Oklahoma regulators just suffered a setback at the hands of the State Supreme Court in a fight with Oklahoma City over the suspended collection of franchise fees as part of the 2021 Winter Storm fees. And now it raises major questions about the collection of those fees which were part of the winter storm bonds used to extend storm costs.
The Court ruled this week that not only must the Corporation Commission give standing to the Oklahoma Municipal League in the legal battle, but it must also reverse its decision to allow utilities not to collect city franchise fees. And in ruling against the regulators, the high court said they didn’t have the power to put the collection of the fees on hold. They ordered Commissioners to take back the case and in essence, correct things.
It was a victory for Oklahoma City which challenged the 2-1 decision by the Commission in 2022. A spokeswoman for the city said officials had no comment because it was considered “pending litigation.”
The case also proved to be just what Commissioner Bob Anthony predicted when he voted against the move two years ago—“problematic.”
Anthony issued a statement in response to the ruling.
Commissioner Todd Hiett and then-commissioner Dana Murphy approved the decision, despite opposition by the Oklahoma Municipal League.
The Commission had decided following the 2021 winter storm that the extraordinary fuel costs subject to municipal franchise fees and municipal gross receipts taxes at the time of the storm would not be collected by utilities from customers due to application of the February 2021 Regulated Utility Consumer Protection Act.
“We conclude rthe Commission’s determination that the February 2021 Regulated Utility Consumer Protection Act changed, amended, or altered a utility’s legal obligations concerning municipal franchise fees and gross receipts taxes is a determination not sustained by law and must be reversed,” wrote the Justices.
Oklahoma City went to court and challenged the order of the Commission.
In ruling against the Corporation Commission, the Supreme Court criticized the regulators for entering the arena of legislatie actions.
“The Final Order’s language is primarily legislative and not judicial when combined with the PUD’s request for the Commission to legislative a result consistent with the PUD’s perception of fairnesss for customers by alleviating them from the PUD’s perceived “windfall” for municipalities,” they added.
The Justices also said the Commission was wrong in taking the stance that utilities had no gross receipts tax and contractural municipal freanchise fee liability.
“–the Commission is not empowered to determined whether a utility has a legal tax liability (obligation) or contractual municipal franchise fee liability (obligation) in a particular circumstance,” they added.
The ruling also made it clear that the Regulated Utility Consumer Act of 2021 does not give commissioners the authority to determine the legality of a municipal franchise fee or whether such a fee liability is legallly unenforceable by a utility rate or tariff.
When Oklahoma City filed suit, it argued the decision was unconstitutional and reperesented an “invasion of the exclusive right of electors residing in Oklahoma City to negotiate and approve franchise agreements with utilities and to receive franchise fees from utility franchisees.”
Millions of dollars in uncollected franchise fees remain at stake.
Corporation Commissioner Bob Anthony was the lone regulator who opposed the order in August of 2022. At the time, he estimated the case involved $60-$100 million owed by the utilities to the cities and towns across the state.
In his dissenting opinion filed after the vote, Anthony suggested the decision could lead to big problems down the road.
“If a court of competent jurisdiction later determines that franchise fees or other municipal fees or taxes are owed on the WES Charge, then the majority’s order preventing Respondents from billing for such fees and taxes could prove exceptionally problematic. Will past uncollected amounts be recoverable from ratepayers? What if those past amounts fall outside of the test year? Will prohibited retroactive ratemaking be involved? How else will the amounts be recovered?”
