The Frontier: Commission OK Corporation’s Mechanism to Defer Certain Costs of Natural Gas Utilities | New
The Oklahoma Corporation Commission voted unanimously on Tuesday to allow one of the state’s largest natural gas utilities to begin preparations that it says will prevent customers from paying gas bills. in the coming months and will suspend gas cuts for non-payment until mid-April.
The measure approved by the commission allows Oklahoma Natural Gas to establish what is called a “regulatory asset” in which to defer spending related to the mid-February cold snap, waives the requirement that the cost gas increases and expenses are passed on immediately to customers and instituted a moratorium on gas cuts for non-payment until April 15.
The company’s costs that go into this regulatory asset – and what effect that will have on the monthly bills of Oklahoma natural gas customers – have yet to be determined by the company and the commission.
Oklahoma Natural Gas applied for the regulatory asset on February 18, and in a hearing before an administrative judge on February 25, the American Association of Retired Persons (AARP) requested the waiver. It was not granted by the judge at the time, but the company later agreed to voluntarily include the moratorium in its request the next day.
During the second and third weeks of February, the freezing of wellheads, pipelines and natural gas processing plants caused by below-freezing temperatures that affected much of central the country, in addition to Increased demand from customers and power companies, has caused gas prices to skyrocket in the daily spot and index markets, with some reports pointing to price spikes of more than 300 times the normal price.
Like other utilities, Oklahoma Natural Gas, a Tulsa-based division of ONE Gas, had to make gas purchases on the daily index and spot markets, bringing costs for the month of February alone to around $ 1. , $ 5 billion. By comparison, Oklahoma Natural Gas spent $ 306 million in 2019 on natural gas purchases.
To secure the funds to pay for the purchases, whose payments are due in late March, ONE Gas, the parent company of Oklahoma Natural Gas, which also covers parts of Texas and Kansas, secured an unsecured term loan of $ 2.5 billion from Bank of America. , NA, according to a recent SEC filing by ONE Gas.
In its file with the State Commission Corporation, Oklahoma Natural Gas estimates that, if the regulatory asset was not approved by the commission, gas prices for customers starting during the first billing cycle in April might require payments of $ 95 to $ 100 per decatherm. Usually, gas sells in the market for between $ 2 and $ 3 a decatherme.
Normally, the cost of purchasing gas is passed on directly to gas utility customers, which Oklahoma Natural Gas warned in its documents would result in sharp price increases on customers’ April bill and likely lead to significant price increases. cuts, people being unable to pay the inflated amounts.
In order to avoid this, the utility asked the company’s Commission to drop the requirement that the costs of adjusting the fuel price should be passed on immediately to consumers and allow the utility to place the February winter weather spending in an account known as “regulatory asset. “
“Basically it’s just a place… to park these costs for counting purposes only so that the commission can review them later when the invoices come in and the company has had a chance to put it all together. and present it, ”Curt Long, an Oklahoma Natural Gas attorney, told commissioners.
The costs that would be included in the regulatory asset include:
• Costs of natural gas from purchases made by NGOs on site and in daily markets.
• Costs and services of liquefied and compressed natural gas.
• Costs associated with temporary facilities used to build and maintain line pressure and delivery of supply to distressed or isolated locations.
• Maintenance costs of critical points and piping networks.
• Costs related to emergency response and outages, including materials, supplies and travel to ensure the stability and reliability of natural gas during the emergency.
• Deferred charges, such as charges to the business for debt financing charges used to fund deferred charges related to the emergency.
The commission should consider whether the costs classified in different cost categories by Oklahoma Natural Gas are prudent before approving them.
During the meeting, Commissioner Bob Anthony said he was concerned about a protection order approved by the commission last week that would temporarily protect items submitted by Oklahoma Natural Gas, including coverage information, consequences of the gas supply crisis on customer bills if it is not moderate. through regulatory relief, funding information and other elements. Anthony said the protection order was probably approved too hastily and showed “incredible secrecy”.
Mike Valez, of the commission’s utilities division, said the protective order is only temporary to allow real-time information sharing, and that before costs are submitted to the commission for approval, they must be made public.
“I think we’re going to have to go out to the audience,” said Anthony, “to go out to the consumers and have total openness and say it’s like an event that we hardly ever see.”
Commission chairman Todd Hiett echoed Antony’s sentiment that the commission only had two options, and neither were good.
“We really only have two options at this point. One is a bad option, and it is probably the option we need to choose to shift costs from today to the future. I don’t like to do that, ”Hiett said. “But I think the other option is a dire option. We know that at this point the regulated utilities alone have about $ 4 billion to $ 5 billion in extraordinary costs. What if these were to be billed to the consumers, I think that would trigger a downward spiral that would be detrimental to Oklahoma. ”
Electric utilities have also anticipated an increase in the cost of fuel used to power generators. Most of the electricity in Oklahoma is produced by natural gas. OG&E, which estimated it spent nearly $ 1 billion on fuel in February, filed a proposal with the Corporation Commission that would spread the cost to customers over 10 years using a similar regulatory asset.
Public Service Company of Oklahoma, along with gas utility companies CenterPoint Energy and Arkansas Oklahoma Gas have also submitted applications to the commission to create similar regulatory assets.
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