Public Service Company of Oklahoma finds itself in a struggle with the state Attorney General who wants Corporation Commissioners to nearly cut in half PSO’s $218 million rate hike request.
The request was an almost immediate reaction to last fall’s decision by regulators to give PSO only about half of an original request of more than $294 million. PSO has filed for seven base rate increases along with other requests for cover recovery since 2014.
It is a request that if approved, would see residential rates for its nearly 494,000 residential customers go up by 7% or another $10 a month. The utility also has 79,000 commercial and another 600 industrial customers. The overall average increase for all customers would be 11%.
PSO lined up a long list of supporters last week who presented their statements of support before Corporation Commissioners Bob Anthony and Todd Hiett. Commissioner Kim David was not present for the hearing. No vote was taken during the meeting.
The list included Bob Firth, Dean of the School of Engineering at the OSU Institute of Technology in Okmulgee; Debbie Lawson, head of Economic Development for the city of Idabel; Clarence Fortney with the Great Plains Techology Center in Lawton; Nate Maraz, Superintendent of Elgin Public Schools; Vickie Patterson, City Manager for Broken Bow; Mike Taylor, City Manager for city of Antlers, Dr. Robert Steeber, Superintendent of the McAlester Public schools; and Clint Hardison with the Ameristate Bank in Atoka.
All offered praise for PSO in its maintenance and support for their schools and cities.
In filings with the Corporation Commission, Matthew Horeled, Vice President of Regulatory and Finance for PSO stated the utililty had to file the hike as soon as possible “because the rates approved are not adequate to provide PSO an opportunity to recover its costs and earn a reasonable return while providing safe and reliable service to our customers.”
His reference to “as soon as possible” was to the Corporation Commission approval in November of last year for a PSO hike of $155 million. PSO had originally filed a request for$294,497,000 in rate increases but the Commission’s final order slashed it. As a result, the 2-1 decision raised rates by $5.35 for residential customers but because of a fuel rate adjustment, bills also fell by $17.08 per month.
Horeled in his testimony still felt last fall’s Corporation Commission ruling was wrong.
“Anytime a Commission order prohibits PSO from recovering millions of dollars of reasonable expenses which are necessary for PSO to provide the adequate and reliable service that customers expect, then it is out of balance.”
PSO maintains it needs the additional funds for maintenance and repairs as pointed out by Kamran Ali, Vice President of the utility’s Transmission Plan and Analysis.
If the utillity “does not take steps to address these aging assets now, the cumulative negative impact on transmission system performance and reliability will be significant,” he stated in a filing with the Commission.
Ali contends that a “significant population” of PSO’s transmission line and station assets were constructed in the 1940s through the 1970s “and are now at or near the end of their expected life.”
He also noted that many of the lines were built using a wood pole design and are in need of replacement.
“Typical inspection reports indicate rot, woodpecker holes, broken or split cross-arms, ground line deterioration, loose or missing hardware and broken or missing grounds.”
PSO is also asking regulators to include the Rock Falls Wind facility which it acquired after EDF Renewables built the 154.58 MW project in Kay and Grant Counties. It became operational in 2017 but the Corporation Commission excluded the wind farm from PSO’s rate base issue last fall.
The utility contends it is critical to the transmission demands directed by the Southwest Power Pool. The SPP took steps in 2023 to increase PSO’s reserve margin from 12% to 15%. Now the utility contends, “Rock Falls was a prudent business decision to meet a near-term SPP capacity need, while simultaneously providing a fuel-free generation resource to benefit customers from the next twenty-five years.”
Horeled testified that because the wind farm was disallowed and the SPP’s new directive, the utility plans to meet the new 15% reserve requirement by delaying the retirement date for four of its existing gas powered units—Southwestern Units 1 and 2 and Weleetka Units 4 and 5 from 2025 until 2030.
A PSO filing explained the Corporation Commission admitted the benefits to customers “but disallowed the facility in rate base due to a mechanical timing issue.”
Another PSO executive, Dylan Drugan, a Resource Planning Manager for PSO’s parent company, American Electric Power Service Corporation, testified that the new SPP directive forces the utility to maintain sufficient accredited capacity to cover 15% above its net peak load demand each year.
“If PSO fails to meet its capacity obligation, it could be subject to significant deficiency payments.”
Despite the claims and explanations of the rate hike request, they face opposition from Attorney General Gentner Drummond.
The Attorney General’s office pointed out that in filings in the past 9 years, PSO’s rate base more than doubled to $4.5 billion and during the period, residential customers’ incomes have increased at a slower pace than PSO’s rates.
“The Company’s anticipated strong rate base growth will lead to excessive rate increases for Oklahoma households and businesses if not tempered by self-restraint and Commission action,” stated the AG’s office.
The Attorney General is recommending the Commission reduce the requested rate increase of $217,636,689 by $104,414.140 to a base rate revenue deficiency of $113,222,549.
Todd Bohrmann, Regulatory Analyst with the Attorney General’s office testified, “This adjustment will allow PSO an opportunity to earn a fair return on invested capital while keeping electric rates affordable for its customers.”
Assistant Attorney General Greg Matejcic also testified in a filing against the utility’s request and instead recommended the Commission deny PSO’s request for a vegetation management tracker and a reduction of the amortization time for storm damage recovery from five years to three years. He said the Commission should increase the amortization time to 7 years.
The Attorney General’s office also came out against PSO’s request to receover $37,607 or 50% of its money spent on Chamber of Commerce fees and opposed PSO’s request to approve recovery of $326,082 or 100% of its member association fees “because it is unclear what benefits ratepayers receive through the Company’s participation.”