Average monthly residential OG&E bill to increase $2.32

Arkansas’ Public Service Commission on June 17 approved an $8.787 million rate increase on about 66,000 Oklahoma Gas & Electric customers in western Arkansas. That increase could soon be followed by another if the PSC approves OG&E-requested surcharges to cover technology costs.

The deal, which is $8.935 million less than OG&E originally sought, will see the average residential bill increase $2.32 beginning with the July statement. Commercial class customers who use 7,000 kwh may see their monthly bills increase $18.37.

“Even after new rates go into effect July 1, OG&E’s Arkansas residential rates will be 35 percent below the national average and 13 percent below the regional average, based on the most recent available data,” OG&E noted in a statement.

OG&E sought the rate increase to help recover $475 million for new wind energy facilities (OU Spirit Wind Energy Farm) and associated transmission lines. The increase also is intended to pay for $549.3 million in system expansions since the previous rate increase, and recent increases in facilities maintenance. In its filings, OG&E said it spent $14.7 million more on maintenance in 2010 than 2009.

The request for the new rates was first made Sept. 28, 2010, with a revision made Oct. 7, 2010. The PSC staff and Arkansas Attorney General’s office rejected the original request, and after several rounds of negotiations settled on the plan approved Friday.

“(T)he Agreement does not materially change cost allocation methodologies recommended by the AG, but does mitigate the impact on larger customers in conformity with accepted Commission practice, which is important given economic development concerns,” noted hearing testimony from the Attorney General’s office.

Howard Motley, vice president of regulatory affairs for OG&E, said the company’s goal is to invest in facilities that reduce future costs for the company and its customers.

"The 2020 goal includes implementing demand management initiatives, energy efficiency programs and smart grid technology, all of which are designed to manage peak demand and delay the need for the next power plant, providing significant savings for customers," Motley said in a statement.

The plan approved Friday is in addition to a rate change approved by the PSC in January that allows OG&E to recover from Arkansas customers about 11% of $2.1 million in costs related to the OU Spirit Wind Farm.

According to OG&E Spokesman Brian Alford, the average residential bill will increase by 14 cents in 2011, but is estimated to be reduced by 32 cents in 2012, reduced by 60 cents in 2013, reduced by $1.01 in 2014 and down $1.44 in 2015. The reductions are expected to result from lower electric-generation costs from the wind farm.

OG&E has a pending rate increase request before the PSC related to rolling out smart-grid and smart-meter technology in Arkansas. The company, in a filing first made Dec. 17, 2010, is asking for approval to add a surcharge to consumer bills to pay for the upfront costs of the new digital-measuring and management systems. OG&E has said the “net present value benefit” of the new technology to Arkansas customers after 15 years of use will be $26.3 million.

The AG’s office has rebutted the benefit claim through its expert witness Barbara Alexander. She has advised the PSC staff to “object to allowing OG&E to obtain cost recovery for an investment that relies on a projection of cost effectiveness that contains unsupported assumptions.” Alexander, an energy sector consultant who worked almost 10 years as director of the Maine Public Utilities Commission, further advised that OG&E shareholders assume more of the risk in rolling out the new technologies.

In his response to Alexander, Motley said the opportunity to quickly move to a new infrastructure to better manage and control electricity delivery and use falls outside the normal regulatory boundaries. He argues her old method of approaching public regulation of utilities hamstrings the ability of a utility to quickly adopt new technologies and systems.

“Under normal operations, the number of meters the Company would change out and install in one year would be a very small percentage. However, in this instance, the Company is replacing 100% of the meters in the Arkansas jurisdiction over a few months. Approximately 58,000 meters will be replaced irrespective of the remaining useful life to allow Arkansas customers to take advantage of a paradigm shift in technology,” Motley said in his testimony.

The case is set for a June 27 public hearing in Little Rock.