On social media and in public comments at the Corporation Commission, Oklahoma utility customers are expressing their anger about higher electric and natural gas bills.
“I thought when I got older, I would be fine,” said a 70-year-old woman in Oklahoma City. “However, because of the rate hikes, I barely ever turn on my heater. I wear my coat in my house all the time now, because it’s too expensive to turn on my heater.”
About this story
This is a collaboration between Oklahoma Watch and KWTV-News 9, the CBS affiliate in Oklahoma City owned by Griffin Media. Oklahoma Watch reporter Paul Monies and Dana Hertneky, special projects reporter for News 9, reviewed public documents, regulatory filings and interviewed customers, regulators, utility experts company executives to find out why Oklahoma customers are paying so much more for their electricity and natural gas bills.
“This must be the most horrendous case of price gouging ever,” said an Edmond customer. “Oklahoma Natural Gas should have sued these companies instead of just passing on the bill to the customer with the ‘Ho-hum. It’s the customer’s problem now’ attitude.”
“I work with many seniors who are crippled under the weight of these fuel costs,” said another woman in Oklahoma City
The sticker shock comes two years after a winter storm blanketed the central United States with record-low temperatures, causing blackouts and even leading to deaths in Texas and other states.
Customers are directing their ire at utilities, lawmakers, the former attorney general and regulators, but there’s not a single culprit. The complicated nature of utility regulation meant all those players had a part in passing the burden to customers.
Oklahoma’s higher bills aren’t just from Winter Storm Uri in February 2021. Natural gas prices were above average the rest of 2021, and then spiked again last year after Russia invaded Ukraine. The combination of weather and geopolitical events have left Oklahoma customers on the hook for billions in fuel costs.
The increases are hitting households already dealing with the effects of inflation on groceries and health care. And because commercial and industrial customers are big consumers of electricity and natural gas, their fuel costs are passed along to retail customers. Rent is more expensive, leases have gone up, and higher energy costs are showing up in the form of higher fitness club membership or judo lessons.
“We didn’t feel like there was enough skin in the game by the utility companies,” said Sean Voskhul, director of Oklahoma AARP, which advocates for older Oklahomans and protects customers in rate cases at the Oklahoma Corporation Commission. “Not enough questions were answered about where the costs went, who’s paying for them. And unfortunately the customers have been stuck with the bill from day one.”
Curled Up ‘In A Ball Crying’
Customers like Ellen Graham are getting hit by higher utility bills at home and work. She and her husband, David, live in Oklahoma City and own The Village Laundry. They are electric customers of Oklahoma Gas and Electric Co. and gas customers of Oklahoma Natural Gas. The storm surcharges on monthly bills for the laundry are an extra $65 per month. Home surcharges total an extra $15 most months. Those charges will continue for decades.
“The only thing I’ve ever financed for 30 years has been my house,” Graham said.
“With the rising prices of gas and electric, we have to take our prices up just to cover it. We’re not trying to make a killing on it. We just want to make sure we are able to keep our employees, keep our customers happy, have good service in here and have newer (energy efficient) equipment.”
The utility crisis comes after years of relatively low natural gas prices. The electric generation system continues its transition, moving away from coal generation for environmental reasons and toward natural gas and renewable energy. It also has some asking if the regulated utility model is best for residential electric and natural gas customers if the cost of fuel is passed directly on to customers? Under Oklahoma law, utilities can’t profit on the cost of fuel.
Oklahoma is usually among the top five states for natural gas production. During the 2021 winter storm, the price of natural gas on the spot market spiked to more than 600 times pre-storm prices in the regional trading hub that serves Oklahoma. Other regional gas trading hubs, including those in Texas and Kansas, saw significant spikes during the storm. But not on Oklahoma’s scale.
Traders from several utilities doing business in Minnesota expressed dismay at the out-of-control prices on the Oklahoma hub in informal chat messages on the natural gas trading platform called ICE. The messages were obtained by the Minnesota attorney general.
The traders, who weren’t identified, talked about prices being “scary” and in “uncharted waters.” Others said “the world is ending,” while one said he “will be in a ball crying if you need me.”
To date, nobody has explained why prices on the Oklahoma trading hub were so much higher than other regional trading hubs.
Much of the price spikes can be attributed to freezing equipment and problems getting natural gas into pipelines during extreme cold conditions. OG&E representatives said they were under pressure from regulators to keep the lights on and customer outages to a minimum.
“Our primary responsibility was to maintain the electric supply to our customers,” said Kimber Shoop, OG&E’s director of regulatory affairs. “And I think we did that well. We just had to pay for the gas at the levels that were available in the marketplace.”
‘Oklahoma Was the Worst’
Some Oklahoma lawmakers were concerned about price gouging. Then-Attorney General Mike Hunter vowed to investigate. Hunter left office months later amid revelations of an extramarital affair. In his place, Republican Gov. Kevin Stitt appointed John O’Connor, whose office showed little interest in pursuing price gouging allegations.
Customers of the three biggest regulated utilities in the state — Oklahoma Natural Gas, Public Service Co. of Oklahoma and Oklahoma Gas & Electric Co. — did not see the storm’s high fuel prices appear on their bills in the months after the storm. That differed from customers in Texas, some of whom had monthly bills in the tens of thousands of dollars before lawmakers and regulators intervened.
In Oklahoma, the conversation shifted to how the utilities would pay for natural gas fuel costs that amounted to billions of dollars.
A post-storm report by Houston-based energy consultants Intelometry put the storm’s costs in perspective. Among the 15 states affected by the winter storm, utility customers in Oklahoma are paying the most. The state outpaced even Texas in charges to each residential customer.
“We just assumed Texas was going to be by far the worst, but Oklahoma was the worst,” said Intelometry’s Guy Sharfman, who co-authored the report with his colleague Jeffrey Merola. “But at the end of the day, the cause was nuts and bolts. It was a structural breakdown. Basically, physical supply couldn’t get to where it needed to go.”
Lawmakers quickly settled on ratepayer-backed bonds as an option to spread the enormous costs over several years so it would better fit customer budgets. It involved selling bonds to private investors, with the proceeds going to the utilities to pay for the fuel costs. Bondholders would be paid back with monthly surcharges on customer bills over decades including not only the fuel costs but interest payments, too. Stitt signed SB 1050 in April 2021.
A Few Lines of Lines of Explanation, $1.3 Billion in Costs
Ratepayer-backed bonds were by no means the only option available to Oklahoma utilities. They could have packaged the costs on corporate books in something called a regulatory asset. That allows them to set aside the costs and have customers pay back the debt over a period of time, usually between seven to 10 years.
In fact, before Stitt signed the securitization bill into law, the utilities all asked the three-member Corporation Commission for permission to put the fuel costs into a regulatory asset. Regulators approved the requests, but the method was rendered moot after all but one of the utilities opted to use securitization to pay for the fuel costs from the storm. In 2-1 votes in December, the Corporation Commission closed the regulatory asset cases.
Corporation Commissioner Bob Anthony, also the lone dissenter in most of the securitization cases, said closing the regulatory asset cases robbed consumers of a key piece of price transparency. The utilities promised to provide a full accounting of the fuel costs in the regulatory asset cases. But those costs were deemed “prudent” in the securitization cases. Fuel prudency is a key part of utility regulation where utilities are audited to make sure they aren’t profiting from fuel costs and they bought fuel in a reasonable manner.
“They gave us one page with three or four or five lines totaling $1.3 billion,” Anthony said of the fuel compliance report for Oklahoma Natural Gas. “Where’s my detail? How am I supposed to assess if this is prudent and reasonable?”
In an interview, Corporation Commissioner Todd Hiett said fuel costs from the storm were audited as part of the securitization cases, all of which had multiple public hearings that ended last spring. For a capital intensive business running power plants, transmission lines and poles, customers are better off when a utility’s borrowing costs are lower, he said.
“It’s important to the consumers in this state that the utilities maintain good credit ratings,” Hiett said. “And we’ve seen that after the securitization cases, all of the credit ratings have been maintained at the top levels.”
OG&E, which has about 68,000 customers in Arkansas, recently got approval from that state’s regulators to put the 2021 winter storm costs into a regulatory asset over 10 years. Like Oklahoma, Arkansas lawmakers passed a law allowing ratepayer-backed bonds as on option for utilities to pay for extraordinary storm costs.
OG&E told Arkansas regulators it studied securitization options but the $80 million in higher fuel charges probably wasn’t big enough to entice bond investors as interest rates keep rising.
“We looked at the benefits of securitization versus just doing it the regular way, and we decided that it was probably more cost effective for our customers to recover that over a 10-year period and just keep it on our books,” Shoop said.
Arkansas regulators approved OG&E’s method of recovering storm costs, but they are still investigating the appropriateness of how all utilities in Arkansas paid for fuel and how they performed during the storm. That scrutiny is ongoing.
Sharfman, the energy consultant with Intelometry, said he’s aware of just one case where a portion of fuel costs from the winter storm in 2021 were disallowed by state regulators. The Minnesota Public Utilities Commission criticized four utilities in that state and shaved 10% off the $660 million asked by utilities to pay for fuel.
“In the end, utilities could’ve done better to protect consumers from the risks of these price increases,” said Katie Sieben, that commission’s chairperson. “And going forward they need to be more diligent as these extreme weather events are becoming more frequent.”
Paul Monies has been a reporter with Oklahoma Watch since 2017 and covers state agencies and public health. Contact him at (571) 319-3289 or email@example.com. Follow him on Twitter @pmonies.