By Mike W. Ray
Lawton Constitution
The Oklahoma Corporation Commission’s website says the agency’s Public Utility Division works to ensure safe and reliable utility service at “fair, just and responsible rates.”
That will be put to the test soon.
Public Service Co. of Oklahoma filed a request for permission to bill its customers for construction work in progress (CWIP) on eight projects that would produce 1,299 megawatts of electricity.
Those projects include three purchased power agreements (PPAs) supplied from wind farms, three battery energy storage systems (BESS), a capacity purchase agreement (CPA) with an existing natural gas-fired power plant, and a self-build natural gas combustion turbine purchased power and sale agreement (PSA).
Development of the eight energy sources would cost an estimated $1.255 billion – which would be paid for entirely by the utility’s customers. In contrast, a private company must finance capital improvements with borrowed money or its own reserves and recoup that investment from its subsequent profits.
The new energy sources would be phased in from 2026 through 2029, starting with three wind purchase power agreements and one capacity purchase agreement in 2026-27. Three battery storage systems would enter service in 2028, and the Northeastern Units 5 and 6 gas facility would be completed in 2029.
The total estimated annual retail rate impact of PSO’s proposal after all of the generation resources entered commercial operation is $157.1 million, Matthew Horeled, vice president of Regulatory and Finance for PSO, stated in pre-filed testimony.
PSO wants the commission to approve a “rider” that would allow the public utility to receive a return on “construction work in progress, operation and maintenance expenses, depreciation, amortization, ad valorem taxes, production tax credits, investment tax credits, and a return on the assets” during the three-year period before those assets are incorporated into the company’s base rates.
A “rider” is a surcharge that allows a utility to recover specific costs that are not included in the company’s standard base rates.
Until the last quarter of the 20th century, utility regulators “commonly made cost recovery decisions about new capital projects only after construction was completed and the facility had entered commercial operation,” wrote Scott Hemplin, executive director of the National Regulatory Research Institute, and Washington, D.C., attorney Scott H. Strauss.
CWIP and similar pre-approval concepts are being driven by multiple factors such as “growing demand, aging infrastructure, environmental requirements, an increasing call for the construction of renewable projects, and shrinking credit markets,” Hemplin and Strauss explained.
PSO’s current rate base is approximately $4.5 billion; the proposed investments would increase it by approximately 28%, the company reported in its application.
Myriad opponents
An array of individuals and organizations have lined up to oppose parts or all of the utility’s application.
Mark Garrett, appearing on behalf of Oklahoma Industrial Energy Consumers, contends PSO’s “justifications” for an energy security rider are “unsubstantiated.” Garrett is president of Garrett Group Consulting, a firm that specializes in public utility regulation, litigation, and consulting services.
OIEC is an association of large energy consumers in Oklahoma, with members that purchase “substantial quantities of electric power” for their operations.
“It is not clear that PSO appropriately justified the use of the energy security rider as proposed, particularly given the outsized burden on residential ratepayers to support new capacity investments,” the non-profit Oklahoma Sustainability Network opined.
Dr. David E. Dismukes, a consulting economist with Acadian Consulting Group, argued that PSO selected non-economical battery storage projects. The BESS resources PSO selected cost roughly $3,192 per kilowatt of accredited capacity, “more than twice the cost of the company’s natural-gas self-build option at $1,237 per kW,” he pointed out.
Furthermore, the “cost disparity” is consistent with industry reports which show that BESS units are “far more expensive than conventional gas technologies,” Dismukes testified.
Frank J. Beling, a senior vice president with Guernsey consulting company who testified on behalf of the state Attorney General’s office, concluded that PSO “did not appropriately consider reasonable alternatives in its selection” of the three battery storage projects. Beling recommended denial of the BESS projects.
The Tulsa-based International Brotherhood of Electric Workers, Local 1002, AFL-CIO – whose members are “in the novel position of being not only employees of PSO, but also consumers of PSO” – advised the Corporation Commission that approval of PSO’s application “could impede, if not terminate, meaningful and substantial negotiations over the term” of a collective bargaining agreement between PSO and the IBEW, “potentially to an extent violative” of the National Labor Relations Act.
Mary Elizabeth Purvis, a programs manager with the Corporation Commission’s Public Utility Division, and John Givens, a regulatory depreciation manager in the PUD, both recommended that the commissioners deny PSO’s request for preapproval of two new natural-gas combustion turbines, Northeastern Units 5 and 6.
PUD recommended the commission disallow recovery, via the company’s energy security rider, of all O&M expenses except those related to property taxes.
If the commission determines that the electricity generation from purchase power agreements and capacity purchase agreements is needed, PUD recommends that “those costs be collected through PSO’s fuel adjustment clause.”
CWIP shifts risk
Enrique Bacalao, a consultant who specializes in public utility economic and financial issues, testified in behalf of AARP that CWIP “shifts financial risk from PSO to its customers.” The utility’s consumers would be required to “underwrite PSO for assuming the risk of their investment during the construction phase without appropriate compensation for having to assume that financial risk,” he said.
CWIP also would allow PSO to begin recovering its expenses from customers “three years earlier” than it would under normal circumstances, Bacalao said.
And the IBEW labor union asserted that approval of CWIP would allow PSO to charge its customers the cost of construction of new facilities “before they’re even operational.” The “up-front investment costs” would be “shifted completely to the consumer.”
PSO price increases continue to add up
Purvis testified that the Public Utility Division is concerned that the cumulative effect of recent and projected rate increases imposes “an increasingly significant financial burden on PSO customers.”
The Corporation Commission approved, by a 2-1 vote June 4, PSO’s application to start billing its customers almost immediately after acquiring the 23-year-old, 795-megawatt natural-gas plant “Green Country” power plant in Jenks.
To finance the acquisition, “The average residential customer using 1,100 kilowatt-hours per month will see an increase of $7.19 on their total bill,” said Matt Rahn, PSO’s region communications manager. “In 2026 that average impact will drop to $6.47.”
PSO estimates the Jenks power plant still has a 30-year life span. Corporation Commissioner Todd Hiett expressed concern about PSO’s projected $138 million in Green Country operation and maintenance expenses over the next three decades.
In 2029, after all of the eight proposed new PSO facilities are operational, the projected impact on a typical residential customer who uses 1,100 kilowatt-hours of electricity each month would be $10.34, according to Rebecca Schwarz. She is director of regulatory pricing and analysis for American Electric Power Service Corp., a subsidiary of American Electric Power Co., PSO’s parent.
Commercial customers would experience a rate increase of 0.76% in 2026, and an estimated total bill increase in 2029 of 5.51%. For the industrial class, PSO estimated an increase of 1.06% in 2026 and a total bill increase in 2029 of 6.05%.
On Nov. 17, PSO filed notice of its intent to file an application “on or about Jan. 2, 2026,” for another rate hike.
Meanwhile, PSO incurred $675.2 million in fuel and purchased power costs during the two-week Winter Storm Uri in February 2021. In May 2022 the Oklahoma Supreme Court authorized the Oklahoma Development Finance Authority to “securitize” those expenses by selling bonds, which won’t be paid off for another 17 years.
For the “average” PSO residential customer, the monthly cost of the storm recovery bonds was estimated at approximately $4.70, depending on a customer’s usage.
“Implementing customer protection measures is crucial to address these affordability issues,” Purvis asserted.
“We are retired living on a fixed income. We live in an all-electric house, so our electric bills are higher than average,” Gary Siftar of Broken Arrow wrote to the Corporation Commission. “We ask you to NOT approve this increase. We had one last year. They keep nickel and diming us to death.”
Tulsa-based PSO serves 575,800 customers (residential, commercial, industrial, and “other”) in 232 cities and towns in eastern and southwestern Oklahoma.
The utility serves more than three dozen communities in southwest Oklahoma, including Lawton, Altus, Duncan, Chickasha, Cache, Elgin, Fletcher, Porter Hill, Sterling, Temple, Hobart, Apache, Temple, Rush Springs, Carnegie, Cement, Cyril, Davidson, Duke, Elmer, Fort Cobb, Frederick, Gotebo, Gould, Grandfield, Granite, Headrick, Hollis, Lone Wolf, Manitou, Martha, Mountain Park, Mountain View, Roosevelt, Snyder, Terral, Tipton and Waurika.
Large load tariff
Ms. Purvis of the PUD was among those who recommended that the commission order PSO to develop a specific tariff or contract option for large-load customers “that included accountability and ratepayer protections.”
Examples of the type of protections that should be included, she testified, include exit fees, financial minimums, grid flexibility, minimum load factor ramps, minimum demands, upfront infrastructure payments, and contract minimums.
The Oklahoma Sustainability Network recommended that a new tariff “specific to large-load customers” should be implemented. An electric tariff is a structured pricing plan that determines how much consumers are charged for electricity service.
Guernsey exec Beling recommended the creation of a new large-load tariff. He also recommended that the Corporation Commission require PSO to provide a guarantee that “adding new resources to serve new large loads would not raise rates on existing customers.”
“The rise of a new class of large customers” – such as data centers and artificial intelligence – “has created enormous potential demand for power,” said Frank Mossburg, a partner with Bates White Economic Consulting in Washington, D.C., who testified for the PUD. “Many of these customers require the entire output of a generating resource to supply their needs,” Mossburg noted.
In the case of PSO, new demand for electric power “is mostly from just 11 customers,” Mossburg testified. Approximately 468 megawatts of new projected demand from three customers “is secured by contracts for electric service that provide protections, such as minimum bill requirements, that generally mirror protections found in recent approved and proposed large-load tariffs.”
However, “the vast majority of new demand – up to another 3,300 megawatts – is backed only by eight letters of agreement (LOAs) that require minimal exposure as compared to the ultimate project cost.”
To include the significant load from LOAs in the load forecast “creates a risk for ratepayers to pay for generation that is not needed,” Mossburg warned. “A more reasonable forecast can be constructed,” he suggested, “by including the needs of just the existing load and the forecast load of customers who have signed a contract for electric service.”
Continuing, Mossburg wrote, “Barring industry collapse, capacity procurement going forward will be exclusively for large-load customers.”
PSO’s proposed path forward would require residential ratepayers to pay for “resource additions to serve these well-capitalized customers,” Mossburg said.
Therefore, “It is vital that the Corporation Commission … establish a process for both supplying and billing these customers that protects ratepayers and avoids subsidization.”
Other PSO customers also have expressed their reservations about PSO’s plans.
“I am concerned about the new data center being built near Pryor, and a future one near Stillwater, raising electric rates,” wrote Dennis Lovett of Tulsa. “Companies using this much energy should be bearing the cost of additional energy production. Not enough jobs will be created for the public to bear the cost” of electricity hogs such as data centers.
“I have concerns about news of recent rate increases to pay for growth in capacity for PSO,” Bill Lamb wrote in an email to the Corporation Commission.
“While I am glad to pay for increased capacity and reliability for current residential and commercial customers, I don’t feel that I should pay for increased capacity for data centers and aluminum smelters.
“I welcome these businesses to Oklahoma but don’t feel like I – a 78-year-old retiree (who votes) – should pay for their electricity.”
PSO case schedule
Public comments on PSO’s proposals are set to be heard on Feb. 12, 2026.
An administrative law judge will conduct a hearing on the merits of the case starting on Feb. 17 and continuing each business day afterward until the hearing concludes. The hearing will be conducted in the Concourse Theater, Suite C50, in the underground tunnel between the Will Rogers and the Sequoyah Memorial Office Buildings in the 2400 block of Lincoln Boulevard in Oklahoma City.
The ALJ is required to submit a “Findings of Fact and Conclusions of Law” within 10 days after the hearing on the merits concludes.