Oklahoma officials discuss proposed legislation to address high utility bills
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Updated: 3:02 PM CDT Apr 12, 2021
KOCO Staff
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Updated: 3:02 PM CDT Apr 12, 2021
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Good morning. I'm Senator James lee. Right. I chair business, commerce and tourism for the Senate and I recently was appointed by the president pro TEM To chair a select energy committee to investigate the February 2021 storms. As we all know. The february winter storm was widespread throughout the continental us. It brought sub zero temperatures to Oklahoma. For days on end. Our utility systems are not built for that type of weather. The cost of electricity generation went through the roof. Natural gas spiked incredibly high. Oklahoma was has approximately 4.5 billion plus an energy generation cost from the storm as field to generate has passed through the ratepayers. Ratepayers have the obligation for that expense. Doing nothing will financially devastating facts for Oklahoma, families, businesses and our overall economy. If we do nothing, this cost for families, seniors and fixed income, single working families could be strapped with bills they struggle to pay, leading them between paying for necessities or paying the electric and gas bill business is still reeling from the effects of the pandemic. Could be forced to make cutbacks. Layoffs to pay off these high utility bills. Both of these scenarios, we'll have rippling effects throughout our economy. If you remember several weeks ago, the governor, the president pro TEM the speaker and the A. G. Announced that they expected high utility bills would be investigated and solutions would be forthcoming. Since that time, several members from the executive branch, the legislative branch, including myself, have been meeting to find a solution to a very complex and difficult situation. The solution is securitization of the debt incurred by rate pairs during the winter storm and require legislation is set up that framework. This legislation will help manage the short term financial effects for Oklahoma families and small businesses. The legislation lowers the total monthly cost for most repairs and lengthens the amount of time to pay off that utility cost. Other states have pursued this option to pay for unplanned, significant recovery costs in the wake of large scales, natural natural disasters. What we need to remember is, Oklahomans will see higher bills. We use record levels of energy and fuel prices soared to record levels. The bill is coming due and we're taking the steps to ease the burden of paying it back. Securitization makes the most sense to help us deal with this problem. I want to be very clear, no long term harm to the state budget, no increase the state debt. State does not pay anything. We're only setting up the framework, plenty of safeguards and restrictions were built into the legislation. The state does not assume any debt or liability utilities not allowed to profit paid what they're owed and no more. After weeks of work, it's the best option for ratepayers. It's the best option for our economy and it's the best option for Oklahoma. With that. Now, I want to introduce my counterpart counterpart on this committee represented Gary mice and I'd like to publicly thank him for working countless hours with me to come up with a solution along with the rest of committee. With that represented mice. Thank you appreciate the opportunity. I too want to reiterate some of the comments made by my counterpart in the Senate. I appreciate your work on the on this as well. Um My name's Gary Mayes and state Representative for House District 31 Chairman of the House utilities committee. A few items that we want to discuss our first. This is not long term indebtedness to the state, this is not going to be on the state's balance sheet. One of the other things that we also wanted to do and address in this legislation is that we did not want to grow government in our efforts to solve for this problem. Uh Both of these points are addressed in the language of these bills. Uh what I mean by not growing government, we were able to identify an existing authority in the Oklahoma Development Finance Authority to ensure uh supervision and oversight of the issuance of these bonds. That's what I mean. Specifically when I talk about not growing government, secondly, we also wanted to address some of the safeguards and restrictions that were written into the bill. Examples are timely audits of costs associated with this storm, uh extensive required vetting and analysis by the Oklahoma Corporation Commission as it pertains to the regulated entities and costs associated with also a requirement of specific dates for the emergency in question. So that exact prices can be calculated again, that is all language that is in uh in the bills. Finally point that we wanted to make sure and be very clear are these costs were incurred so they were going to and are going to be paid for regardless what we are simply doing by passing these two bills and opening up these buckets is allowing for those costs to be spread out over a longer period of time to make it easier to pay for for the ratepayer and the customer. With that. I'd like to introduce brandy wreath to talk about billing. Brand is the director of public utilities. Mhm. Thank you, represented Mayes. Uh The Corporation Commission appreciates being able to be a part of this process to look for solutions related to the storm. Um I've prepared some information today, we thought it was important that people understand the order of magnitude that this storm has brought about for ratepayers and why this step is critical and necessary. So with that On if we can go to the next slide, we have a pre storm cost example that's showing here. And this is showing that an average customer on a gas system in the state of Oklahoma was roughly paying about $100 a month on their gas bill before the storm. And if you notice on the bottom right hand corner, the average cost. The total cost of gas delivered to those customers was about $3.37 per unit. And if we go to the next slide, this will show us If we were to take the storm and put it through traditional regulatory treatment and what's known as a fuel adjustment clause or what normally would happen at the commission. The first customer bill that they would have received after the storm with these new costs would have been roughly $1967 for one month of usage. So well over a total years billing and that would take it to an average of about $92 per unit delivered. Keeping in mind that this would not be a once and done scenario, they would not receive one large bill and it would be over. They would see those impacts for up to seven months after, through increased cost of gas, with those average bills Being around $1,200 a month for the next seven months in this gas scenario. Um, so if we go into the next slide, We have what we're actually proposing through the legislation or what the legislation is proposing through cost mitigation through securitization would take that average bill impact down to $158. So as was mentioned, it is still higher than the original $100 bill. These charges are not going to go away. But this is a way through extraordinary relief to bring that per customer impact down significantly and hopefully to a more manageable level and brings that average gas cost in this example to about $5.92. Keep in mind the additional thing that this does. That is so important that this legislation be a tool for the commission to consider is it removes the long term profit from the scenario While keeping utilities hole in the short run once it moves into securitization, that will not have profit built into it. And over the life of a ten-year example in this one utility alone, that would save around $400 million dollars in rape pair billing. So that's why this tool is so important to have as an option for the commission to consider as it's determining how these costs will be handled going forward. If we move to the next slide, this is just to give an order of magnitude. While the commission does not regulate municipal systems, we thought it was important that the public have an order of magnitude of how they were impacted collectively. The municipals that have reported so far usually spend about $1.1 million dollars during the february billion period. During the storm period. They were used and build $24 million $80 on a normal month And during the storm period a little over $2500 during the storm period. So as you can see, these impacts are devastating to individual customers without extraordinary relief. And the commission stands ready to have this tool available for consideration. And with that, I would like to hand it over to Jared Haines with the office of the Attorney general. Mhm. Thank you. Director Wreath. I am Jared Haines the chief assistant attorney general for the utility regulation unit at the Attorney General's office on behalf of the Attorney General. We would like to thank the other people standing with me today. Uh They have come together from the Senate, the House, the Governor's office and from the Corporation Commission to look at how we can mitigate the impact on Oklahoma customers. We appreciate their efforts and their work and we truly believe that having this tool available will be to the benefit of Oklahoma customers. As Director wreath laid out, there are significant savings on the interest costs of these bills that have to be paid back and they can be paid back over a longer period of time turning off the, the horrible impact in the short run that customers and households in Oklahoma could face. We also believe that this tool is consistent with our efforts to investigate market manipulation and price gouging in the natural gas market in Oklahoma. We believe that the bill would allow any restitution or relief for customers that we obtain to go back to customers and offset the bond payments that securitization would entail. We are excited to work with the Corporation Commission and other stakeholders to continue to evaluate this tool. We hope that it's bill that the bill is passed here in the Legislature to enable the Corporation Commission's review and I'll turn it over to Secretary Wagner from the Governor's office. Thank you. Thank you. My name is ken Wagner and I'm the Secretary of Energy and Environment. I think one of the things that we need to point out is the two bills. One will uh solely be focused on the regulatory side that that is traditionally and normally handled by the public utility division at the Corporation Commission. Uh, the second bill is broader, it uh if you recall six weeks ago when we first came before you and started talking about the storms that there was this whole class of non regulated municipal gas systems and others who would be affected by um non regulated gas costs that couldn't be afforded the same safeguards that you have at the Corporation Commission. So we have uh focused and this group was very broad. We have focused that on helping those smaller municipal systems. It would also include those wholesale providers who provide power to the municipalities like the Grand River Dam Authority or the Oklahoma Municipal Power Authority also are Great Electric Co Ops would be qualified to use this uh tool if they so choose. It would also include municipal gas systems to be broader. We also made it inclusive of rural hospitals, who may have incurred unprecedented costs at a rate that would seriously put in jeopardy their operations as well as school districts. And so, uh, this program is not mandatory. On the non regular regulated side. I would call it an opt in program. And so we're hopeful that we, when we, when we all got together and we realized that again, these costs have been incurred, we've so called, already incurred the debt. It's how do we pay for it? We wanted to provide another opportunity for those municipalities or electric co Ops or others who may want to take advantage of that to do so. So it's not without work and it's not without, you know, figuring out that system, how it works for that particular municipality or hospital or school district or whatever the case may be, But it is a pathway to save them potentially millions of dollars. Uh, the governor uh, certainly supports and thankful for being, uh, this opportunity being brought to us. Uh, we're thankful to the Senate, uh, and the House for their work. We know that that they've got their work ahead of them to get this passed through their members. I'd like to particularly thank the Senate staff and Jared and his staff at the Attorney General's and certainly General Hunter and Assistant Attorney tim downing for their work. It really was um, meeting almost every day for six weeks to, to analyze number one, collect data on non regulated systems. You'd be surprised how hard it is to find out what those bills actually were. And even today, they're still coming in and we don't have the full breadth of it. Um, Certainly the attorney general uh and Jared were instrumental in that, as was the Senate uh and house in in taking care of that. And of course, uh the Corporation Commission, um they requested of the governor that we help find another tool that would save potentially between 0.5 billion and a billion dollars to consumers on just cost of carry for this indebtedness and doing it in a way that I think benefits the consumer. Um It is helpful to the credit of the utilities and it also doesn't directly obligate the authority of the state or the appropriations of the state. And so were we, We think that this is the best possible in a bad situation, the best possible outcome in a bad situation. So we're hopeful that this will all come clear as you get to read the legislation and talk to others. But with that, I would like to turn it over to Mike Fiona of the Oklahoma missile. Thank everybody. I just want to thank all the legislative leadership, the Governor's Office. We have some municipalities in the state that are in desperate need. I received multiple inquiries weekly about this topic and we're not talking about our large cities. We're talking about our small municipalities. They cannot afford these bills. They need a lifeline. And the state is providing that because we're in desperate need. Uh, where to a point where some of these bills are exceeding these small communities annual budget. So we're desperate. We need help. We think this is a great solution. So I just want to thank everybody that's worked on this for our municipalities.