Not only does Oklahoma Gas and Electric Company want Oklahoma Corporation Commission approval to raise rates, it is also seeking preapproval for electric transmission projects that will also likely result in increased costs to consumers.
The company, serving 907,000 customers covering 30,000 square miles in Oklahoma and western Arkansas says its 2024 Integrated Resource Plan (IRP) demonstrates a need for additional capacity in 2028 of 1,096 MWs and growing to 1,215 MWs in 2030. It contends that by 2034, there will be a need for 2,592 MWs.
As a result, OG&E is seeking preapproval from Corporation Commissioners to cover a 5-year Capacity Purchase Agreement with Tenaska’s Kiamichi Energy Plant in Kiowa; a 20-year agreement for power from the Black Kettle Energy Storage in Oklahoma City; and the addition of two new gas-fired combustion turbines at a cost of $506.4 million at its Horseshoe Lake power plant in eastern Oklahoma County.
“OG&E is filing this Application pursuant to 17 O.S. § 286(C), seeking a determination of need for and approval of three projects selected from the 2024 RFP process and approving a cost recovery rider,” according to the filing. If approved, it could lead to another 55 cents per month for residential customers in 2026, another $1.26 by 2727 and $2.02 in 2028.
Testimony provided by Kimber Shoop, OGE’s Director of Regulatory Affairs indicated the utility received 200 bids from 248 participating entities at 58 sites and eventually settled on the three power sources.
“OG&E is still negotiating with several bidders but has finalized contracts with three of the bidders and is requesting pre–approval for those projects,” he testified.
Even then, Shoop said the three projects still won’t satisfy the company’s power needs.
“OG&E will continue to negotiate with other bidders and explore other options for new capacity over and above the Projects in this application.”
He claimed OG&E is in “a capacity shortfall situation and experiencing unprecedented load growth.”
In what appears to be the utility taking advantage of a new law approved by Gov. Kevin Stitt following the legislative session, OG&E is seeking “work in progress” approval on the Horseshoe Lake power plant where two new gas turbines are being added.
The measure, SB998, was passed without the emergency and allowed to become law without the governor’s signature. The State Constitution says it won’t become law until mid-August or 90 days after the end of the legislative session. As cited in the state Constitution, “No act shall take effect until ninety days after the adjournment of the session at which it was passed, except enactments for carrying into effect provisions relating to the initiative and referendum, or a general appropriation bill, unless, in case of emergency, to be expressed in the act, the Legislature, by a vote of two-thirds of all members elected to each House, so directs.”
The new law won’t have effect until this summer, but it allows for the CWIP to be used, if approved by state regulators.
A legislative analysis stated, “The measure allows a utility to start recovering work-in-progress expenses prior to the commercial operation of a new, or newly expanded, natural gas facility. The Commission is required to permit a special rate for the recovery of such expenses.”
Shoop contended in his testimony that if CWIP recovery is approved, it would result in a reduction in the overall amount of money ultimately charge to customers for the project. Another OGE witness, Charles Walworth, claimed customers would save approximately $190.5million over 30 years under the CWIP method.
The same argument of lower costs was made by Rep. Trey Caldwell during the House debate on the bill in early May.
““This piece of legislation will lower the overall cost to your mom and pop ratepayer when it comes to the additional costs that are coming,” he promised. “Whether if we do nothing or if we do something, there will be a plethora of generation, transmission and distribution needs across the state of Oklahoma over the next decade.”
Two legislators argued otherwise and opposition came from Oklahoma City Rep. Forrest Bennett who said the CWIP amounted to a “gift” to utilities who should be funding the infrastructure “that they should be doing.”
Rep. Nick Archer, R-Elk City, argued against it too, stating, “While families are tightening their budgets—all across the state, regulated monopolies were reporting record earnings—they’re not struggling, they’re not—they’re thriving.”
Shoop further said in his testimony filed with the commission that the utility needs approval from regulators by November 15 to proceed with the projects “to meet immediate capacity needs.” He said it will need approval to fully acquire the gas turbines from General Electric for the Horseshoe Lake power plant. Shoop also testified the utility needs approval of the Kiamichi agreement so that “Tenaska does not try to find another buyer for its highly sought after capacity.”
The Black Kettle operation is a new Battery Energy Storage System with a planned capacity of 200 MW. Owned by Plus Power, it won’t be in commercial operation until June 2027. If approved by the corporation commission, it would also be the first battery storage project to be used by OG&E to meet its capacity needs.
The filing for the preapproval of the power expansion projects comes on the heels of OGE’s filing of an intention to seek a rate increase. Details of the rate hike will be provided in the coming weeks.