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PSO customers could soon be receiving 20-year invoice for last February’s cold-weather fuel usage

By Tulsa World Staff

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    OKLAHOMA (Tulsa World) — Public Service Company of Oklahoma customers soon could be getting what amounts to a 20-year invoice for costs associated with a widespread and prolonged cold snap in February last year.

So with the anniversary of that deep freeze only weeks away, many rate payers are wondering whether they could be saddled with similar generation-length bills in the future.

The short answer is that’s possible.

“Everyone from an industry perspective understands that these extreme weather events may not continue to be extraordinary,” PSO President Peggy Simmons told the Tulsa World in a virtual meeting. “They may be a little more reoccurring. …

“I just continue to reiterate that we’re all integrated and we’re all looking at this and seeing how we work together to ensure the best outcome for our customers. It’s going to take work from each one of us.”

Lest anyone forget, the bone-numbing cold that hit Oklahoma and the region in February triggered chain reactions that depleted energy supplies and curtailed utilities’ stream of electricity.

Besides heating businesses and residences, natural gas also fuels many power plants. Burdened by more than a week spent in single-digit and, at times, subzero temperatures, Oklahoma saw state gas utilities and transport companies endure drastic spot-price increases, freezing wellheads and problems with commodity acquisition, line pressure and supply shortages.

For example, a total of 151.7 billion cubic feet of natural gas was delivered in the United States on Feb. 14, and 149.8 Bcf was delivered the following day, setting a record for the largest demand for a two-day period, according to the American Gas Association.

To conserve electricity and at the behest of the grid operator, Arkansas-based Southwest Power Pool, PSO had to conduct controlled service interruptions that affected tens of thousands of customers.

By the time everything had thawed, Tulsa-based PSO had paid $675.2 million for fuel and purchased power in February, an astronomical increase over the roughly $500 million it normally pays for such expenses over an entire year.

PSO is seeking to recover the $675 million in a securitization case before the Oklahoma Corporation Commission. If approved, those expenditures would be spread over 20 years and would raise the average residential customer’s bill, according to early estimates, by a little more than $4 a month.

“We’re used to heat waves here. We’re used to planning for those,” Simmons said. “We’re used to understanding what those impacts are and how we respond to that.

“The winter side of that, it wasn’t expected. … We’re learning from that and are going to be better prepared if something like that does occur again.”

Deborah Thompson, an attorney for OK Energy Firm, appeared on a Facebook forum Wednesday on behalf of AARP Oklahoma, which argues that higher utility rates put particular financial pressure on older Oklahomans.

Referring to securitization-linked rate increases by Oklahoma utilities, she said “it is likely that $6 billion will be extracted from customers from that two-week period in February. That is a huge amount of money that may be leaving the state and not available for customers to inject into the Oklahoma economy.”

PSO makes no profit on fuel and purchased power expenses. As for examining alleged price gouging during the winter of 2021, the Corporation Commission has no authority over energy trading markets. But the Federal Energy Regulatory Commission is investigating allegations of market manipulation during that time period, and in September, it released its findings for weatherizing the grid.

Simmons was asked whether PSO felt fleeced by the exorbitant natural gas prices it had to pay. February spot-gas values in parts of the country grew by 900% month-over-month, according to S&P Global, a New York-based data and analytics company.

“What we were thinking about at that time was keeping the lights on for our customers,” she said. “We were going out to get the supply we needed to keep our generation facilities up and running, and that’s what we did.

“I would much rather be sitting here having conversations with you and anyone else around expenses and the impact versus having conversations that we could not keep the power flowing and why someone lost a life. I’ll take that conversation all day long.”

To decrease the chances of a repeat of last winter, PSO said it’s doing its share.

The company has increased its hedging — although that, too, comes with additional costs, Simmons said. PSO, which serves about 400,000 customers in the Tulsa area, also is diversifying its fuel generation mix by bringing on more renewables.

One example is the company’s North Central Energy Facilities, its three wind farms in western Oklahoma.

Those farms — two are operating and the third will come online this year — are designed with a cold weather package that will increase performance during extreme weather. Had the facilities been operating in February and performed as designed, PSO said, the weatherization equipment would have allowed the facilities to save the company about $200 million in fuel costs.

Half of PSO’s energy is purchased from the Southwest Power Pool. Wind and natural gas represent about 22% each.

“We didn’t obviously profit from this event in any way and would have loved to see smaller numbers,” said Tiffini Jackson, PSO’s vice president of external affairs. “But we had to take what was available at the time.”

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