OKLAHOMA CITY — Oklahoma’s attorney general “failed” utility consumers and abdicated his duty to advocate on their behalf regarding questions about one of the state’s largest utilities and whether it acted prudently in purchasing natural gas during extreme cold weather in February 2021, two Oklahoma Supreme Court justices wrote.
Attorney General John O’Connor, though, denied the allegation Wednesday.
Supreme Court justices Douglas Combs and Noma Gurich argued in their concurring opinion that O’Connor never took a position on whether Oklahoma Gas and Electric Co.’s (OG&E’s) winter storm purchase of natural gas was “fair, just, reasonable or prudently incurred,” and wrote that he also failed to litigate points raised by over a dozen protestants.
Those individuals had to represent themselves before the state’s highest court earlier this year in a case that sought to invalidate efforts to securitize nearly $800 million in costs stemming from the extreme cold.
The two justices wrote that O’Connor instead took the position that securitization of any amount would save OG&E consumers money. But, had he litigated the amount of the company’s extraordinary costs he would have likely saved consumers even more money, and achieved a much more “just” result, they argued.
O’Connor’s desire not to press those issues before the Oklahoma Corporation Commission, also translated into his failure to file an appeal with the Oklahoma Supreme Court. O’Connor would have been the best party to file the appeal because he didn’t have to post the nearly $1 billion bond that was required so that more than a dozen Oklahoma residents could have had most of their arguments considered on appeal.
The utility customers O’Connor is tasked with representing have “effectively been left without representation,” because their access to counsel lies with O’Connor, the justices wrote.
“Yet he has failed them,” the two wrote. “The lack of meaningful participation at the settlement stage, the failure to file an appeal of the Corporation Commission's financing order, and the decision not to intervene in this proceeding leaves this Court with no input from the utility consumers' statutorily appointed counsel and with few options when it comes to reviewing the (the Oklahoma Development Finance Authority) application to approve the bonds.”
The court also unanimously ruled Tuesday that the Legislature’s plan that allowed the securitization of nearly $800 million in winter storm debt was constitutional.
Under the plan, consumers would see a fee on their monthly bills potentially lasting several decades. The utility would collect that money from the consumer to repay the bond. Other states have securitized debt from natural disasters such as hurricanes along the Gulf Coast to avoid large upfront increases for ratepayers.
In a statement, Rachel Roberts, an O’Connor spokeswoman, said that his office has specifically supported efforts to reduce OG&E’s request, and it was reduced by $10 million in the settlement agreement approved by the Corporation Commission.
O’Connor was appointed to the post last year by Gov. Kevin Stitt following the resignation of his predecessor.
“Our office always vigorously represents the ratepayers and we have done so in this instance, despite the opinion of two justices who were not privy to the full process,” she said.
Roberts said securitization was the best way to meet the needs of customers while helping OG&E recoup costs from “the unprecedented storm.” She also said the bonds will save ratepayers hundreds of millions of dollars in interest that utilities would have been charged with traditional financing.
“Attorney General O’Connor is grateful that the legislature recognized the need to act quickly to establish sound fiscal policy and take advantage of low bond rates to maximize savings to Oklahoma consumers – which was specifically not within the purview of the Supreme Court,” she said. “As you know, interest rates are rising and any delay in the process was costly.”
OG&E’s case was the first of the state’s major public utilities to come before Oklahoma’s highest court. The case is expected to be a bellwether of what’s to come for the other utilities that have also asked the Corporation Commission to allow them to recoup billions of dollars in costs from consumers.
Mike Reynolds, a former Republican lawmaker, who is not an attorney, had to represent himself pro se before the Oklahoma Supreme Court. He said Wednesday that both he and the justices agreed that O’Connor should have been there representing consumers.
“I hope that John O’Connor guaranteed that he won't be reelected by not representing the ratepayers for $4.5 billion worth of bonds,” Reynolds said.
He also said that OG&E’s request is only the tip of the iceberg of securitization cases to come.
Public utilities reported that they were forced to buy natural gas at as much as $1,200 MMBtu (a unit of measuring natural gas equivalent to a million British Thermal Units) when it had been selling for about $2 to $3 just ahead of the February 2021 two-week cold snap.
The weather event generated nearly $4.5 billion in unexpected utility expenses. Corporation commissioners decide who gets to pay — ratepayers or shareholders, and if ratepayers, which ones. Commissioners also must decide if utility companies acted prudently when they bought gas in the period leading up to and during the storm.
The cost of just one case illustrates the impact on consumers. Commissioners recently voted to increase the average OG&E customer’s total bill by over $700, ordering consumers to pay an additional $2.12 a month on average for the next 28 years to cover the $748.9 million in fuel costs generated by that utility during the winter storm.
State Sen. James Leewright, R-Bristow, who authored the securitization legislation, said “it was an option to a bad situation.”
Leewright said he’s not in a position to comment on O’Connor’s actions or inactions, but lawmakers have put their faith in O’Connor’s office with expectation that he is continuing to investigate any companies that voided existing purchase contracts with Oklahoma public utilities using so-called “Act of God” clauses. He also said O’Connor should be continuing to work to recoup money to offset the new securitization debt.
“What we were doing with securitization was to give an option that either businesses and homeowners were going to get a one time huge bill or some way at a very cheaper rate, to be able to spread that out over time,” Leewright said. “Now even spreading it out over time, (it) still gives more time for the AG’s Office to see what they find out. And, if they find out there's wrongdoing then that can wipe that (debt) out.”
State Rep. Forrest Bennett, D-Oklahoma City, said O’Connor shirked his responsibility to the public in terms of securitization, which he called “a huge mess.”
“If the Attorney General was going to be focusing his energies on anything, it should be making sure that the people of Oklahoma aren’t getting ripped off by our utility companies,” Bennett said. “You would think even from a political standpoint this is so much more important to the average Oklahoman than any of the things that he’s been focused on. When he joins national lawsuits against the Biden administration, those lawsuits are going to carry on either way whether or not Oklahoma joins them, and so it would really behoove him to focus on helping Oklahomans keep our tax dollars, keep our utility dollars and make sure that we’re not getting fleeced for things that frankly were not in our control.”
Janelle Stecklein covers the Oklahoma Statehouse for CNHI's newspapers and websites. Reach her at firstname.lastname@example.org.