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Public Service Co. of Oklahoma obtains approval of settlement in rate case before Corporation Commission

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The Tulsa Power Station is operated by Public Service Co. of Oklahoma. [PSO]
The Tulsa Power Station is operated by Public Service Co. of Oklahoma. [PSO]

Oklahoma’s Corporation Commissioners on Thursday unanimously approved a rate case settlement agreement with Public Service Co. of Oklahoma that will boost the average residential customer’s bill by $2.38 a month.

However, the agreement increases those customers’ bills significantly less than what the utility initially requested when it filed its case in September.

It also includes a “safety and reliability rider” that’s designed to streamline the process regulators and the utility use to review and approve costs for work that’s needed to improve the utility’s electrical distribution system.

Under the rider, PSO will be able to bring projects it deems are needed to improve its system to the commission’s Public Utility Division and the Oklahoma Attorney General for review, without having to wait until it makes a future rate increase request.

If regulators agree the project is needed and reasonable, PSO will be authorized to proceed with the work and pass on approved costs to its customers after work is done.

The amount the utility will be allowed to recover annually is capped at $5 million, which officials have said will keep potential impacts on customers’ rates low.

Additionally, the settlement changes the way regulators track some dollars that customers traditionally have paid to reimburse the utility for its costs associated with operating inside the Southwest Power Pool.

Officials said the change creates a more streamlined and transparent way of tracking those and, going forward, allows for adjustments to customers’ bills when those costs decline.

The utility originally had sought an $88 million rate increase annually, which could have resulted in a $7 monthly increase on the bill paid by an average PSO residential customer.

The settlement reduced that amount to $46 million, which dropped that monthly impact for residential customers by two-thirds. The agreement provides the utility with a 9.4 percent return on equity and requires it to wait until at least 2020 to file another rate increase request.

Commission Chairman Dana Murphy called the settlement a "win-win" that addresses key concerns of reliability and cost.

“The agreement is proof that in Oklahoma, parties with different agendas can reason together in a spirit of cooperation and collaboration with the ultimate goal being a result that benefits all,” Murphy said. “The settlement means Oklahoma will continue to be able to offer industry and residents alike reliable service at the lowest-average cost in our region.”

Commission Vice Chairman Todd Hiett agreed, noting that affordability and reliability have to go hand-in-hand.

“While Texas is already warning there may be brownouts in that state this summer as demand overwhelms supply, Oklahoma is able to offer the second-lowest average price for electricity in the nation, while also ensuring reliability,” Hiett said. “The settlement developed by the parties to this case supports Oklahoma’s enviable position in America when it comes to electric utility service.”

Commissioner Bob Anthony praised the settlement for providing certainty for customers and the company alike.

“Approval of this agreement means customers in all sectors now know what to plan for, without waiting for months while the rate case is litigated,” Anthony said.

“The agreement sets up a process in which PSO will be able to address, in timely manner, reliability projects that would otherwise may have to wait for a lengthy approval process, while still ensuring any costs are given a thorough and proper review to ensure customers get the full benefit for their money.”

The agency’s Public Utility Division reached a settlement with PSO on Feb. 27. Other parties involved in the negotiations included AARP Oklahoma, the Oklahoma Attorney General and Oklahoma Industrial Energy Consumers organization.

A spokesman for AARP Oklahoma said Thursday the organization supported the deal because it limited the rate increase and included protections for some of the state’s most-vulnerable consumers.

Peggy Simmons, PSO’s president and chief operating officer, also praised the settlement. The utility serves about 550,000 customers in eastern and southwestern Oklahoma.

“The agreement approved today will create a path forward for us to continue providing safe, secure, reliable and affordable service,” Simmons said.

The “safety and reliability rider” included as part of Thursday’s approved settlement is a feature that regulators have used in previous agreements to regulate natural gas service providers as they moved toward performance-based ratemaking, which was something PSO originally sought in this case.

Brandy Wreath, director of the Public Utility Division at Oklahoma’s Corporation Commission, told commissioners Thursday his staff continues to work with electrical utilities to iron out future issues that someday might make performance-based ratemaking for those entities possible.

“We are going to keep working on those,” Wreath said.

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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