Constitutionality of OGE’s storm cost financing heard by Supreme Court referee

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The constitutionality of the act created in 2021 by the Oklahoma legislature that allowed Oklahoma Gas & Electric Company to use securitization of up to $800 million in February 2021 winter storm costs was at the heart of arguments Wednesday before a state supreme court referee.

In a hearing that was live-streamed because the Oklahoma Judicial Center remains closed to the public due to COVID-19 restrictions, referee Kyle Rogers heard arguments from an attorney for the Oklahoma Development Finance Authority and two opponents of the OGE storm-financing plan that had been approved by the Oklahoma Corporation Commission.

Jered T. Davidson, an attorney for the ODFA opened the arguments in defense of the 2021 Regulated Utility Consumer Protection Act which allows for the use of the sale of ratepayer-backed bonds so OGE’s $735 million in storm costs can be spread out over a 28-year period.

“The heart of the act is to minimize consumer’s bills with just and reasonable costs,” he stated while wearing a protective facial mask, a measure that was required of all participants in the courtroom. Davidson argued the financing method would result in an estimated $959 million in savings for OGE customers and result in lower costs to them.

During his nearly 25-minute address to the referee, Davidson noted that the Attorney General supported the use of securitization to help OGE with its storm costs. As to the constitutionality of the 2021 act adopted by the legislature, Davidson told the referee, “No state funds, taxes or appropriations are involved in these funds. At no time do these funds enter the state treasury and they are not the property of the state or the Oklahoma Corporation Commission.”

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Referee Rogers responded with a few questions about the amount of costs incurred, would the costs follow a customer who chose to leave an address and the obligation to repay the bonds.

Former State Representative Mike Reynolds was the first of two opponents who had filed formal protests to the ODFA’s legal request to make his arguments.

“I believe the court should not render a decision on this matter until the constitutionality of the Act is ruled because until then, some bonds might be sold and it’s hard to put the horses back in the barn,” he said, standing before the referee.

“We’ve heard OG&E is not profiting from this—but somebody is! I’m certainly not!”

Reynolds told the referee that most Oklahomans don’t understand the process and that perhaps billions of unconstitutional bonds might be approved in a “blatant violation” of the state constitution.

“Because no one hasn’t appealed doesn’t mean it’s constitutional,” he said. “The court could send a strong message this is not appropriate because the ODFA has no guarantee that OGE will be in business in 28 years.”

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Referee Rogers read other names of at least 10 others who filed protests and only one was present—Suzanne Broadbent. She spent a few minutes addressing the referee , arguing there was no accountability of OG&E on such a request and that the Corporation Commission had not given unanimous support to the financing method.

In a closing response, the ODFA’s Davidson told the referee the utilization of the securitization will save nearly $1 billion in costs.

“The Corporation Commission voted 2 to one on this issue but there is no requirement it has to be unanimous. Further, these bonds follow very, very strict standards.”

The court referee adjourned the hearing with a statement that his recommendation will be made to the court.