Oklahoma Commission Approves Rate Cut

A plan to cut the electric rates of OG&E Electric Services by $25 million annually won unanimous approval from the Oklahoma Corporation Commission.

The settlement between OG&E, the state's largest electric utility, and state regulators will save customers more than $150 million over three years. The average residential customer will save about $30 a year under the plan.

OG&E's 700,000 customers will begin seeing reductions in their bills in January.

OG&E agreed to the rate reduction even though it initially requested permission to raise rates by $26 million annually to pay for improvements to its system and repair damages caused by a January ice storm.

"The fact that what started as a rate increase became a rate decrease demonstrates why gas and electric utility rate case audits should occur regularly," Commissioner Bob Anthony said.

Although OG&E agreed to the settlement, the rate reduction will create some challenges for the utility, said Steven E. Moore, chairman, president and chief executive of OGE Energy Corp., the parent company of OG&E.

"The rate reduction presents us with the operational challenge to deliver the same reliable service, and the financial challenge to deliver the same shareowner value," Moore said. "We intend to meet these challenges."

In addition to the rate reduction, the settlement enables OG&E to acquire at least 400 megawatts of less costly, more efficient electric generation. That is expected to save customers an additional $75 million over three years, officials said.

If OG&E does not achieve that savings through the purchase of more efficient generation, the difference will be refunded to customers in the form of credits, officials said.

"The final settlement furthers the goal of maintaining abundant supplies of electricity at affordable prices," said Commission Chairwoman Denise Bode.

Oklahoma Attorney General Drew Edmondson and the staff of the Corporation Commission agreed to the rate reduction. Edmondson signed off on the deal even though he recommended a much deeper cut in rates -- more than $100 million a year.

"It is in the best interests of ratepayers that OG&E remain fiscally stable," Edmondson said. "A greater rate reduction could have resulted in company layoffs and less dependable service."

Staff of the Corporation Commission, which recommended a $43 million cut in rates, also agreed to the deal. Administrative Law Judge Jacqueline Miller, in a ruling last month, recommended that the commission adopt the settlement.

Under the plan, rates for residential customers will be lowered 1.56 percent, while rates for all other classes will be cut an average 2.24 percent.

Also customers will receive a bigger share of OG&E's off-system sales, Edmondson said. "Right now, when OG&E sells electricity to other providers, they're required to split the profits evenly with Oklahoma ratepayers," he said. "For the first three years of the agreement, the company will keep the first $1.8 million it earns in profit and return the next $3.6 million to ratepayers."

After that, 80 percent of such profits would be returned to ratepayers.

"The new configuration allows ratepayers to receive $2.28 million more on every $10 million the company earns from off-system sales," Edmondson said.

An order authorizing the agreement is expected to be signed by commissioners Friday.