Consumers Challenge OG&E’s Rate Hike Request Under New Law

Consumer advocacy groups are opposing a requested rate increase by Oklahoma Gas & Electric (OG&E), setting the stage for a significant test of a new utility regulation law, Senate Bill 998. The law changes the framework under which utilities can finance new construction projects, allowing them to request rate hikes while projects are still underway. The controversy centers around OG&E’s plans for two new power plants expected to be operational east of Oklahoma City by 2029.

In a statement released in December, organizations such as AARP Oklahoma and the Oklahoma Industrial Energy Consumers (OIEC) urged the Oklahoma Corporation Commission to reject OG&E’s request. AARP Oklahoma’s State Director Sean Voskuhl criticized the utility’s approach, stating, “If there is a Scrooge this holiday season it is OG&E. They turned right around and are asking for it again,” referring to a previous case where the commission denied OG&E’s attempt to recover an additional $100 million in financing costs.

The debate hinges on the interpretation of the new law, which permits utilities to recover costs through Construction Work In Progress (CWIP). Under CWIP, utilities can collect rates from customers during the construction phase of projects, rather than waiting until they are completed. OG&E argues that this approach will save an estimated $173 million in interest costs associated with $506 million in construction loans, benefits that the company asserts will ultimately help consumers by reducing expenses passed on to them.

Christi Woodworth, OG&E’s Vice President of Marketing and Communications, explained the historical context, stating, “Customers aren’t helping provide the dollars for that until the project is fully operational, which means all of that interest accumulates.” Yet, consumer advocates contend that this system could unfairly burden customers who may never benefit from these investments.

Attorney Adam Singer, representing AARP Oklahoma, raised concerns about the fairness of the proposed rate hikes. “They’re asking some, or many of their customers to pay for facilities that they may never see the benefit of,” he stated. Singer highlighted potential scenarios where customers may pay increased rates only to move away before the plants are operational or pass away before benefiting from the service.

The OIEC’s Executive Director Thomas Schroedter echoed these concerns, arguing that the new legislation could lead to higher costs for ratepayers compared to traditional financing methods. He emphasized that the law undermines the Corporation Commission’s authority to ensure just and reasonable rates for consumers. “The law interferes with the Corporation Commission’s authority to ensure just and reasonable rates for utility customers,” he remarked.

Schroedter criticized the legislation as beneficial primarily to large data centers that are rapidly expanding in Oklahoma. He argued that OG&E customers would be forced to finance power plants intended for these large-load customers without receiving immediate benefits. “If it’s upheld, the new law will require customers to finance capital investments needed to serve large-load artificial intelligence customers that will be coming on to OG&E’s system in the future,” he noted.

This latest rate case marks OG&E’s second attempt for advanced funding for its planned facilities at Horseshoe Lake. The Corporation Commission previously denied OG&E’s initial request in December, leading advocates to argue that the utility should not be permitted another opportunity to seek approval. OG&E contends that its first request was submitted before the new law went into effect, and now that the law allows for CWIP, it is necessary to proceed with the funding request.

An initial hearing on this contentious case is scheduled for January 8, 2024, before an administrative law judge. As both sides prepare for this pivotal moment, the outcomes could significantly reshape the regulatory landscape for utility financing in Oklahoma and set a precedent for future utility rate requests.