Oklahoma House Committee dives into performance based ratemaking

Performance Based Regulation: Harmonizing Electric Utility Priorities and State Policy


The arguments made in a legislative hearing on proposed Performance Based Ratemaking for Oklahoma utilities were just as adament for and against on Monday.

The House Utilities Committee held the interim study as those preferring the PBR or alternative ratemaking were the utilities represented by Oklahoma Gas and Electric and Public Service Company of Oklahoma.

“PBRs don’t cause rates to skyrocket as critics say,” argued Kimber Shoop, Director of Regulatory Affairs at OGE. He made the case to eliminate the current method in which electric utilities go before the Oklahoma Corporation Commission for any approval of rate increases, contending the Performance Based Ratemaking would result in “greater transparency” and “rate stability” and “protect customers.”

But others lined up against the PBR system, arguing the Corporation Commission serves as a proxy for competition.

“The current system offers meaningful discovery and significant adjustment in rate cases,” maintained Mark Garrett, a consultant with the Oklahoma Industrial Energy Consumers. “With the Performance Based Ratemaking, there are few meaningful adjustments and this is the big problem.”

He noted how a number of corporations and groups are against the proposed PBR in Oklahoma including, AARP, Koch, Republic, Tyson, Phillips 66, CP Kelco, HP Sinclair, International Paper, Petroleum Alliance of Oklahoma, Targa and Walmart.

Perhaps the strongest opponent of PBRs was Dr. David Dismukes, Director of the Center for Energy Study at Louisiana State University.

“The problem with PBR is it requires a big leap of faith,” he told the hearing. “Nothing I heard today would tie to reliable service.”

He said there is no way one can find systematic evidence that the PBR in Oklahoma would result in any reduced or improvedd retail rates.

“It will result in considerable rate increases for ratepayers and it doesn’t treat ratepayers fairly,” he declared “I would argue you stay away from it—-it’s not a good deal.”

What is Performance-Based Rate Making? | RateAcuity™

Former Oklahoma Corporation Commissioner Jeff Cloud, now President of Alliance for Secure Energy testifed in support of converting electric utilities to performance based ratemaking.

“Regulatory lag can slow down progress and investment,” he argued, stating an annual review that would be part of a PBR “gives the Corporation Commissoin more scrutiny.”

Cloud said the PBR would “create better accountability while protecting consumers.”

Matt Horeled, Vice President of Regulatory Finance at PSO said the benefits of performance based ratemaking would include loer finance costs, access to capital, more gradual price changes and increased transparency.

But Walmart’s Steve Chriss, Director of Energy Sources responded with his own declaration.

“Oklahoma regulations aren’t broken—the process here works.”

Now it’s up to legislators.

“I really hope that in the next 3 to 5 months, we can get into a room and find common ground and not so much annimosity,” stated Rep. Trey Caldwell, chairman of the committee, as he finished the hearing.

It will also mean those same legislators can expect to see heavy lobbying from the very same groups that testified at the interim hearing.