OKLAHOMA CITY — Utility regulators had few answers for ratepayers Tuesday when asked why consumers, instead of shareholders, should shoulder the burden for “astronomical” electricity costs resulting from February’s winter storm. They also could not — or would not — say who profited from the weather last winter that drove up prices and caused rolling power interruptions in order to prevent uncontrolled blackouts.
The three-member Corporation Commission faced criticism from two ratepayers following a debriefing with Lanny Nickell, chief operating officer of the Southwest Power Pool. The SPP operates the power grid across 14 states in the central United States, including Oklahoma, and is tasked with ensuring a reliable supply of power, a working transmission infrastructure and competitive wholesale electricity prices.
Some Oklahoma consumers and lawmakers, meanwhile, continue to press for answers as to why they’re facing more than $4.5 billion in additional energy generation costs as a result of February’s two-week winter storm. In Oklahoma City, temperatures reached minus 14, the coldest since 1889. The state stayed below 20 degrees for almost a week straight — the longest such period in at least 60 years.
The cold created major challenges for the state’s energy supply as renewable sources like wind and solar dropped to nearly zero production, natural gas wells froze and compressor stations went offline. Utility companies scrambled to buy energy at skyrocketing prices
“This has been a very mild-mannered discussion of $4 billion being added to people’s (utility) bills, especially all the Oklahomans on fixed income,” said Steve Goldman, a member of VOICE, a coalition of Oklahoma City area churches and community organizations. “The consumers performed well here. This is for the commission to look at the practices of the utilities themselves and suppliers to utilities.”
Goldman, who has been researching the issue, said it was not extra consumer demand that fueled price increases, but rather a spike in prices and the lack of energy generation. He said three elected commissioners alone are going to decide how to divvy up $4 billion worth of costs to consumers, who should be able to expect stability in prices.
“Shareholders of utilities sign up for risk,” he said. “That’s part of the stock and bond system. So we’d like to hear from the commission what they see as their next steps in protecting consumers.”
Commissioner Dana Murphy said there’s a process in place for deciding how to allocate that $4 billion, but noted that the commission doesn’t regulate all power-producers. Lawmakers, she also said, provided measures that allow for securitization of that debt over time.
Nick Singer, also an advocate with VOICE, said that securitization doesn’t eliminate the debt for consumers, it just spreads it out over years.
He demanded to know who profited off the winter storm.
Singer said he knows the investigation is ongoing, but “it’s just getting harder and harder to find who got these gigantic checks, and who made this money. I think that’s something that the public deserves to know is who we are giving all this money to.”
Brandy Wreath, director of the Commission’s public utility division, said the alternative to securitization would be bills that nobody could afford to pay.
But he noted that the OCC doesn’t regulate natural gas markets. Costs that are being passed through securitization will be filed as part of the rate case. He said those who profited could be kept under seal, meaning the public won’t get to see them.
Commissioner Bob Anthony also pressed Nickell about cost allocation and cause.
“There are enormous extraordinary costs that have been incurred, whether it’s by electric generation in our state or whether it’s natural gas service itself,” Anthony said. “And I’m curious to know, as a result of your knowledge and your studies here, what was the circumstance, what was the biggest driver that caused the costs to astronomically increase.”
Nickell said the majority of SPP’s analysis has focused on the reliability of its power grid, but said they observed market prices as high as $4,200 per megawatt hour. He said generators in SPP’s 14-state footprint had to pay over $1,000 for gas when it’s usually in the $2 to $4 range.
“That is the single largest contributing factor to the high prices of electricity during this time,” he said.
Murphy, the commissioner, said that while there might be caps on the prices of electricity, the SPP doesn’t have anything to do with prices in regard to natural gas.
Nickell said that the SPP is taking steps to shore up grid reliability.
SPP’s governing board, for instance, is now requiring that the organization send letters to all generator operators in the region, requiring them to inform the organization about plans to have and maintain the fuel necessary to assure the availability of energy generation for the upcoming winter season.
The board required that SPP perform an additional investigation into why the natural gas fuel supply failed. Policies are needed to enhance fuel assurance to improve generation availability and reliability in the region.
SPP officials said it’s also critical to advocate for improvements in gas industry policies including the use of price cap mechanisms to ensure supply is affordable and readily available during extreme weather events.
“I just want to assure everything on the commission, in Oklahoma, that this is not something we ever want to see happen again,” Nickell said.
He said SPP is going to do the best it can to make improvements, but there’s no way to guarantee that something like this won’t happen again.
“But I tell you, I’ve got a little bit of a career left, I hope, and I don’t want to see it ever happen again, so we don’t take this lightly,” he said. “We’re going to work diligently with our regulators and our members to put the right mechanisms in place.”
Janelle Stecklein covers the Oklahoma Statehouse for CNHI's newspapers and websites. Reach her at firstname.lastname@example.org.