CRITICS WARN BILL WILL HIKE ELECTRICITY RATES

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Oklahoma’s electricity rates, once among the nation’s cheapest, have increased dramatically in recent years.

Critics warn a bill recently approved by the House Utilities Committee may make things worse.

Under House Bill 4097, by state Rep. Trey Caldwell, there would be no competitive bidding for transmission projects with a rating greater than 300 kilovolts that would be completed within three years. For projects outside the three-year window, the bill says an “incumbent electric transmission owner has the right to own and maintain” the new line if the incumbent utility solicits bids for the project with the bid process handled by an official at the Oklahoma Corporation Commission.

A group calling itself the Alliance for Secure Energy has promoted HB 4097, declaring it will “Stop Obama/Biden Energy Policy.”

When presenting HB 4097 to members of the House Utilities Committee on Feb. 22, Caldwell said the legislation is “essentially a bill about asserting state sovereignty” because it would shift some control to the state and away from the Federal Energy Regulatory Commission and, he said, inject more competition into the process.

But a coalition of 14 groups disagrees.

That coalition’s members include Americans for Prosperity-Oklahoma, the National Federation of Independent Business, the AARP (formerly known as the American Association of Retired Persons), Americans for Fair Energy Prices Oklahoma, R Street, Oklahoma Industrial Energy Consumers (OIEC), the Electricity Transmission Competition Coalition, Industrial Energy Consumers of America, American Economic Liberties Project, the Glass Packaging Institute, Advanced Power Alliance, Coastal-FMC, Cardinal FG, and LS Power.

The group’s members describe HB 4097 as a “build to transfer” law and say it effectively discourages competitive bidding in the transmission market since incumbent utilities still have effective control, which critics say will ultimately boost the costs imposed on Oklahoma consumers.

The coalition says measures like HB 4097 are comparable to passing a state law that says “that only those with existing oil wells in the state could drill new wells.”

The groups call the idea a “scheme from the incumbent utility companies” that “would ostensibly allow competing companies to bid on the construction of high-voltage transmission lines authorized by the Southwest Power Pool, only to subsequently transfer the completed projects to incumbent utility companies.”

“Far from being a genuine compromise, this arrangement continues to entrench incumbent utility development, construction, and operation of transmission lines, while effectively compromising the wallets of ratepayers,” a handout from the coalition states.

In practice the groups opposed to HB 4097 say it will do “nothing to expedite the needed electricity infrastructure or enhance reliability,” but would instead “entrench” incumbent utility control and ultimately increase consumer costs because the system effectively deters competition.

The coalition noted this proposal is being advanced even as Oklahoma Gas and Electric (OGE) has requested a $332 million rate increase from the Oklahoma Corporation Commission that would result in an almost 14 percent increase in rates for consumers and a similar request has been submitted by PSO for a $218 million rate hike.

When he presented the bill in committee, Caldwell dismissed those arguments.

“There are some arguments on the negative side of this piece of legislation that will come out and they may say to you, ‘Well, this is going to stifle competition,’” said Caldwell, R-Lawton. “And that is completely false. There are over 15 companies in the United States that’s all they do is build and construct transmission lines. Those companies will bid.”

He said many companies are forced to be subcontractors under the current system.

In September 2022, the Alliance for Electrical Restructuring in Oklahoma showed that electricity rates surged by 49 percent from June 2021 to June 2022, bumping Oklahoma from having the most affordable electricity rates in the nation to having the 18th-highest costs. By July 2023, a report by WalletHub found that Oklahoma had the sixth-most-expensive electricity rates in the nation.

Caldwell declined to predict HB 4097 would prevent additional rate increases.

“Under this new system, your proposal, could you guarantee that my constituents’ rates will not increase?” asked state Rep. Mickey Dollens, D-Oklahoma City.

“No, I cannot guarantee anything,” Caldwell responded.

He added that the bill could generate “downward pressure” on rates.

Opponents have also noted that similar laws have been struck down by courts, pointing to a decision issued by the U.S. 5th Circuit Court of Appeals that struck down a Texas law and a ruling by the Iowa Supreme Court that struck down a law in that state.

The Iowa Supreme Court declared the Iowa law to be “rent-seeking, protectionist legislation” that was “anticompetitive.”

Dollens raised concern about a similar outcome in Oklahoma if HB 4097 becomes law.

“Do you foresee any chance that this could end up being litigated?” Dollens asked.

“One hundred percent,” Caldwell responded, but predicted HB 4097 would be upheld, saying there are differences between his bill and the measures struck down by courts.

In recent years, Oklahoma utilities have lobbied for legislators to pass new laws granting utilities greater control over transmission construction.

At a legislative study conducted last October, lawmakers reviewed a proposal to guarantee that incumbent utilities have the right to construct all new line for transmission projects involving up to 345 kilovolts.

David Osburn, general manager for the Oklahoma Municipal Power Authority (OMPA), which provides wholesale electricity to 42 Oklahoma municipalities, was among those who spoke out against that proposal.

Osburn’s presentation noted that transmission has been OMPA’s fastest growing expense over the past eight years, surging from $14 million in 2015 to over $23 million per year in 2023, an increase of 64 percent that occurred despite the OMPA’s load remaining virtually flat.

Osburn’s presentation noted that transmission has “become a growth opportunity for some regulated utilities” since they can earn a return of more than 11 percent on those projects.

OMPA officials argued new transmission projects should be competitively bid because that lowers up-front cost in the design process, pointing to recent transmission projects in the Southwest Power Pool, of which Oklahoma is a part. OMPA officials noted the original estimate for one transmission project was $376 million but the actual cost after competitive bidding was $291.6 million.

“The goal should be to control costs and keep transmission rates in check, and the best way to do that is to continue the existing structure,” OMPA’s presentation stated. “Giving incumbent transmission owners exclusive rights is akin to writing blank checks.”

The coalition opposed to HB 4097 noted millions have been saved on transmission projects in Oklahoma and elsewhere when true competitive bidding occurred.

The groups said $26 million in savings was generated by competitive bidding for the Minco-Pleasant Valley Draper transmission project, a 48-mile, 345 KV line in Oklahoma.

A 94-mile transmission project stretching from Kansas to Missouri saw projected costs reduced by $58 million due to competitive bidding, while a New Jersey project experienced $900 million in estimated savings from competitive bidding. A New York project saw $500 million in estimated savings.

HB 4097 passed the House Utilities Committee on a 10-2 vote. The bill can next be heard by the full Oklahoma House of Representatives.

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