The Finch Formerly Known As Gold

22 May 2005

The new OG&E rate case

There's some interesting stuff in the $89 million rate increase sought by OG&E. From the statement filed by CFO James R. Hatfield [requires Adobe Reader]:

Small business drives Oklahoma's economic growth, and it is clear that they have been paying more than their fair share for electricity for far too long.

So they get a rate cut, about seven percent. Not so lucky this bunch:

Large industrial and residential customers have enjoyed artificially low rates for several years, and it is time to bring them in line with what they should be paying.

And Tinker gets a break because it's, well, Tinker:

We are recommending that Tinker Air Force Base receive a special military base tariff that will result in cost savings. We hope this will contribute to efforts to better position Tinker as a critical military installation over the long term.

Take that, BRAC.

Down among the nuts and bolts, Roger Walkingstick, in charge of pricing and revenue analysis, notes the following with regard to the classes of service who are being hardest hit by the proposed new rates:

The existing subsidies among customer classes should be minimized, new rates should reflect a rate design consistent with marginal costs, and additional customer rate options should be offered to our customers.

Since [Residential and Large Power and Light] represent almost 60% of all energy sales in the Oklahoma jurisdiction, this presents a significant problem in rate design. Ideally, both classes should be moved to the average Oklahoma jurisdictional ROR [rate of return] and that is what I am proposing for the LPL class. However, the revenue impact of completely eliminating the subsidy for the Residential class would impose an unacceptable level of customer impact. This group of customers has limited ability to modify their consumption so as to mitigate increases and no way to pass those cost increases on to others.

So customers in the Residential class will still be subsidized, albeit at a lower level.

There's a lot of regulatory jargon in the proposal, of course, but there's a definite trend toward demand-based pricing, with higher rates in the summer (of course). The biggest change? Right now, you pay one rate for the first 600 kWh you use and a lower rate for usage over 600 kWh, except in the summer, when all usage is billed at the same rate. Under the new plan, the rate for summer usage will actually increase at the 1400-kWh point. There is also a new subsidy: customers qualifying under the Low-Income Home Energy Assistance Program will be exempted from the flat $6.50 customer charge that is included in the standard Residential rate during the four-month summer rate period. The net increase to Residential customers, they say, will be about 3.5 percent, around $3 a month.

Those of us who buy OG&E's wind-farm watts, however, get a break. Last month I paid $12 for my 600-kW package, offset by $7.55 in fuel adjustments I didn't have to pay. Under the new rates, if I'm reading this correctly, I wouldn't have any of the fuel adjustments — the new base for computing them would be higher than actual numbers for the month — but the cost of the package itself would drop from $12 to 60 cents, a $3.95 savings overall.

I can't imagine the Corporation Commission raising much of a fuss about this proposal; I expect it will be approved with minor changes at most.

Posted at 11:22 AM to Family Joules , Soonerland