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Oklahoma Corporation Commission backs electric cooperative in dispute over a large power agreement

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A construction site along ONEOK's Arbuckle II pipeline is shown. Once complete, the line initially will be capable of transporting up to 400,000 barrels per day of unfractionated natural gas liquids from the heart of Oklahoma's SCOOP field to the company's storage and fractionation facilities at Mount Belvieu, Texas. [PROVIDED BY ONEOK]
A construction site along ONEOK's Arbuckle II pipeline is shown. Once complete, the line initially will be capable of transporting up to 400,000 barrels per day of unfractionated natural gas liquids from the heart of Oklahoma's SCOOP field to the company's storage and fractionation facilities at Mount Belvieu, Texas. [PROVIDED BY ONEOK]

The Oklahoma Corporation Commission on Tuesday short-circuited ONEOK’s hopes to have Oklahoma Gas and Electric Co. supply power to a pump station near Binger on a pipeline it is building.

In a case that could land before Oklahoma’s Supreme Court, commissioners voted 2-0, with Commissioner Bob Anthony not voting, to approve an order that grants a request made by CKEnergy, an electric cooperative that serves the area, to prevent the investor-owned utility from providing power to the facility.

The order has potentially significant ramifications, given there are many potential locations where new or growing businesses need large supplies of electricity in unincorporated areas of Oklahoma to meet their power needs. Many of those businesses are oil and natural gas service providers, such as pipeline operators and sand mine operations.

Business leaders want to find the cheapest source of electricity possible to power their operations, but the commission’s order concludes that state law established nearly 50 years ago sets limits to that pursuit.

The law, the Retail Electric Supplier Certified Territory Act, sets out ground rules electric cooperatives and utilities are expected to follow to meet the electrical needs of their customers.

It does so by setting out electrical service territories for cooperatives and big, investor-owned utilities, granting each retail electric supplier an "exclusive" right to furnish power to all electric-consuming facilities located within its territory.

The intent behind that language, an attorney representing the commission’s Public Utility Division has said, is to allow for an orderly development of coordinated retail electric service throughout Oklahoma to avoid wasteful duplications of distribution systems.

The language also aims to minimize service disputes between retail electric suppliers.

It also, however, includes language that allows one supplier to “extend” its service into another supplier's territory in cases where that extension would serve a customer that needs at least 1 megawatt of power capacity.

That language, known as the “1-megawatt exception,” was the focus of the case commissioners decided Tuesday.

The agency's intervention was sought after OG&E had won a contract awarded through competitive bidding to provide a significant amount of power to a compression station ONEOK needed to build near Binger. The compressor station would help operate a natural gas liquids pipeline ONEOK is building to carry that product from the heart of Oklahoma’s SCOOP field to the Houston area.

A substation OG&E proposed that would have provided the compressor station with power would have obtained the energy from a nearby transmission line owned and operated by Western Farmers Electric Cooperative. OG&E would have obtained that energy through an interconnect agreement it had negotiated with the Southwest Power Pool.

CKEnergy Electric Cooperative Inc., the cooperative that serves that area, challenged that plan, arguing the investor-owned utility’s plan didn’t extend its service to provide ONEOK with electricity.

On Tuesday, commissioners didn’t comment before voting to approve the order to grant CKEnergy’s request to prevent OG&E from providing ONEOK with the power.

Intent debated

In arguments before an administrative law judge at the commission and before commissioners in an earlier hearing, attorneys representing both sides focused on legislative intent behind the act’s 1-megawatt exception language.

Attorney Patrick Shore, representing OG&E, told commissioners the utility believed it had the right to supply ONEOK with needed power without having to extend its distribution system from inside its service territory to get it there.

"We are extending line to serve a customer … completely consistent with what the statute says,” Shore previously argued. “If that is not fair, or not right, that is up for the Legislature to decide.”

The utility's position was backed by attorneys representing ONEOK and Public Service Co. of Oklahoma.

But the opponents countered legislators never intended for deals of this type to be done.

Brian Hobbs, an attorney representing CKenergy, and Eric Turner, representing the Oklahoma Association of Electric Cooperatives, argued that a plain reading of the statute’s entire text showed OG&E only could provide new service to ONEOK in CKenergy’s service territory if it extended the power from its existing retail system to get the electricity to where it was needed.

Because the utility planned to use power supplied by a nearby transmission line operated by another provider, the project fell outside of the scope of what legislators intended when they approved the law, they argued.

Their position was backed by Kenneth Tillotson, an attorney representing the commission’s Public Utility Division.

“Interpretation of the statute in the way OG&E and ONEOK propose here would effectively render the certified territories act meaningless for loads in excess of 1 megawatt,” Tillotson had said.

Commissioner Anthony couldn’t be reached Tuesday evening to be asked why he chose not to vote on the order.

Parties in the case who are dissatisfied with the order have the right to appeal it to Oklahoma’s Supreme Court, Hobbs said Tuesday.

Jack Money

Jack Money has worked for The Oklahoman for more than 20 years. During that time, he has worked for the paper’s city, state, metro and business news desks, including serving for a while as an assistant city editor. Money has won state and regional... Read more ›

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