Violations, or not? Commissioners hear arguments on electric service cases
Oklahoma’s electric cooperatives continue to fight against various deals a larger, investor-owned utility made to serve customers in their territories.
The dispute involves the Retail Electric Supplier Certified Territory Act, approved by Oklahoma’s Legislature in 1971.
Language included in the act states its goal is to promote orderly extensions of electric service across the state by preventing duplicative facilities and fights between cooperatives and utilities over service rights.
As part of the law, legislators allowed for territorial infringements on an electric provider’s “exclusive” service territory, but only in cases where the power needs of a customer would be 1 megawatt or greater and only in cases where the energy provider extends its service to the delivery point.
Over the past several years, Oklahoma Gas and Electric Co. extended service to oil-field and commercial customers in electrical cooperatives’ service territories using the 1 megawatt exception provided for by the law.
But a key question before Oklahoma’s Supreme Court yet to be decided is whether the disputed deals are legal, given the utility is supplying customers with power obtained from third-party-owned transmission, not the system it uses to provide power to customers in its service territory.
The cooperatives argue OG&E is cherry picking cream-of-the-crop potential cooperative customers and revenues they could be paying to those nonprofits. Those revenues, they have said, would be used to boost services to their customers.
OG&E, meanwhile, maintains it is following the law. Its leadership repeatedly discussed how new service extensions boosted economic development efforts across much of the state by furnishing affordable, reliable energy to new customers that create jobs to build and operate facilities.
This month, elected members of Oklahoma’s Corporation Commission heard arguments related to administrative law judge recommendations on two pending cases that involve other issues surrounding the law that also could end up before the Supreme Court. Commissioners took the cases’ arguments under advisement.
CKenergy Electric Cooperative vs. OG&E
In the case of CKenergy Electric Cooperative vs. OG&E, the cooperative seeks a commission order that would back a judge’s recommendation to force OG&E to quit serving saltwater disposal facilities owned by Bison and Cimarex within CKenergy’s service territory. That territory covers a large portion of western Oklahoma including parts or all of Blaine, Caddo, Canadian, Comanche, Custer, Dewey, Grady, Kiowa, Roger Mills and Washita counties.
The issue involves the amount of power each of the facilities consumes, given that the law states the 1 megawatt exception involves “connected load for initial full operation.”
Attorney Brian W. Hobbs, representing CKenergy, argues neither facility has used a required 1 megawatt of energy that would be required for OG&E to serve those customers.
The utility counters that the nameplate capacity of each facility was 1 megawatt or greater, regardless of how much power each actually uses.
Patrick D. Shore, representing OG&E, agreed the act doesn’t define what connected load for full operation means.
“Both sides of this issue believe it means something different,” Shore said, noting the judge determined that meant to her what a facility’s load is when actual operations begin. “But you can’t make that determination until an agreement has been signed and a facility has been constructed. I don’t believe that the legislature intended that you would have to wait to turn a facility on before knowing whether or not you passed the 1-megawatt test. The utility cannot predict the future.”
Instead, he said he believes the legislature’s intent was to allow a utility to make that determination before a facility goes live through plan and specifications reviews.
The question has far-reaching implications, an intervener in the case argued.
“This is a very important case for cooperatives across the state,” said attorney Adam J. Singer, representing the Oklahoma Association of Electric Cooperatives.
He argued the utility, if victorious in this case, could work with potential customers to game the system on future projects by over-engineering a project to meet the 1 megawatt exception, knowing that whatever was being built wouldn’t reach that level of energy consumption.
“Either a connected load for full operation is equal to or greater than 1 megawatt, or it is not,” Singer said.
Oklahoma Electric Cooperative vs. OG&E
Oklahoma Electric Cooperative seeks an order from the commission in Oklahoma Electric Cooperative vs. OG&E that would ignore a judge’s recommendation to dismiss its cause.
Here, the arguments center on whether the cooperative should have more quickly raised objections to OG&E’s plan to provide electric service to a natural gas compression facility built within its service territory by Blue Mountain Midstream, a division of Riviera Resources.
Oklahoma Electric Cooperative serves portions of central and south-central Oklahoma, including parts of Canadian, Cleveland, Grady, Oklahoma and Pottawatomie counties.
OG&E and Blue Mountain argue the cooperative waited too long to object to its plans, given that it didn’t challenge the deal until after service to the 40 megawatt consumer had been activated.
Because it failed to raise the issue earlier, the cooperative voluntarily surrendered its rights to object and should be barred from pursuing the issue now because it could cause unreasonable hardships on Blue Mountain, they asserted.
Had the cooperative addressed the issue earlier by asserting its exclusive rights to serve the facility, attorneys representing OG&E and Blue Mountain argued the latter might have chosen to build its natural gas processing plant elsewhere, or not at all.
They said the cooperative, which provided Blue Mountain’s owner with temporary power to meet its construction needs to actually build the facility, had the ability then to discern what was being built and to raise an objection.
J. Dillon Curran, representing Blue Mountain, said electric motors are used to compress natural gas at the facility and that the company needed high-quality, affordable energy to power those motors.
“Blue Mountain chose to put the plant where it did because it believed OG&E would serve it,” Curran said. “We can’t move the plant, and we have concerns about reliability from OEC and cost changes on our power agreements that we would have limited ability to pass along to our customers."
Patrick Shore, representing OG&E, argued that Oklahoma Electric Cooperative knew about OG&E’s intent to serve Blue Mountain before the investor-owned utility spent money to build a substation to carry the load.
“They had the knowledge, and had the duty to come forward,” Shore said.
But Brian W. Hobbs, representing Oklahoma Electric Cooperative, argued OG&E didn’t reveal its intent to serve Blue Mountain when the two exchanged emails and met to discuss a shared right of way the investor-owned utility sought to use as part of its plan.
He said cooperative officials offered to meet with Blue Mountain representatives to discuss what was being built so they could offer permanent service to the facility, but noted those meetings never materialized.
“Every time I hear OG&E say a cooperative should have known what was going on, what I really hear is, 'you need to catch us doing things,'” Hobbs said. “The intent of the act was to provide exclusive service territories and to only provide exceptions on a limited scope. It is OG&E’s job to comply with the law.”