Municipal League joins OKC in challenging Corporation Commission over franchise fees


Nearly a year after Oklahoma City filed suit against the Oklahoma Corporation Commission, challenging the agency’s decision allowing utilities not to collect franchise fees under the 2021 winter storm law, the Oklahoma Municipal League recently joined forces in the suit.

In a recent filing, the Municipal League also argued against the Commission’s Public Utilities Division move to prohibit the Oklahoma Natural Gas Company, Oklahoma Gas and Electric Company, Public Service Company of Oklahoma and Summit Utilities, Inc. from billing customers for any franchise fees, municipal fees or taxes impacted by the February 2021 Reegulated Consumer Protection Act.

The Act was created after the Winter Storm Uri and its impact on natural gas prices in the state. The Corporation Commission’s final order prevented municipalities throughout the area served by the utilities,from collecting the franchise fees and taxes. The Municipal League claimed such a decision was made without providing the towns and cities an opportunity to be heard.

Oklahoma City made the same arguments and the Municipal League, in its filing dated August 24, 2023, supported the city in the lawsuit before the State Supreme Court.

“The Commission fails to distinguish the Legislatures’ attempt to provide bonds that are free from taxation, from any previous obligation or agreement of the energy providers,” argued the OML. It also contends that the issue of franchise agreements and “previously incurred tax liabilities” were not addressed by the Legislature in the February 2021 regulated Consumer Protection Act.

The League called the lack of addressing the franchise fees a “blatant impairment” and that it is in violation of the Consitution which granted municipalities the power to assess and collect taxes.

The Municipal League also agreed with Oklahoma City in its original challenge that the Corporation Comission did not have the authority or power and “engaged in conduct which far exceeded the bounds of its authority.”

“In the present case, if the electric companies wanted to utilize securitized bond revenue to cover increased expenses, that is their internal management decision,” further argued the Municipal League. “However, that business decision does not authorize the Commission to have blatant discretion to set aside franchise fee agreements and taxing ordinances that were in effect at the time of the February 2021 storm.”

The Municipal League also contended the Act does nothing to change the nature of the local control because the franchise fees were not addressed by the bill in the legislature. It also claimed that before allowing the utilities the ability not to collect the franchise fees and distribute them to the cities and towns, the Commission failed to notify the impacted municipalities.

Oklahoma City filed the lawsuit September 16, 2022 and the Municipal League filed its support last month. The original lawsuit is case No. CU-120707 in the Oklahoma Supreme Court.