Now that Oklahoma Attorney General Gentner Drummond has his hands on perhaps thousands of email communications from the Corporation Commission, how will he handle a review of them?
His subpoena of the three Corporation Commissioners and the entire Commission staff had a deadline of Nov. 27. It was intended to be an extension of the attorney general’s investigation into alleged market manipulation of natural gas prices during the 2021 winter storm where those prices soared to historic levels.
Gentner Drummond’s original investigation, announced last spring, was intended to explore how some companies used the Winter Storm Yuri to take in billions of dollars through market manipulation. He promised legal action to recover the money for ratepayers.
“Bringing with it ice, snow, record setting cold temperatures, it was among the most brutal winter storms in history,” said Drummond. “Here in Oklahoma, families and businesses suffered greatly and they are still suffering paying the price of higher utility rates.”
At the time, he said the oil and gas industry was not responsible for the increased prices, but others were. Instead, his initial investigation, carried out by the Foshee & Yaffe law firm of Oklahoma City, showed natural gas marketers were the culprits.
“The magnitude of this scheme is staggering and unconscionable. The conduct in question is well outside the boundaries of ordinary capitalism.”
He told reporters at the time, the marketers arranged the purchases and sales of natural gas during the storm and some of them manipulated supply in order to charge higher prices when demand increased during the storm.
“I will do everything in my power, as Attorney General, to return what was taken and to hold accountable those responsible,” said Drummond.
He later hired Foshee & Yaffe to carry out the legal action that he vowed to take. So far, no such action has been filed. But, Drummond, also spurred by Anthony’s public filings and comments about wrongdoings, decided to put the Commissioner to a challenge. In a letter to Anthony in late October, Drummond basically told him to stop making such public claims of wrongdoing or come up with evidence and documentation.
Commissioner Anthony responded with the documentation and it consisted of what had been in public filings within the Commission’s records. And it had been in the Attorney General’s hands all along—given to him when he was running for office and personally hand-delivered by the commissioner himself. Further, Anthony had also held an in-depth discussion of his claims with two of Drummond’s Assistant Attorneys General.
About a week after Drummond was called out by Anthony, the Attorney General responded with his subpoena.
It was originally filed following allegations of Corporation Commissioner Anthony who contended the issuance of securitization bonds allowing four utilities to extend ratepayer costs over a period of up to 25 years came as a result of suspected wrongdoing.
What kind of wrongdoing? Commissioner Anthony was never shy about his allegations and made them in public dissents or filings with the Corporation Commission following his opposition of granting the securitization bonds to PSO, OGE, ONG and Summit Utilities. All won approval on votes of 2-1.
One such filing, containing 74 pages of claims and documentation, was made Sept. 22 of this year. In it, Commissioner Anthony asked the questions upon which his dissenting votes, including last week’s where the Commission approved a 2.5% cap on residential rates for Public Service Company of Oklahoma, were based.
- What happened to the “savings” that securitization supporters said would result from using ratepayer-backed bonds to spread out the winter storm costs?
- Were state government RFPs and hiring decisions legitimate, or improperly or unlawfully influenced by utility companies or others?
- What role did unqualified financial advisors and/or undisclosed conflicts of interest play in this financial disaster for ratepayers?
- Were consumer protections, tariffs and/or state laws inappropriately bypassed or violated, and if so, what were the consequences?
- Did parties responsible for the sale of the bonds fail to get the best pricing for them? If so, how much more did that cost ratepayers and who benefitted at their expense?
- Were federal securities laws or financial advisors’ fiduciary duties to clients violated?
The exorbitant costs of the securitization bonds were the basis for Anthony’s opposition. As he pointed out in the September filing, the $675 million that PSO said its customers owed for the power to keep warm during the winter storm would now cost them nearly $1.1 billion over the next two decades.
“That total includes an unbelievable $190 million more in interest costs than was advertised by the two Corporation Commissioners who inflicted this ratepayer-backed bond scheme on PSO customers,” charged Anthony in the filing, referring to commissioner Todd Hiett and then-commissioner Dana Murphy.
Anthony contended in the filing that when PSO’s $190 million excess interest is added to OG&E’s $330 million extra and ONG’s additional $483 million, that’s more than a billion dollars in “under-estimated interest expenses being passed on to Oklahoma ratepayers.”
“Whatever else it was, in my opinion, this “creative financing mechanism” is not only a public policy fiasco and a budding human tragedy, it is also the largest fleecing of the Oklahoma ratepayer in the history of the state,” charged the Commissioner.
Which might put it in the same kind of category that the Attorney General described about the alleged market manipulation. But Anthony also made other allegations in his filing.
“Some bond hawkers used shameless scare tactics, predicting that without securitization, households would receive multi-thousand-dollar utility bills that would force them into bankruptcy. Others fabricated hundreds of millions in bogus “customer savings.” As I pointed out at the time, both arguments were demonstrably false.”
While he was outvoted 2-1 in the securitization bond cases, Commissioner Anthony maintained the Commission already had the power to spread out the storm costs over time without using seccuritization under the act quickly approved by the state legislature within a few months after the February storm.
“I suggested we forget this futile bond scheme and simply spread out the power and fuel costs over 4-5 years allowing the utilities to recoup their carrying costs at the 10-year U.S. treasury rate (then 1.44%),” wrote Anthony.
He claimed the finance would have resulted in total financing charges of only $20 million, not the $371 million in interest expense ratepayers are now footing.
Were such claims by Anthony what prompted the Attorney General to enforce a subpoena for what lays behind the controversial securitization? Or, was it something else in Anthony’s claims?
Another report will be published tomorrow by OK Energy Today.
