Court considers objections to power plant

OKLAHOMA CITY, OKLAHOMA - Chesapeake Energy Corp. and a consortium of Oklahoma businesses implored the state's high court to stop regulators from approving a proposed $1.8 billion coal-fired power plant.

The plant is the subject of a set of regulatory hearings that began before the three-member Oklahoma Corporation Commission. The decision rendered in those hearings could affect whether the 950-megawatt facility is built near Red Rock.

Opponents of the plant filed an action with the state Supreme Court last month, claiming that the OCC, the state agency that regulates utilities, does not have jurisdiction to approve the plant before construction begins.

They are petitioning the court for a writ of prohibition that, if granted, would restrain the commission from proceeding with the regulatory hearings.

"This is an exercise in unauthorized judicial power," Bob Nance, an attorney representing Chesapeake, said during the Supreme Court hearing.

Nance and the Quality of Service Coalition, a group of Oklahoma businesses and municipalities, maintain in court filings that the commission does not have the right to regulate and supervise the internal operations of a public utility.

And the commission's authority does not include pre-approving or determining the need for electricity generation facilities prematurely, according to the petition.

"It does not include the ability to invade the discretion of corporate management," Nance said.

Specifically, Oklahoma City-based Chesapeake and the Quality of Service Coalition are questioning a 2005 state statute that allows the commission to determine if there is a need for a generation facility, deem that the power would be "used and useful" and ultimately allow the recovery of the costs through utility rates.

While the OCC has had the power to determine if power is needed, the statute authorized the commission to make the determination before a facility was completed.

The proposed power plant, a joint venture between three electric utilities - American Electric Power-Public Service Company of Oklahoma, Oklahoma Gas and Electric Co. and Oklahoma Municipal Power Authority - is the largest single private investment in the history of the state, according to testimony given during the regulatory hearings.

Although the companies could proceed without approval from the commission, they might not.

"The dollars are too significant," AEP-PSO President and Chief Operating Officer Stuart Solomon told the commission.

AEP-PSO plans to invest $900 million in the facility and contends that it would like some "certainty" in recovering its costs at a later date.

The utility also is seeking a mechanism to recover the financing costs associated with construction of the facility through a separate, pending rate case.

Bill Humes, the assistant attorney general participating in the Red Rock hearings, said the commission is not overstepping its power in deciding the usefulness of the plant.

"It is voluntary in nature," he said of the regulatory hearings. "There is no interference in internal management decisions."

David A. Kutik, an attorney representing OG&E during the hearing, said the utility would like some idea of what the rate impact of the construction would be." But he assured the court that this was not a "red light, green light" approval process.

"The Legislature was merely approving a power the Oklahoma Corporation Commission already had," Kutik said.

Daniel E. Karim, a referee who presided over the hearing, will consider the arguments over the next week and present a recommendation to the Supreme Court, which will make the final determination.