuring in Oklahoma (AERO) will be leading a coalition of businesses and voters in asking lawmakers to end our monopoly system and to embrace choice and competition in the market. Oklahomans deserve the ability to shop for the best plans with the best prices, and to pursue their own individual preferences, which might include fixed rate deals that protect them from weather events or renewable plans that protect the environment.
OG&E and PSO, meanwhile can continue to generate value for their shareholders by winning business on an open, competitive market, rather than using the power of government to compel ratepayers to buy their products.