Pros and cons of alternative ratemaking plan heard by Corporation Commissioners


Oklahoma Corporation Commissioners took another recent step in their consideration of the controversial issue of Performance Based Rating, an annual form of ratemaking heavily supported by utilities but opposed by consumer groups.

Commissioners on Friday spent nearly two hours listening to the pros and cons of the suggested alternative ratemaking plan supported by utilities who contend there will be benefits for consumers.

“It puts utilities in a preditable cadence,” stated Kimber Shoop, Director of Regulatory Affairs at OGE. “You don’t have to show it’s broken in order to improve it.”

Not so, argued Thomas Schroedter, an attorney with Oklahoma Industrial Energy Consumers.

“Nothing’s broken. There’s been no showing of need—we don’t need to go there,” he told Commissioners.

Rick Chamberlin of Walmart, who also testified at a recent Oklahoma House interim study hearing, opposed any change in the current system.

“There are no benefits for customers. It’s just a solution looking for a problem.”

“There are very little benefits for ratepayers,” added Dr. David Dismukes, a professor emeritus with Louisiana State University and another person who also testified before the House hearing. He represented the Petroleum Alliance of Oklahoma.

“Oklahoma has relatively low rates and in order to keep them where they are, do what you’re doing,” he urged.

Joy McGill, Associate State Director of the AARP chapter in Oklahoma spoke against any changes.

“We believe it’s a solution in search of a problem,” she said, adding that the recent lowering of a Public Service Company of Oklahoma rate increase would not have been possible with a PBR.

One of the issues concerns the lag time faced by utilities as they file a case for a rate increase. It can take months before the case receives a final vote by the three-member commission. The utilities contend the lag time is harmful to their cost recovery efforts.

“The longer you take for us investors to wait for a fair return, the less you serve investors,” declared Ron Staken with OGE Shareholders. He told commissioners the reduction of the regulatory lag time “is always a good thing, good for all public utilities.”

Staken added that if the alternative ratemaking method is good enough for Oklahoma Natural Gas, then it would be good enough for other utilities such as OGE.

Schroedter with the OIEC responded that the lag time is a good thing and “an important tool for cost control.” He alleged that if the commission were to adopt the PBR, it would lead to overspending by utilities. Schroedter further argued the current method of ratemaking forces discipline in costs.

“We don’t believe tying the hands of regulators with PBR is a good thing. Stick with the plan that’s worked for Oklahoma.”

Matthew Horeled, Vice President of Regulatory and Finance at PSO said there would be major benefits if the PBR or alternative ratemaking plan were to be adopted. He said it would result in lower financing costs and increase access to capital along with gradual price changes for customers.

Horeled added a PBR would also “increase transparency.”

“The regulatory lag is too much for us now. We’re too much out of balance.”

Groups went back and forth in their arguments as Public Utilities Division Director, Geoffrey Rush, asked for responses to his questions as part of the Commission’s Notice of Inquiry.

“None of those benefits touted out there don’t normally happen,” answered Dismukes, the emeritus professor.

“PBRs are not gonna cause prices to go out of control. We’ll see benefits to customers,” said Shoop as he continued representing OGE.

Under a Performance Ratemaking Plan, utilities would offer rate requests annually without the lengthy wait of approval from regulators.

Chamberlin with the Walmart companies had his response.

“There’s nothing preventing the companies from filing rate increases every year,” he said, referring to the current system.

McGill with the AARP said there would be “absolutely no benefits.”

Schroedter, the attorney for OIEC, maintained that under a PBR plan, those groups such as his that monitor and challenge the rates requested by the utilities, would become involved in cases 50% of the time.

“We will be forced to intervene in a case every year—that’s very expensive,” he added.

The hearing was an opportunity for Commissioners Hiett, Anthony and David to hear what the different sides had to argue about the proposed plan. A public hearing will be held in February of 2024.