By Mike W. Ray
Southwest Ledger
Oklahoma Natural Gas Co. has asked the state Corporation Commission to approve its fifth rate hike in five years: a request for a $41.5 million increase.
Company officials contend that ONG’s earned return on equity for calendar year 2024 was lower than the 9.4% ROE authorized by the Corporation Commission.
If approved as submitted, the proposed increase would raise the monthly service charge by $3.24 for the “average” residential customer and $1.03 for a residential low-income customer.
However, to comply with the Tax Cuts and Jobs Act of 2017, ONG will refund to its customers $13,243,908 in excess deferred income taxes (EDIT) next February. The one-time payment will amount to $13.39 for an “average” residential customer and $3.96 for a low-income residential customer.
Consequently, the net monthly “impact” would be an increase of $2.12 (or 2.99%) for the “average” residential customer and 70 cents (1.77%) for an “average” low-income residential customer, according to Cory Slaughter, ONG’s director of rates and regulatory.
In addition, $737,253 in excess collections on energy efficiency programs is to be rebated.
An administrative law judge will hear public comments about the application [Public Utility Division case number 2025-000011] on June 12, starting at 10 a.m. and continuing each business day until the hearing concludes.
The hearing will be held in the Concourse Theater, Suite C50, located in the underground tunnel between the Will Rogers and Sequoyah memorial office buildings in the 2400 block of N. Lincoln Boulevard in Oklahoma City. The commission has been conducting its regular meetings there while its headquarters, the Jim Thorpe Building, are being renovated.
ONG is a natural-gas public utility that serves approximately 924,000 residential, commercial, and industrial customers throughout Oklahoma. It is based in Tulsa, but its service territory also includes Oklahoma City and Guthrie and encompasses more than three dozen cities and towns plus Fort Sill in southwest Oklahoma.
ONG spent $272M on capital improvements
Elizabeth Chandler, a rate specialist with ONG, said in pre-filed testimony that ONG has invested $272.3 million in capital improvements since its last performance-based rate change.
She said that included $24 million for line or equipment replacement due to obsolescence, inadequacy or construction change; $7.5 million for software and computer equipment; $1.8 million for installation and replacement of compressed natural gas fill stations; $17.8 million to buy meters and other measurement devices; $13 million for purchases of tools and mobile construction equipment; and $3.56 million for facilities.
ONG also spent $58 million on replacement of lines and equipment “due to corrosion or deterioration,” Chandler said. Aging pipelines “are more prone to leaks and failures,” thereby “disrupting customer service with unplanned repairs,” Slaughter noted.
The company spent $28.57 million to replace or move utility lines “due to highway, street, or other government construction,” Chandler said. That included relocation of a line in conjunction with the US-81 bypass project at Chickasha.
Many of the line relocation projects are reimbursable, Slaughter acknowledged. Therefore, they are “amortized to revenue over five years…,” he said.
The utility also spent $88 million on meter and service installation for new customers, and $22.68 million for installation of lines to connect new customers, Chandler said.
Approximately 41% of the capital additions last year resulted from installation of lines and services to connect new customers, Slaughter said.
“The largest projects … are for enhancement of the Mustang area that is forecasted to see 10,000 houses built over a 10-year period,” he said. Other large projects include enhancement of the Greenhill area of north Tulsa, Mid-America Industrial Park at Pryor, residential growth in north Oklahoma City, “and to relieve capacity constraints in the El Reno area.”
As of Dec. 31, 2024, ONG had more than 48,000 “new meter prospects from individuals or entities that have agreed to receive future service from the company,” Slaughter said.
Last year the company also spent approximately $1.2 million on inducements “to defray the cost of venting and piping for 289 residential units that otherwise might have gone all-electric,” he said. “This provides those customers the same energy choice and ability to save on heating bills as other residential customers.”
Almost $11M for pay hikes, benefits, health care expenses
ONG’s rate hike request includes $10.56 million on payroll and related benefits. That included $4.1 million on “annual company-wide market adjustments” to “ensure the company remains competitive within our local markets and retains employees who consistently meet or exceed performance expectations,” Slaughter said.
It also includes $2.7 million on pay raises for 815 field operations employees. “The market was outpacing the rate of pay for these employees,” he said.
ONG also added 35 employees to its field operations unit. The utility is shifting “a significant portion of line locating services from outside contractors to company employees,” Slaughter said. The “primary reason” for this transition is “to reduce line locating costs.”
Those extra employees resulted in a $1.2 million increase in vehicle expenses in 2024, because of the acquisition of another 60 vehicles and increases in the cost of fuel and parts, Slaughter said.
The company experienced a $3.5 million increase in health care expenses that was driven by “an increase in medical claims in 2024 over 2023, as well as higher administrative fees from providers,” Slaughter told the Corporation Commission.
Fort Sill excluded from rate case
In 2001 the commission authorized ONG to charge rates under a special contract to provide natural-gas distribution service to Fort Sill. The company agreed to track the assets, expenses and revenues associated with that service, and to exclude them from its overall rate cases.
Accordingly, $1.3 million in revenue collected from Fort Sill in calendar year 2023, and $279,267 in expenses to provide service to the Army post that year, are not incorporated into ONG’s current rate increase application.
Details about last 4 rate cases
ONG’s last four rate hikes were approved by the Corporation Commission on:
Nov. 31, 2021. ONG’s revenue “deficiency” was set at $15.25 million. However, a refund of $10.8 million in excess deferred income taxes (EDIT) lowered the monthly impact to 34 cents on an “average” residential customer and 8 cents on a low-income customer.
Nov. 29, 2022. A $19.56 million base rate increase was approved, along with $1.16 million for “under-collection” of energy efficiency programs. After an EDIT was deducted, the net impact was $1.15/month for the “average” residential customer and 27 cents for a low-income customer.
July 11, 2023. The commission approved a $26.29 million rate increase, but the one-time EDIT lowered the overall monthly increase to $1.38 for the “average” residential customer and 33 cents for a low-income customer.
Aug. 27, 2024. A $31.4 million increase in base rates was approved, minus a rebate of $737,253 for “over-collection” on energy efficiency programs and a one-time deduction for an EDIT of $12,785,276. The net effect was a monthly increase of $1.33 for an “average” residential customer and 48 cents for the “average” low-income customer.
Still paying for 2021 Winter Storm Uri
In addition to those price hikes, the Corporation Commission approved a settlement agreement that found ONG “prudently incurred” $1,284,101,405 in “extreme” natural gas purchases in February 2021 during Winter Storm Uri. When $73 million in financing costs and interest were added, the final bill totaled $1.357 billion.
The debt was “securitized” and the Oklahoma Development Finance Authority issued bonds that are backed by a monthly surcharge on ONG bills to retire the debt over a 25-year period. ONG customers will be paying that surcharge every month for 22 more years.
The surcharge on a northwest OKC resident’s latest ONG bill was $5.15 for the “winter event cost recovery.”