OG&E after $17.7 million Arkansas rate increase

OG&E seeks a $17.7 million rate increase for its Arkansas customers to help pay for more than $475 million invested in wind energy and other recent and planned expenses for a distribution system that covers 30,000 square miles.

The increase, if approved by the Arkansas Public Service Commission (PSC), will add an estimated $6.61 by the third quarter of 2011 to the average residential electric bill among the company’s 64,700 western Arkansas customers, according to information provided by OG&E. The company has about total 776,500 customers.

OG&E spokesman Brian Alford said the wide variance in energy use among commercial and industrial customers makes it impossible to estimate average increases for those classes.

The Oklahoma City-based electric utility received PSC approval on a $13.3 million rate increase in May 2009 after first requesting a $26.4 million bump. However, a fuel charge refund based on lower natural gas rates — OG&E uses natural gas to produce some of its electricity — resulted in a less than $3 increase on average residential bills. The 2009 rate increase was the first general rate increase OG&E received in 25 years.

In the Tuesday (Sept. 28) OG&E filing with the PSC, a “significant reason” for the rate request is to fund the company’s OU Spirit renewable wind energy facility that came online in December 2009 and the Windspeed transmission line — between Woodward, Okla., and Oklahoma City — energized in April 2010. The cost for both projects was about $475 million.

"The investments we’re making now help us save customers money by achieving our goal to reach the year 2020 without adding fossil-fueled electric generation," Howard Motley, vice president of regulatory affairs for OG&E, noted in a company statement. "The 2020 goal includes implementing demand management, energy efficiency programs and smart grid technology, all of which are designed to reduce peak demand and delay the need for the next power plant, providing significant savings for customers."

OG&E also noted in its filing that its Arkansas customers will continue to have some of the lowest rates in the nation if the increase is approved. The company cited the 2009 Edison Electric Institute report which noted OG&E’s Arkansas retail average rates were the 5th lowest in the nation.

“OG&E’s Arkansas rates are lower than 167 of the 171 electric utilities surveyed in the study. If the requested 10.5 percent increase was added to OG&E’s rates in the study, our Arkansas rates would still be lower than 159 of the electric utilities,” the company said in the filing.

The company also acknowledged it is giving Arkansas Valley Electric Cooperative Corp. more time to find a new electricity supplier. OG&E’s 2020 goal includes exiting the wholesale electricity business, which means several electric cooperatives have been scrambling to find new sources of power.

OG&E explained: “The Company is currently discussing a possible new contract with AVEC that would allow them time to find a replacement supplier as well as optimize the timing of the capacity transfer to the retail jurisdiction.”

Also on Tuesday (Sept. 28), the publicly held utility announced a dividend of 3.625 cents to be paid Oct. 29 to shareholders of record on Oct. 8. The company posted 2009 net income of $261.1 million, up 9.9% compared to 2008. For the first six months of 2010, the company recorded $103.1 million in net income, up 16.4% compared to the 2009 period.

OG&E shares (NYSE: OGE) closed Tuesday at $40.11, down 31 cents. During the past 52 weeks, the share price has ranged from a $42.25 high to a $31.66 low.