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Regulators approve Oklahoma Gas and Electric's plant acquisition plan

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Regulators in Oklahoma have cleared Oklahoma Gas and Electric's plan to acquire AES Shady Point, near Poteau. [OKLAHOMAN ARCHIVES]
Regulators in Oklahoma have cleared Oklahoma Gas and Electric's plan to acquire AES Shady Point, near Poteau. [OKLAHOMAN ARCHIVES]

Members of Oklahoma’s Corporation Commission on Monday approved an order that will allow Oklahoma Gas and Electric Co. to spend about $27 million to acquire a 360-megawatt coal-fired plant near Poteau owned by AES Shady Point.

The plan also authorizes the utility to spend $26 million to buy a 146-megawatt natural gas-fired, combined cycle plant in west Oklahoma City owned by Oklahoma Cogeneration.

The order won’t allow the utility to begin recovering costs for acquiring the facilities until a pending rate case it has before regulators is settled, which should happen before the end of June.

The agreement also limits the length of time OG&E will have to recover those expenses to three years. The utility is a subsidiary of Oklahoma City-based OGE Energy Corp.

Commissioners issued the order after spending a couple of hours Friday hearing arguments about the competitive bidding process the utility used to make its selections and about a rate adjustment connected to its plan.

While the deal to acquire the plants does affect customers’ bills, utility officials told an administrative law judge and commissioners that customers won’t actually see an increase.

They said the costs to acquire the plants is less than what OG&E had been paying each for power under previously existing power purchase agreements in place with owners of both facilities, noting they expect customers will save at least $40 million each of those three years.

Jon Laasch, representing Oklahoma Energy Results, took issue with the competitive bidding process the utility used to select the two plants for acquisition.

Laasch argued the utility should have required interested bidders to include long-term fuel and maintenance costs for their facilities, and, that those costs should have been considered by the utility as part of its decision-making process.

Laasch noted a witness who testified for Oklahoma Energy Results in the case had estimated it would cost the utility more than $500 million to own and operate the two facilities during the remainder of their useful lives.

Richard Chamberlain, representing Walmart Stores East and Sam’s Club East, meanwhile, said the retailers were concerned the deal could set a precedence enabling utilities the ability to avoid the type of analysis regulators conduct whenever a rate increase is sought.

But attorney William Hume, representing OG&E, countered that 19 bidders submitted 94 proposals that included fuel sources of coal, natural gas, wind, solar and batteries located at 26 sites within 350 miles of Oklahoma City.

Technical conferences were held with potential bidders to discuss the utility’s need for capacity, the fitness of those facilities to meet that need, costs for consumers, and the bidding process itself.

“When Oklahoma Energy Results complains it (the process) was biased, what it really means is that the criteria didn’t provide an advantage for its client, who was a (losing) bidder,” Hume said.

As for the argument from Walmart and Sam’s, Hume noted the joint stipulation requires annual reviews and true ups of costs the same way a rate case would, adding that if additional costs must be recovered by three years, a rate case then would be required.

“These acquisitions have no material impact on OG&E’s customers, except for lower electric costs,” Hume said. “The whole point of the request for proposals was to shed two long-term contracts … to get a cheaper alternative to lower rates.”

Brian Alford, OG&E’s spokesman, previously said the utility plans to use the acquisitions to help it meet its capacity needs this summer.

The deal also must be approved by utility regulators in Arkansas, officials have said.

Sierra Club of Oklahoma, another critic of OG&E’s plans to acquire AES Shady Point, didn’t make arguments Friday.

Previously, though, it expressed concerns about OG&E’s plan because the operation had attracted past attention through how it disposed of coal ash generated by its operations.

OG&E officials previously said they intend to modify the coal plant’s operations to reduce its coal use by half, initially, and explore other potential ways to reduce the plant’s emissions and waste stream, going forward.

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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