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BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA
APPLICATION OF PUBLIC SERVICE COMPANY OF )
OKLAHOMA,AN OKLAHOMA CORPORATION, FOR )
AN ADJUSTMENT IN ITS RATES AND CHARGES ) CASE NO. PUD 2022-000093
AND THE ELECTRIC SERVICE RULES, )
REGULATIONS AND CONDITIONS OF SERVICE FOR )
ELECTRIC SERVICE IN THE STATE OF OKLAHOMA ) ORDERNO. 738226
AND TO APPROVE A FORMULA )
BASE RATE PROPOSAL )
HEARINGS: May 9,May 22-24, 2023, in Room 301 (live and virtual teleconference)
2101 North Lincoln Boulevard, Oklahoma City, Oklahoma 73105
Before Linda S. Foreman,Administrative Law Judge
August 15, 2023, in Room C50 (live and virtual teleconference)
2401 North Lincoln Boulevard, Oklahoma City, Oklahoma 73105
Before Commission en bane
APPEARANCES: Jack P. Fite,Anthony Hendricks, and Donald K. Shandy, Attorneys
representing Public Service Company of Oklahoma, an Oklahoma
Corporation
Michael L. Velez and Mike S. Ryan,Deputy General Counsels representing
Public Utility Division, Oklahoma Corporation Commission
A. Chase Snodgrass, Deputy Attorney General and K. Christine Chevis,
representing Office of Attorney General, State of Oklahoma
Kayla D. Dupler, John J. McNutt,Attorneys representing Department of
Defense and all other Federal Executive Agencies
J. David Jacobson,Attorney representing The Petroleum Alliance of
Oklahoma
Thomas P. Schroedter,Attorney representing Oklahoma Industrial Energy
Consumers
Deborah R. Thompson, Attorney representing AARP
Rick D. Chamberlain,Attorney representing Walmart,Inc.
Diana Hall,Attorney representing Alliance for Electric Restructuring in
Oklahoma
FINAL ORDER
This Case comes before the Corporation Commission ("Commission") of the State of
Oklahoma on the above styled and numbered Application of Public Service Company of
Oklahoma, an Oklahoma corporation ("PSO" or"Company") filed on November 22, 2022.
I. PROCEDURAL HISTORY
The procedural history of this Case through the date of the hearing held before the
Administrative Law Judge ("ALJ") beginning on May 22, 2023, is attached as Exhibit B to
Case No.PUD2022-000093 Page 2 of 19
Final Order
the ALJ Report and Recommendation ("ALJ Report") filed on July 14, 2023, and is
incorporated herein by reference.
At the prehearing conference before the ALJ on May 4, 2023, it was announced that
certain parties had reached an agreement, and a non-unanimous Joint Stipulation and
Settlement Agreement ("Stipulation") was subsequently filed on May 5, 2023, and is
incorporated herein by reference. As a result, the hearing resulted in the parties signing the
Stipulation ("Stipulating Parties") presenting the Stipulation and witnesses in support of the
Stipulation, and the parties not signing the Stipulation ("Non-Stipulating Parties") arguing
against the Stipulation and presenting witnesses against the Stipulation and addressing the
positions of the parties filed prior to the Stipulation.
On July 14, 2023, the ALJ Report was filed, as amended on July 17, 2023. The ALJ
recommended the Stipulation not be approved in its complete form.
On July 26, 2023, exceptions to the ALJ Report, as amended ("Exceptions"), were
filed either jointly or individually by all parties to the Case.
On August 1,2023,responses to the Exceptions were filed by PSO,AARP, and jointly
by the Non-Stipulating Parties, with motions for oral argument on the Exceptions and
corresponding notices of hearing setting the motions before the Commission en bane on
August 15, 2023.
On August 15,2023,the Commission granted the motions for oral argument and heard oral
argument on the Exceptions. Following the hearing, the Commission deliberated the Case, and
took the matter under advisement.
H. SUMMARY OF EVIDENCE
Documents filed in this Case are contained in the records maintained by the Court
Clerk of the Commission. Testimony was offered at the hearing. The entirety of the oral
testimony and arguments offered is contained in the transcripts of these proceedings. The
summary of the testimony of each of the witnesses filing testimony pursuant to Preliminary
Order No. 731885 was attached to the original ALJ Report as Exhibit C, and is incorporated
herein by reference. The summary of the evidence presented at the hearing was attached to the
original ALJ Report as Exhibit D, and is incorporated herein by reference. The filings and
exhibits that were admitted into the record at the hearing are contained in the records
maintained by the Court Clerk of the Commission.
III. FINDINGS OF FACT AND CONCLUSIONS OF LAW
Based on a review of the entire record in this Case, including a thorough review of all the
evidence,the Exceptions and responses thereto,the ALJ Report,as amended,and all arguments of
counsel, and upon a full and final consideration thereof, the Commission hereby adopts the
Stipulation, except as otherwise modified herein.
Case No.PUD2022-000093 Page 3 of 19
Final Order
Jurisdiction
1. PSO is an Oklahoma corporation authorized to do business in the State of Oklahoma. The
Commission finds that PSO is a public utility with plant, property, and other assets dedicated to
generation, transmission, distribution, and sale of electric power and energy within the State of
Oklahoma. This Commission has jurisdiction over this Case by virtue of the provisions of Article
IX, § 18 of the Constitution of the State of Oklahoma, and 17 O.S. §§ 151, et seq.
Notice
2. Due and proper notice of these proceedings was given as required by law, Commission
rules, and Order No. 731885.
Test Year
3. The test year in this Case is the twelve-month period ending June 30, 2022. The
Commission finds that 17 O.S. § 284 requires the Commission to give effect to certain known and
measurable changes occurring, or reasonably certain to occur, within six-months of the test year
end. The Stipulation took into consideration the requirements of 17 O.S. § 284.
Stipulation
4. The terms of the Stipulation presented to the Commission are as follows:
(a) The Stipulating Parties agreed and request the Commission approve a gross base
rate revenue deficiency of $155.2M based upon a return on equity of 9.50%, a
capital structure of 54.62% equity and 45.38% debt, and a weighted average cost
of capital ("WACC") of 6.94 percent.
(b) The Stipulating Parties agreed on various components to arrive at a revenue
deficiency.
(c) The Stipulating Parties agreed to cap the residential bill impact at 2.5% and an
agreed class revenue distribution.
(d) The Stipulating Parties agreed and request the Commission authorize the inclusion
of the Rock Falls wind facility in rate base and the inclusion of its operation and
maintenance expense in PSO's cost of service.
(e) The Stipulating Parties agreed to work together to develop a Financial Hedging
Pilot Program plan to be proposed within 180 days of the final order in this Case.
(f) The Stipulating Parties agreed and request the Commission approve the
depreciation rates set forth in Attachment A to the Stipulation be approved.
(g) The Stipulating Parties agreed and request Commission approval that a WACC
Case No.PUD2022-000093 Page 4 of 19
Final Order
return on the six-month post-test year stand-alone net operating loss carryforward
("NOLC")will be excluded from the base rate revenue requirement resulting from
this proceeding. Instead,the Stipulating Parties request that the amount be deferred
to a regulatory asset ("NOLC Regulatory Asset")—with no carrying charge, until
rates are effective in the next Chapter 70 base rate case. Upon receipt of a private
letter ruling from the Internal Revenue Service verifying PSO's approach, PSO
shall notify the Stipulating Parties and the NOLC Regulatory Asset shall be
recovered over a 20-month period through an interim adjustment to the Tax Change
Rider("TCR")being requested to be approved.
(h) The Stipulating Parties agreed PSO would withdraw its proposal to implement a
Formula Base Rate in this Case.
(i) The Stipulating Parties agreed and request the Commission approve amending
PSO's Fuel Clause Adjustment Rider ("FCA") to determine the fuel factors on a
semi-annual basis, as attached to the Stipulation.
(j) The Stipulating Parties request approval of the TCR attached to the Stipulation.
(k) The Stipulating Parties agreed and request Commission approval that the Southwest
Power Pool Transmission Cost ("SPPTC") Tariff be amended to reflect PUD's
recommendations. The proposed SPPTC Tariff is attached to the Stipulation.
(1) The Stipulating Parties agreed and request the Commission approve the proposed
Green Energy Choice Tariff("GECT") attached to the Stipulation.
(m) The Stipulating Parties agreed and request the Commission approve the Grid
Enhancement and Resiliency ("GEAR") Rider for a three-year term (2024-2026)
with a $6 million annual revenue requirement, as attached to the Stipulation.
(n) The Stipulating Parties agreed and request Commission approval to revise the
residential Base Service Charge to $17 per month. PSO is to recover the revenue
removed from the Base Service Charge in the kWh charge.
(o) The Stipulating Parties agreed and request the Commission to approve PSO's
change to large customer deposit policy.
(p) The Stipulating Parties agreed and request the Commission approve allocating
transmission costs on a 12CP basis.
(q) The Stipulating Parties agreed and request the Commission approve allocating the
Sundance and Rock Falls wind facilities on an 84% energy and 16% demand
allocator.
(r) The Stipulating Parties agreed and request the Commission approve all uncontested
tariff changes proposed by PSO.
Case No.PUD2022-000093 Page S of 19
Final Order
Non-Severability
5. Notwithstanding the non-severability clause contained in the non-unanimous Stipulation,
the Commission may enter an order that adopts some provisions of the Stipulation and modifies
or rejects other provisions. This order is based upon a consideration of the entirety of the record
and the law. This is a legislative proceeding in which the Commission has broad authority to fix
and establish rates that are just and reasonable. OKLA. CONST. art. 9, § 18; 17 Okla. Stat. § 152;
Matter of Application of Oklahoma Gas and Electric Company, 2018 OK 31, ¶¶21-22, 417 P.3d
1196, 1204. In the exercise of its legislative,judicial, and executive powers, the Commission is
required to reach its own conclusions based upon the evidence before it and that it may adopt,
reject, restrict, or expand any or all findings and recommendations of the ALJ. State ex rel.
Cartwright v. Oklahoma Natural Gas Co. and Oklahoma Corporation Commission, 1982 OK 11,
¶8, 640 P.2d 1341, 1343.
During the hearing, no party requested a full hearing on the merits if the Stipulation was not
adopted. At the conclusion of the hearing, all pre-filed testimony was admitted into the record;
therefore, in addition to the oral testimony provided during the hearing,the Commission reviewed
the pre-filed testimony and attachments to provide substantial evidence supporting this Final
Order.
A Table reflecting the modifications in this order is set forth as follows:
PSO Revenue Deficiency($000) 293,952
PSO Filed Rebuttal
Six Month Post Test Year Rate Base (15,107)
Six Month Post Test Year Expense/Revenues 15,652
Total Rebuttal 545
PSO Filed Rebuttal Revenue Deficiency($000) 294,497
Return Adjustments-Rev Req.Level
ROE-9.3%(Hypothetical capital structure of Equity 52%/Debt 48%) (37,341)
Change in Income Taxes Synch with ROE (11,817)
Change in Rate Base Return(9.5%to 9.3%-all items excluding Rock Falls) (1,647)
Change in Cost of Debt(due to hypothetical capital structure) 4,445
Total Return (46,360)
Expenses/Revenues-Rev Req.Level
Remove NE3 Accelerated Depreciation (46,358)
Remove Intangible Plant Amortization (17,188)
Remove Depreciation Expense Adjustments (6,640)
NOL Deferred until IRS Verification (6,405)
Storm Damage Expense (4,300)
Storm Amortization(5 years) (4,413)
Incentives(50%ICP,0%LTIP) (7,629)
Remove Annualized Payroll Adjustment (2,315)
SERP (430)
Exclude Rock Falls plant,depreciation expense,ad valorem,and O&M (21,251)
Total Expenses/Revenues (116,929)
PSO Final Order-Base Rate Revenue Increase 131,208
Less Offsets-Riders,PTC and Fuel Offsets (83,927)
PSO Final Order Revenue Deficiency-Net($000) 1 47,281
Case No.PUD2022-000093 Page 6 of 19
Final Order
Revenue Requirement
6. The Stipulation proposed a base revenue deficiency of$55,000,000 and WACC of 6.94%.
PSO witness Horeled testified that in its Application, PSO initially sought an approximate
$294,500,0001 increase in its base rates. (Horeled Direct Testimony, p. 7, 1. 5.) However, the
recommended revenue deficiencies changed after responsive and rebuttal testimonies were filed.
The approximate gross base rate revenue deficiencies asserted by the parties were PSO's (rebuttal
position) $294,496,000, PUD's $169,700,000, AG's $132,600,000, and OIEC's $78,918,000.
DOD/FEA and Walmart did not make a fall revenue requirement recommendation. (Horeled
Settlement Testimony,p. 2, 11. 1-4; Day Settlement Testimony, Ex. TAD-1R.)
The Stipulation establishes a gross base rate revenue deficiency of approximately $155,200,000
and, net of riders, production tax credits ("PTC"s), and fuel offsets, provides a net deficiency of
$50,000,000. Also, PSO determined it would receive additional revenues to be derived from the
SPPTC Tariff and through the GEAR Rider. (Id. at 11. 7-11.) The Non-Stipulating Parties
recommend a base rate revenue requirement deficiency of$110,172,000 and, net of riders, PTCs,
and fuel offsets, results in a net deficiency of$4,994,000. (M. Garrett, Settlement Testimony, p.
11, 1. 24, Table.)
Based upon the modifications set forth herein, the approved gross base rate revenue deficiency is
approximately $126,763,000, and, net of riders, PTCs, and fuel offsets, results in a net deficiency
of approximately $47,281,000 and a WACC of 6.69%. Further, PSO is authorized to retain up to
$21,251,000 on an annualized basis for the treatment of the Rock Falls wind facility, as further
discussed herein.
Return on Equity
7. The Stipulating Parties request a Return on Equity ("ROE") of 9.5%. (Stipulation,¶ La.)
The Non-Stipulating Parties argued for an ROE of 9.3%. (D. Garrett Settlement Testimony p. 9,
1. 5.)
PSO initially requested a 10.4%ROE,but negotiated an agreement with the Stipulating Parties to
request a 9.5% ROE. (Horeled, Tr. 5/22/23 a.m., p. 22, 1. 24 - p. 23, 1. 5.) PUD witness Stroup
testified that an ROE of 9.5%is higher than the PUD's filed position of 9.0%but is within PUD's
range of reasonableness. PUD agreed to the requested 9.5% ROE in the interest of compromise.
(Stroup Settlement Testimony p. 5, 11. 12-14.)
AG witness Bohrmann testified that although AG witness Dr. Woolridge recommended an ROE
of 9.0% (within a range of 8.75% and 9.3%), to facilitate settlement the AG agreed to the 9.5%
ROE in the Stipulation. (Bohrmann, Tr. 5/23/23 p.m.,p. 10, 1. 15 -p. 12, 1. 5.)
OIEC witness David Garrett testified that an awarded ROE in a rate proceeding should reflect
actual, market-based equity costs. Basing equity costs on any other criteria runs the risk of
authorizing an excess wealth transfer from customers to shareholders. (D. Garrett Settlement
Mr.Horeled explained the dollar figures he used in his testimony were rounded. (Horeled Settlement Testimony,p.
9, 1. 3.)
Case No.PUD2022-000093 Page 7 of 19
Final Order
Testimony, p. 5, 11. 1-5.) In this matter, witnesses discussing ROE relied on a proxy group to
obtain key inputs required for the financial models they utilized to estimate the cost of equity. (Id.
at p. 6, 11. 13-15.)
According to Mr. Garrett,the 9.5%ROE requested by the Stipulating Parties is significantly higher
than any objective, academically sound estimate of PSO's cost of equity, regardless of which
capital structure is used. (Id. at p. 5, 11. 13-15.) Mr. Garrett testified that the 9.3% ROE
recommended by Non-Stipulating Parties might still be considered fair because it represents a
small move toward the market-based cost of equity. (Id. at p. 9, 11. 16-18.) A 9.3%ROE is within
the ranges recommended by the parties and begins to move toward the market-based cost of equity.
In PUD's original testimony, witness Rush emphasized that utility companies, as defensive firms
with low betas and low market risk, are relatively unaffected by changes in market conditions
thus should be taken into account when determining a utility's allowed return. (Rush Responsive
Testimony,pp. 11-12.) Further,Mr.Rush explains that PUD embraces the concept of gradualism.
(Id. at p. 25, 11. 5-8.) The Commission supports this approach.
The Commission has broad authority to establish the lowest, reasonable utility rates. In
consideration of the relatively limited financial risk of PSO shareholders, and considering an
evaluation of similarly situated proxy companies—while a 9.3% ROE is greater than PSO's
market-based cost of equity, it is supported by substantial evidence and gradually begins to move
in the direction of a market-based cost of equity. Further, this reduction in ROE results in savings
to ratepayers and is fair,just, reasonable, and in the public interest.
The resulting ROE must offer the public utility the opportunity to earn a fair return on its
investment, allowing a return similar to returns on other similarly risky investments, providing
confidence in the financial integrity of the company, and allowing the company to attract capital.
See Federal Power Comm'n v. Hope Natural Gas Co., 320 U.S. 591, 603 (1944). A 9.3% ROE
meets all the necessary elements set forth in the Hope case.
Capital Structure
8. The Stipulating Parties proposed PSO's actual capital structure consisting of 45.38% debt
and 54.62% equity, resulting in a WACC of 6.94%. (Stipulation,p. 1,¶ La.)
PUD witness Stroup testified that the Commission has a duty to determine whether a company's
proposed capital structure for ratemaking purposes is reasonable, and that the Commission does
not have to accept the company's actual capital structure. (Stroup, Tr. 5/23/23 p.m.,p. 119, Is. 16-
22.) Mr. Stroup further testified that the capital structure of the proxy group that was utilized by
PUD witness Rush to determine his ROE recommendation contained 56% debt. (Stroup, Tr.
5/23/23 p.m.,p. 120, 11. 7-12.)
The average debt ratio of the proxy group used by PSO and the Non-Stipulating Parties is 56%.
The ratemaking capital structure proposed in the Stipulation is inconsistent with, and far more
expensive to ratepayers than the average capital structure of the proxy group. (D. Garrett
Settlement Testimony,p. 6, 11. 17-20.)
Case No.PUD2022-000093 Page 8 of 19
Final Order
Prior to the Stipulation, the following represents the positions of the parties: PSO witness
McKenzie and PUD witness Rush recommended using PSO's actual capital structure of 45.38%
debt and 54.62% equity; OIEC witness D. Garrett recommended a 55% debt and 45% equity
capital structure; DOD/FEA witness Walters recommended a capital structure consisting of 48%
debt and 52% equity; and AG witness Woolridge recommended a capital structure of 50% debt
and 50% equity.
A capital structure of 48%debt and 52%equity results in savings for ratepayers and is in the public
interest and should be approved. A capital structure as provided in the Stipulation that is weighted
toward equity favors shareholder interest over customers. (D. Garrett, Tr. 5/23/23 p.m.,p. 151, 11.
1-22.) As testified to by DOD/FEA witness Walters, PSO's proposed equity ratio of 54.62%
equity (excluding short term-debt) is nearly 10 percentage points higher than that of the other
proxy group's comparable equity ratio. (Walters Responsive Testimony, p. 24, 11. 5-7.)
Previously, the Commission has authorized long-term debt ratios of 51.49% in PSO's 2017 rate
case, 56% in PSO's 2015 rate case, 55.574% in the PSO's 2008 rate case, and 53.55% in PSO's
2006 rate case. (D. Garrett, Tr. 5/23/23 p.m.,p. 153, Is. 1-15.)
The debt ratio utilized for PSO's parent company, AEP, was 58% at the end of 2022. (D. Garrett
Settlement Testimony, p. 6, Is. 23-24; D. Garrett, Tr. 5/24/23 a.m., p. 42, Is. 9-19). Under PSO's
actual capital structure, customers would be required to pay a higher equity return on AEP's lower
cost debt because "equity" on PSO's balance sheet is funded in part with AEP debt. (Id. at p. 6, 1.
21 —p. 7, 1. 7.)
The authorized capital structure of 48% debt and 52% equity results in savings for ratepayers and
is in the public interest. Further, it is substantiated by the record, does not eliminate a profit to
shareholders, rather is a move toward a more balanced capital structure which is fair, just, and
reasonable.
Agreed Adjustments
9. The Stipulation sets forth additional adjustments to certain components of the base rate
revenue deficiency as discussed below. (Stipulation,p. 1,¶ Lb.) The following adjustments will
result in rates that are fair,just and reasonable and are therefore approved.
Storm Damage
Mr. Horeled testified that PSO recommended approval of two storm damage adjustments.
First, PSO requested to increase the amount of storm costs included in base rates to reflect
an updated three-year average. Second,PSO requested recovery of already incurred storm
expense over a three-year amortization period. These two adjustments reduced PSO's filed
rebuttal revenue deficiency by approximately$8,713,000. (Horeled Settlement Testimony,
p. 8, 1. 16 - 9, 1. 2.)
Incentive Compensation and Supplemental Employee Retirement Plan
Mr. Horeled testified the Stipulation had an adjustment to the incentive compensation and
Case No.PUD2022-000093 Page 9 of 19
Final Order
supplemental employee retirement plan ("SERP"). There was an adjustment to remove
50% of short-term incentive compensation ("ICP"), 100% of long-term incentive
compensation ("LTIP"); and 100% of SERP. These adjustments reduce PSO's filed
rebuttal revenue deficiency by approximately$8,059,000.
Annualized Payroll Adjustment
Mr. Horeled testified regarding the annualized payroll adjustment. (Horeled Settlement
Testimony,p. 9, 11. 3-8.) PSO requested cost recovery of a payroll increase effective April
1,2023. The adjustment reduces PSO's filed rebuttal revenue deficiency by approximately
$2,315,000. (Horeled Settlement Testimony, p. 9, 11. 3-8.)
Miscellaneous Adjustment
10. Another adjustment in the Stipulation is identified as "Miscellaneous" and reflects an
agreed reduction in the amount of$13,041,000. (Stipulation, p. 1, ¶ Lb.) This amount resulted
from the overall negotiations and compromises by and among the Stipulating Parties, and does not
have any specific items representing the calculation. (Horeled, Tr. 5/22/23 a.m.,p. 28, 11. 18-25 -
p. 29, 11. 1-5.)
The Commission recognizes that in settlement negotiations parties ultimately agree to certain
provisions in the spirit of compromise in which they might not otherwise accept. In this instance,
the Commission is modifying the proposed Stipulation, which may contradict the parties' internal
decisions which led to supporting the agreement. However, there is no additional evidentiary
support to assist the Commission in reaching its decision on this proposed reduction.
Accordingly, the Commission does not accept the Miscellaneous adjustment. There is no
evidentiary record beyond the parties' agreement in the Stipulation to substantiate the adjustment
to assist the Commission in considering any impact(s) resulting from it modifying provisions of
the Stipulation.Therefore,the Commission is crediting the$13,041,000 Miscellaneous adjustment
to PSO's gross base rate revenue deficiency.
Rock Falls Wind Facility
11. The Stipulation proposes to include the costs of the Rock Falls wind facility in base rates.
(PSO Stipulation, p. 3, ¶ Ld.) The Non-Stipulating Parties argued to exclude this wind facility
from rate base, along with property taxes, O&M expense, and depreciation associated with the
assets because it was acquired by PSO after the end of the six-month post-test year period. (M.
Garrett Settlement Testimony,pp. 12- 17.) Adding the Rock Falls wind facility to PSO's rate base
will increase PSO's revenue requirement by approximately $22,500,000.2 (Id. at p. 11; Horeled,
Tr. 5/22/23 a.m.,p. 49; Day Rebuttal Testimony, Ex. HMW-R1.)
PSO and PUD witnesses Horeled and Stroup testified that including the Rock Falls wind facility
in rate base will be beneficial to customers through PTCs, market revenue credits, and reduced
2 The estimate of$22.5 million for Rock Falls has been adjusted to reflect the corresponding modifications in this
order. The adjusted amount is approximately$21,251,000.
Case No.PUD2022-000093 Page 10 of 19
Final Order
fuel costs. (Horeled Settlement Testimony,p. 12; Stroup Settlement Testimony,p. 9.) Mr.Horeled
testified that the Rock Falls wind facility will provide estimated annualized PTCs of$18,300,000
and an estimated market revenue credit of $13,400,000 for the same time period. (Horeled
Settlement Testimony, p. 12.) These credits are not fixed, but are estimates based on historical
data. (Horeled, Tr. 5/22/23 a.m.,p. 50.) Mr. Horeled testified that the Rock Falls facility qualified
for a hundred percent PTCs in December of 20t7, leaving five years of PTCs remaining for the
facility, and those PTCs will be flowed back to customers. (Id. at p. 99, 11. 2-7.) However, PSO
is not guaranteeing the PTCs or market revenue credits but can guarantee that all benefits from the
PTCs will flow to customers. (Id. at 11. 15-24 —p. 53, 1. 19; Stroup, Tr. 5/23/23 p.m., pp. 134, 11.
18-21.)
In his underlying testimony, AG witness Mr. Bohrmann recommended that the Rock Falls wind
facility be excluded from rate base in this proceeding. (Bohrmann, Tr. 5/23/23,p. 23.) However,
in an effort to garner support for the overall settlement, the parties agreed it was acceptable to
include the Rock Falls facility under the PSO Stipulation. (Id. at 24.)
The Rock Falls wind facility was acquired by PSO on March 31,2023, and was placed into service
for PSO customers as of April 1, 2023, nine months after the test-year end and three months past
the six-month post-test year cut-off for additions for known and measurable changes. (Horeled,
Tr. 5/22/23 a.m., pp. 54-55.) The test year in this Case is the twelve-month period ending June
30, 2022. (Id. at 55.) Oklahoma law allows utilities to recover the costs of prudently incurred
investments that are placed in service within the test year or within six months after the end of the
test year. 17 O.S. § 284; Turpen v. Oklahoma Corporation Commission, 1988 OK 126, 769 P.2d
1309, 1316 n. 7; Southwestern Public Service Co. v. State, 1981 OK 136, ¶ 13, 637 P.2d 92, 97;
Arkansas Louisiana Gas Co. v. Sun Oil Co., 1976 OK 89, 554 P.2d 14, 15; Public Service Co. v.
Oklahoma Corporation Commission, 1983 OK 124, 688 P.2d 1274, 1276. Based upon the
evidence in this Case, the Commission is not persuaded to depart from this well-established
standard as it does not believe it to be sound public policy.
However,the Commission recognizes the benefits of this facility and the projected savings to PSO
and its customers,provided the estimates projected regarding the PTCs and market revenue credits
are realized. Accordingly, PSO is authorized to retain up to $21,251,000 on an annualized basis
until the net plant balance of the Rock Falls wind facility is placed into rate base.
Upon such time as PSO reaches $21,251,000 on an annualized basis for PTCs and/or market
revenue credits,any amounts exceeding$21,251,000 shall be credited to DSO's customers through
the FCA, as further discussed below.
PSO shall submit information to the Director of PUD and interested parties in this Case, on an
annual basis, reflecting the receipt of PTCs and market revenue credits. Upon such time as PSO
has received $21,251,000 from PTCs and/or market revenue credits on an annualized basis, PUD
shall flow all further receipts of PTCs and/or market revenue credits through its FCA.
Case No.PUD2022-000093 Page 11 of 19
Final Order
Financial Hedging Pilot Program
12. The Stipulating Parties agreed to work together to develop a financial hedging pilot
program to be proposed within 180 days of the final order in this case. PSO has agreed to work
with all parties in this proceeding to make this filing. (Horeled Settlement Testimony, p. 10, 11.
13-17.) It is in the public interest for PSO to explore the use of financial hedging as suggested by
PUD and set forth in the Stipulation.
Depreciation Rates
13. Mr. Horeled testified that there were three adjustments to depreciation expense, which are
based upon the recommendations of OIEC witnesses David and Mark Garrett and PUD witness
Dunkel. These adjustments remove the PSO request to accelerate the depreciation on NE Unit 3
($46,358,000); remove PSO's request to change the amortization period from five-years to ten-
years for intangible plant ($17,188,000); and remove various depreciation expense adjustments
($6,640,000). These three adjustments total an approximate$70,186,000 reduction to PSO's filed
rebuttal revenue deficiency. (Horeled, Settlement Testimony, p. 7, 1. 19 — 8, 1. 3.) OIEC witness
David Garrett testified this provision of the Stipulation was in the public interest. (D. Garrett, Tr.
5/24/23 a.m., p. 13, 11. 13-15.) The depreciation rates contained in Exhibit A to the Stipulation
will result in rates that are fair,just and reasonable and are therefore approved.
Net Operating Loss Carryforward (NOLC)
14. Since raising a potential normalization violation in 2021, AEP/PSO continues to await a
Private Letter Ruling ("PLR") from the Internal Revenue Service ("IRS") regarding treatment of
the post six-month Net Operating Loss Carryover("NOLC"), as first addressed in Cause No. PUD
202100055. In Order No. 722410, the Commission adopted the ALJ's Report and
Recommendation to approve an Amended Joint Stipulation and Settlement Agreement ("2021-55
ALJ Report"), which authorized treatment of the NOLC as follows:
A WACC return on the [NOLC] will be excluded from the base rate revenue
requirement resulting from this proceeding. Instead, the amount will be deferred
to a regulatory asset("NOLC Regulatory Asset")until rates are effective in the next
Chapter 70 base rate case. Upon receipt of a [PLR] from the [IRS] verifying PSO's
approach,PSO shall notify the Stipulating Parties and the NOLC Regulatory Asset
shall be recovered over a 20-month period through an interim adjustment to the
Excess Tax Reserve ("ETR") Rider ....
(Order No. 722410 and 2021-55 ALJ Report at p. 7,¶ 13.)
Pursuant to such provision, PSO properly sought treatment of the NOLC in this Case due to this
being its next Chapter 70 base rate case after the issuance of Order No. 722410. To date, the
anticipated PLR has not issued by the IRS and the treatment of the NOLC is therefore necessary
to be addressed herein.
As proposed under the Stipulation, a similar treatment as approved in Order No. 722410 is beijig
sought pending the IRS ruling. The Stipulation provides that a WACC return on the NOLC will
Case No.PUD2022-000093 Page 12 of 19
Final Order
be excluded from the rate base revenue requirement and that the amount of the NOLC be deferred
to aNOLC Regulatory Asset until PSO's next base rate case. (Stipulation,p. 3,¶ l.g.) PSO asserts
this approach is necessary to protect ratepayers from a normalization violation under the tax code.
(Horeled, Tr. 5/22/23 a.m.,p. 24, 1. 16 -p. 25, 1. 5.)
AG witness Bohrmann and PUD witness Stroup testified that a regulatory asset is a debt or liability
of ratepayers. (Bohrmann, Tr. 5/23/23 p.m., p. 20, 11. 1-5; Stroup, Tr. 5/23/23 p.m., p. 123, 11. 1-
4.) Witnesses for PSO,AG, and PUD acknowledged that it is not certain how the IRS will rule on
AEP's request for a PLR. (Horeled, Tr. 5/22/23 a.m.,p. 69, 11. 8-22; Bohrmann, Tr. 5/23/23 p.m.,
p. 20, 1. 6 - p. 21, 1. 8; Stroup, Tr. 5/23/23 p.m., p. 12, 1. 25.) OIEC witness M. Garrett and PUD
witness Stroup testified that the NOLC is not a liability of ratepayers at this time. (M. Garrett,
Tr. 5/24/23 a.m.,p. 56; Stroup, Tr. 5/23/23 p.m.,p. 123.) (emphasis added)
Mr. Garrett further testified that if the IRS issues a PLR which accepts AEP's new view of the Tax
Code, the ruling will be prospective, which would necessitate PSO filing an application at that
time to seek appropriate treatment. (M. Garrett, Settlement Testimony, pp. 19-20). AG witness
Bohrmann also testified that if the IRS accepts AEP's interpretation,the standard procedure would
be for PSO to seek Commission approval at such time for any corrections it deems necessary.
(Bohrmann, Tr. 5/23/23 p.m., p. 79.) The effect of any PLR would be prospective and not
retroactive. (M. Garrett, Tr. 5/24/23 a.m., p. 57, 1. 7 -p. 58, 1. 7.) See also Generic Legal Advice
Memorandum (GLAM) 132120-17.3
As proposed in the Stipulation,in the event the NOLC Regulatory Asset is authorized and if a PLR
is issued in AEP's/PSO's favor, PSO's ratepayers would bear the cost of approximately
$36,000,000 annually, and AEP's earnings would be increased by that amount. (M. Garrett,
Settlement Testimony, p. 18, 11. 12-14.) AG witness Mr. Bohrmann estimated that the impact of
the regulatory asset on ratepayers would be $38,000,000. (Bohrmann, Tr. 5/23/23, p. 22, 11. 17-
23.)
Although the Commission allowed the NOLC Regulatory Asset in a prior case, it recognizes such
treatment was part of a proposed settlement and may have been an improper treatment of this
issue.4 Moreover, the Commission is not bound by its prior decision(s), and has reviewed this
Case based upon its particular facts and circumstances. The Commission is not persuaded at this
3 In clarifying Revenue Procedure 2017-47 in its GLAM 132120-17,the IRS clarified its safe harbor for inadvertent
normalization violations as follows:
We are issuing this GLAM in response to concerns expressed by interested taxpayers that the phrase
"in a manner that totally reverses the effect of the Inconsistent Practice or Procedure"could be read
to require retroactive ratemaking in order to take advantage of the safe harbor. This GLAM clarifies
that the change from the Inconsistent Practice or Procedure to a Consistent Practice or Procedure
need only apply going forward and does not contemplate taking into account any differences
between the Inconsistent Practice or Procedure prior to the change and the Consistent Practice or
Procedure after the change such as though requiring retroactive ratemaking by the Taxpayer's
regulator. (emphasis added)
a See 202100055 ALJ Report at pp. 7-8 (summarizing the positions of the parties and ultimate compromise on the
treatment of the NOLC).
Case No.PUD2022-000093 Page 13 of 19
Final Order
time to allow PSO to continue recording the NOLC Regulatory Asset because it is an expense that
is not yet incurred, and not a current liability of PSO's ratepayers.
Accordingly, PSO is authorized to track the amount of the return that would be associated with
NOLC for the calculation of rate base, as well as the net excess amortization of excess ADIT in
the calculation of the cost of service.
Upon receipt of the PLR, PSO shall promptly provide the Commission offices and all parties to
this Case a copy of the IRS ruling. In the event the ruling recognizes a potential normalization
violation, PSO may initiate a docket before the Commission en banc to address the PLR("NOLC
Proceeding"). If PSO does not initiate the NOLC Proceeding, the NOLC shall be addressed in its
next general Chapter 70 rate case.
With respect to the regulatory asset previously authorized pursuant to Order No. 722410, upon
issuance of this Final Order PSO shall cease recording such regulatory asset but continue to
separately track the amount. All amounts previously booked as a regulatory asset, as well as all
amounts that continue to be tracked as authorized in this order, shall be addressed in the NOLC
Proceeding or PSO's next rate case to determine any necessary recovery from ratepayers pursuant
to the IRS ruling. To the extent the IRS determines that no normalization violation exists, PSO
shall write off the previously booked regulatory asset and such amounts will not be eligible to be
recovered from ratepayers.
While the Commission is not prejudging the outcome of this potential future issue, PSO is not
precluded from seeking recovery of the NOLC. However, any potential recovery and the
corresponding timeframe of such potential recovery from PSO's ratepayers will be properly
addressed in a future proceeding.
Tax Change Rider (TCR)
15. The Stipulating Parties request Commission approval of the TCR. The TCR, originally
established to provide benefits associated with the Tax Cut and Jobs Act of 2017, has been
rewritten to allow more flexibility for PSO to credit or recover other tax law provisions through
the TCR after receiving a Commission order. Factors in this rider will not be revised without
approval from the Director of PUD. (Horeled Settlement Testimony,p. 11, 19- 12,1.2.) However,
the provision in PSO's proposed TCR addressing the NOLC is not consistent with the Commission's
finding above, which rejects PSO's proposal to include the NOLC in a regulatory asset at this time.
Accordingly,the language in the proposed TCR that addresses the NOLC should be revised to conform
to the provisions of this order.
Formula Based Rates
16. No party opposed the withdrawal of the request for a pilot formula based rate proposal.
Further,the Commission notes the pending Notice of Inquiry,Case No. GD2023-000005,in which
further study on alternative ratemaking will be addressed and provide the Commission with
information in which to better inform its decision(s) on this issue in future proceedings.
Case No.PUD2022-000093 Page 14 of 19
Final Order
Fuel Clause Adjustment Rider (FCA)
17. The Stipulating Parties seek Commission approval to allow the fuel factors in the FCA to
be determined on a semi-annual basis rather than the current annual basis. This request is being
made to help reduce the amount of under-recovered fuel costs and allow for smaller adjustments
to the fuel factors. (Horeled Settlement Testimony,p. 10, 1. 18 -p. 9, 1. 2.) Such revision is in the
public interest and is approved. However, the proposed FCA additionally provides for automatic
treatment/flow through for the Rock Falls wind facility which is not consistent with the
modifications set forth above. Accordingly, the language in the proposed FCA that addresses the
PTCs and market revenue credits for Rock Falls should be modified consistent with the terms of this
order.
Southwest Power Pool Transmission Cost (SPPTC) Tariff
18. PSO's current SPPTC Tariff is the result of a settlement in PSO's last base rate case(Cause
No. PUD 202100055, Order No. 722410). The SPPTC Tariff currently includes Schedule IA
(NITs Admin 1)and Schedule 11 (Base Plan-unaffiliated third party and SWEPCO charges). PSO
requested to include Schedule 9, all of Schedule 11, and Schedule 12 charges.
PUD witness Chaplin recommended adding only a portion of Schedule 9 (NITs unaffiliated third
party) and Schedule 12 (FERC Assessment) expenses be added for recovery through the SPPTC
and not the Company's request for all of Schedules 9 and 11 expenses. (Chaplin Responsive
Testimony, p. 9, 11. 4-18.) Mr. Chaplin further testified that the portion of PSO's transmission
investments controlled by PSO should be collected in base rates. (Id. at p. 10, 11. 8-12.)
Schedule 12 reflects fees assessed by FERC and are based on the actual megawatt-hours of energy
transmitted in interstate commerce during the calendar year as reported on FERC Form 582. Mr.
Chaplin testified these fees are not under the control of PSO and allowing collection of the
Schedule 12 charges via the SPPTC Tariff would be in accordance with how other electric utilities
recover the cost of the Schedule 12 charges. (Id. at p. 11, 11. 4-18.)
The addition of the Schedule 9 and Schedule 12 costs that are beyond the control of PSO to the
SPPTC Tariff, as recommended by PUD witness Chaplin, and as attached to the Stipulation, is
approved as being fair,just, and reasonable.
Green Energy Choice Tariff(GECT)
19. The Stipulating Parties request Commission approval of the proposed GECT. The GECT
is a voluntary tariff and provides green energy options for all customers. The tariff allows for the
purchase of energy and/or renewable energy credits from PSO's owned or purchased renewable
energy. According to OIEC witness Norwood, "the new GECT rate offerings are optional and
appear to be a good first step in expanding the choices available to customers who wish to purchase
renewable energy." (Norwood Responsive Testimony, p. 16, 1. 8-10; Horeled Settlement
Testimony, p. 11, 11. 6-13.) The GECT, as attached to the Stipulation, is approved as being fair,
just and reasonable.
Case No.PUD2022-000093 Page 15 of 19
Final Order
Grid Enhancement and Resiliency(GEAR) Rider
20. The Stipulating Parties request Commission approval of the proposed GEAR Rider. The
GEAR Rider will recover costs associated with automation and technology upgrades as well as
other enhancements to advance efforts towards continued distribution grid resiliency. The GEAR
Rider has a term of three years (2024, 2025, and 2026) and has a revenue requirement cap of$6M
annually. (Id. at p. 11,ll. 14-18.)
Base Service Charge
21. The reduction of the monthly residential Base Service Charge from $20 to $17 should be
approved. Additionally, the residential rates should be designed to assure recovery of the $3
reduction in Base Service Charge revenue in the kilowatt-hour charge.
Large Customer Deposit Policy
22. PSO's non-residential deposit provision addresses payment problems but fails to address
load increases. The Stipulation requested Commission approval to address non-residential load
increases to reduce bad debts and therefore benefiting all customers. No party filed settlement
testimony in opposition to the proposed change. The change in the deposit provision for non-
residential customers is fair,just and reasonable and in the public interest.
Transmission Cost Allocation
23. The Stipulating Parties propose to allocate PSO's transmission plant costs using a 12CP
(coincident peaking) allocator. (PSO Stipulation, p. 4, ¶ l.p.) The Non-Stipulating Parties argue
for continuing that PSO's transmission costs continue to be allocated on a 4CP basis because
PSO's retail customers in Oklahoma are using PSO's system based on a four-month summer peak.
(M. Garrett Settlement Testimony,p. 21.)
The requested change to a 12CP method was proposed by PSO and supported by PUD and AARP.
(Stroup Settlement Testimony, p. 15.) Witnesses for PSO, AARP, and PUD testified that
transmission costs should be allocated on a 12CP method because the Southwest Power Pool(SPP)
allocates costs using a 12CP methodology and PSO is a member of SPP. (Horeled, Tr. 5/22/23
a.m.,pp. 96-98; Palmer, Tr. 5/22/23 p.m.,p. 69; Tr. 5/23/2 p.m.,p. 124.)
The Commission recognizes a need to further assess and evaluate whether the current cost
allocations for transmission remain appropriate in light of the arguments raised and PSO being a
summer peaking system in Oklahoma. However, based upon the record in this Case, it is without
enough information to persuade it to change allocations at this time. Further study and evaluation
should be presented to the Commission in PSO's next Chapter 70 general rate case, or other
applicable filing properly addressing transmission cost allocations, whichever first occurs.
Sundance Cost Allocation
24. The Stipulating Parties propose to allocate the Sundance and Rock Falls wind facility costs
using an 84% energy and 16% demand allocator. (PSO Stipulation, p. 4, ¶ l.q.) The Non-
Case No.PUD2022-000093 Page 16 of 19
Final Order
Stipulating Parties oppose this request and recommend that PSO's wind generation costs should
be allocated using a 4CP A&E(average and excess)allocation. (M. Garrett Settlement Testimony,
pp. 25-30.)
AARP witness Palmer testified that PSO's wind cost allocation would be aligned with cost
causation by allocating the portion of wind plant that can be relied upon for capacity value— 84%
using an energy factor, and the remaining 16% using a demand factor. (Palmer Settlement
Testimony, p. 11.) Ms. Palmer testified that the current methodology treats wind like all other
production plant, which results in allocating an excessive portion of wind costs based on demand
related load characteristics as opposed to energy related load characteristics, which resulted in
residential customers cross-subsidizing other customer classes. (Id.) AG witness Bohrmann
testified that part of the reasonableness of the stipulated energy allocator for wind facilities is to
better align the costs and benefits of the project. He further testified that most of the benefits of a
fuel-free resource are received by those who use the most energy. (Bohrmann, Tr. 5/23/23 p.m.,
p. 66, 1. 19—p. 67, 1. 9.)
AARP witness Nelson testified that using a demand factor to allocate all wind costs rather than
allocating some costs on an energy factor is detrimental because a demand allocator would move
production costs to residential customers,compared to an energy allocator—resulting in a situation
where residential customers cross-subsidize other customers, including large commercial and
industrial customers. (Nelson Responsive Testimony,p. 42, 11. 4-8.)
The Commission authorizes the Sundance wind facility to use an 84% energy and 16% demand
allocator. In authorizing this methodology in this proceeding, the Commission is not making a
final determination on this issue—rather, in an effort to further study the appropriate allocation of
wind facilities, it will utilize Sundance as a pilot project to further evaluate proper allocations.
Further, the Commission makes no such finding as other wind facilities within PSO's portfolio at
this time. PSO and/or other parties may request the Commission consider adjusting the allocation
for Sundance and/or other facilities in future Chapter 70 base rate proceedings.
Residential Cap
25. The Stipulation provides for a residential bill impact at 2.5% and an agreed class revenue
distribution. (Stipulation, p. 1, ¶ l.c.) The cap on the residential bill impact was a result of
negotiaion amongst the Stipulating parties. (Horeled Tr. 5/22/23 a.m.,pp. 47-48.)
As part of its underlying case,PSO conducted two(2)cost of service studies, one for jurisdictional
cost separation between PSO's wholesale and retail customers and one for assignment of costs to
the retail classes, which is used to determine the costs that different classes of customers impose
on the PSO system. (AP Schedules K and L). Additionally, PSO conducted a three-step process
to assign costs to the customer classes. The functionalization step defines costs as either
generation, transmission, distribution, or customer related. The classification step identifies the
basis (e.g., number of customers, energy kWh, or demand kW) for which the costs are incurred.
The allocation step assigns the functionalized and classified costs to customer classes. (Miller,
Direct Testimony, p. 4, line 19-p. 5, line 2). PSO proposed to use equalized revenue distribution
for the Company's proposed revenue distribution,resulting in moving major rate classes to parity.
Case No.PUD2022-000093 Page 17 of 19
Final Order
An equalized rate of return represents a scenario in which each customer class pays their costs as
allocated by the cost of service. Under this scenario,each class provides an equal return percentage
on their allocated portion of the Company's base rates. The use of equalized revenue in the
development of new rates was adopted by this Commission in Cause No.PUD 201700151. (Scalf,
Responsive Testimony, p. 13, line 11-p. 14, line 8)
The Commission recognizes in determining class revenue distributions,there is always a balancing
of interests and consideration of policy determinations. The Commission declines to adopt an
artificial cap on the residential class without substantial evidence presented. The modifications
adopted in this Order result in further reductions to PSO's revenue requirement, class base
increases, and class bill impacts and provide for a more equitable result.
Therefore, except as described in this Order, the Commission adopts PSO's cost of service
allocation studies, utilizing an equalized revenue distribution to bring each major class to an
equalized return,which includes the six-month post-test year adjustments. Establishing rates based
on the utility's cost of service produces equitable rates that reflect cost causation, send proper price
signals, and minimizes price distortions.
The Commission recognizes that the impact of this order, without adjustments, would result in
only one one sub-class of customers (LPL 1) receiving a negative bill impact, with the remainder
of this class receiving an increase. To more equitably address the overall bill impact for this class,
the reduction attributed to the LPL 1 subclass should be re-assigned to the LPL 2 subclass due to
it otherwise receiving the highest base increase. A comparision of PSO's original request, the
Settlement, and this Final Order as reflected in the following Table:
Base Revenue Percent Increase Total Bill Percent Increase
Rate Class Direct Settlement Order Direct Settlement Order
Residential Total 26.3% 11.3% 11.9% 10.1% 2.5% 3.7%
Commercial Total 31.7% 18.8% 12.3% 8.2% 3.2% 1.2%
Total Lighting 12.3% 14.5% 22.0% 5.8% 7.9% 13.8%
LPL 3 Total 49.8% 28.9% 21.3% 8.6% 2.0% 1.0%
LPL 2 Total 80.5% 44.0% 31.3% 11.2% 2.8% 1.2%
LPL 1 Total 63.6% 48.1% 40.3% 2.3% 0.0% 0.0%
Total Industrial 64.7% 37.3% 27.9% 9.0% 2.1% 0.9%
Total Retail 33.1% 17.4% 14.5% 9.2% 2.7% 2.4%
(Horeled Settlement Testimony,p. 13, 1. 14, Table 3; Stipulation p. 1, ¶ l.c.)5 (numbers rounded)
Uncontested Tariff Changes
26. The uncontested tariff changes proposed by PSO in its Application should be approved and
are fair,just and reasonable.
5 Final numbers will be provided by the Company when submitting the tariffs to the Director of PUD to comply with
the terms of this order.
Case No.PUD2022-000093 Page 18 of 19
Final Order
Interim Rate Refund
27. On May 22, 2023,PSO implemented an interim rate adjustment applicable to the base rate
charges of all PSO's retail customers, based on the terms of the Stipulation. PSO's interim rate
adjustment was implemented subject to refund.
A refund to customers of PSO's interim rate adjustment is appropriate and necessary to the extent
it exceeds the rates approved in this Final Order. The refund shall include reasonable interest at
the one-year U.S. Treasury Bill rate consistent with 17 O.S. § 152,and credited to PSO's customers
using the same allocation method by which the interim rates were collected from such customers.
The refund shall appear as a credit on the customer's monthly billing and shall be refunded in
equal monthly installments beginning with the first monthly billing cycle following the issuance
of this Final Order and concluding no later with PSO's April 30,2024,monthly billing cycle. PSO
shall submit a monthly report to the Director of PUD and a copy of such report to all parties
reflecting the refund ordered herein.
Based on the particular circumstances of this Case, and pursuant to 17 O.S. § 152(B)(5), the
Commission further finds that PSO shall provide refunds to customers who left the PSO system
prior to the credit ordered by the Commission. The refund shall be available to those former
customers who paid the interim rates. The refund shall be calculated on an average customer
monthly impact by class. The former customers' refund shall be the average monthly impact
multiplied by the number of months they paid under interim rates. Only customers who ended
service without starting new service on the PSO system are eligible for a one-time refund. Former
customers not in good payment status will first have their accounts credited, then any remaining
refund balance will be provided to them. Former customers shall have six months from the date of
this Final Order to request a refund from PSO. Thereafter, any remaining funds shall be included
in the deferred fuel account and credited immediately to PSO's fuel expense for the benefit of all
customers. The Commission further directs PSO to immediately issue press releases in its service
areas to inform former customers of any potential refund.
IV. ORDER
IT IS THEREFORE THE ORDER OF THE CORPORATION COMMISSION OF
OKLAHOMA that the Stipulation, subject to and as amended or superseded by the
modifications detailed hereinabove, is hereby adopted, and incorporated herein as if fully set
forth, as the order of this Commission.
IT IS FURTHER ORDERED that PSO shall track the receipt of any and all PTCs and
market revenue credits attributed to the Rock Falls wind facility, as set forth herein.
IT IS FURTHER ORDERED that the rates, charges and tariffs reflecting the terms of this
Final Order be and the same are hereby approved as fair just and reasonable, and shall become
effective with the date that PSO implemented interim rates,May 22,2023.PSO shall submit tariffs
to the parties that conform to this Order, including specific modifications to the TCR and FCA,
and the tariffs shall then be reviewed and approved by the Director of PUD.
Case No.PUD2022-000093 Page 19 of 19
Final Order
IT IS FURTHER ORDERED that PSO shall provide a refund to customers of all amounts
collected by PSO pursuant to its May 22, 2023,interim rate adjustment which refund shall include
reasonable interest at the one-year treasury bill rate consistent with 17 O.S. § 152, which shall be
credited to PSO's customers using the same allocation method by which the interim rates were
collected from such customers. The refund shall appear as a credit on the customer's monthly
billing and shall be refunded in equal monthly installments beginning with the first monthly billing
cycle following the issuance of this Final Order and concluding no later with PSO's April 30,
2024,monthly billing cycle. PSO shall submit a monthly report to the Director of PUD and a copy
of such report to all parties reflecting the refund ordered and provided herein.
CORPORATION COMMISSION OF OKLAHOMA
J. DD H Chairman
KIM DAVID, Vice Chairman
DISSENTING OPINION ATTACHED
BOB ANTHONY, Commissioner
DONE AND PERFORMED THIS 3rd DAY OF NOVEMBER, 2023.
pfply[MISSIO+
**
BY RDE ,OF TH COMMISSION:
GPRE L. RTHAM, Commission Secretary`s+o
CASE PUD 2022-000093 ENTRY NO.302 FILED IN 0CC COURT CLERK'S OFFICE ON 11/03/2023- PAGE 1 OF 6
BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA
APPLICATION OF PUBLIC SERVICE COMPANY OF )
OKLAHOMA, AN OKLAHOMA CORPORATION, )
FOR AN ADJUSTMENT IN ITS RATES AND )
CHARGES AND THE ELECTRIC SERVICE RULES, ) CASE NO. PUD 2022-000093
REGULATIONS AND CONDITIONS OF SERVICE )
FOR ELECTRIC SERVICE IN THE STATE OF )
OKLAHOMA AND TO APPROVE A FORMULA )
BASE RATE PROPOSAL )
DISSENTING OPINION OF COMMISSIONER BOB ANTHONY
Ongoing Dereliction of Dutv: Once Again, the OCC Ignores both State Statutes and the
Requirements of Its Own Orders!
On September 6, 2023, I issued a Deliberations Statement' detailing a multitude of ways in which
the record of this case to date was deficient. Among them, neither the utility nor the OCC Public
Utility Division ("PUD")had answered my repeated request for specific information about"Who
got paid how much for what?" among the $10.5 million in Bond Issuance Costs PSO reported
were incurred to issue its almost$700 million of 2021 Winter Storm bonds.2 I first requested this
information in September 2022(!) and have repeated it ad nauseum in the year since. Nothing has
changed; answers to this multi-million-dollar question remain incomplete, as literally highlighted by
the blanks in PSO's "Expense Comparison"posted among the so-called"Securitization Reports" on
the OCC website.3
On October 6, 2023, more than a year after PSO's bonds were issued, I asked the OCC PUD for the
same "Who got paid how much for what?" information, including actual cost amounts, for the
bonds' Ongoing Financing Costs, estimated by PSO in September 2022 to be some $700,000
annuallv for the next 20 years.4 On October 11, 2023, the director of the OCC PUD sent me an
email repeating the utility's earlier estimated amounts and stating:
PUD does not have access to "to date" data for the requested fees and costs.
Further,PUD does not have access to the identity of the entities that have received
funds as a result of the Ongoing Financing Costs or the specific services rendered.
Unbelievably, despite this agency's obvious failures to properly perform its constitutional duties to
"inspect the books and papers" of this monopoly public utility and"enforce just and reasonable
1 Anthony,Bob. "Deliberations Statement of Commissioner Bob Anthony"filed Sep. 6,2023:
httDs://Dublic.oce.ok.Rov/WebLink/DocView.asnx?id=14001425.
z PSO Issuance Advice Letter(Sep.2,2022)Attachment 1, Schedule B:
httDs://Dublic.occ.ok.aov/WebLink/DocView.aspx?id=12269700.
a PSO"Issuance Expense Comparison 3/31/2023":httDs:Hoklahoma.aov/content/dam/ok/en/occ/documents/pu/pud-
reports-pace/securitization-reports/pso/2023-03-31-pso-issuance-expense-comnarison.odf.
4 Supra Note 2,Attachment 2, Schedule B.
1
CASE PUD 2022-000093 ENTRY NO.302 FILED IN 0CC COURT CLERK'S OFFICE ON 11/03/2023- PAGE 2 OF 6
rates and charges against"'it, once again my fellow commissioners have approved an order that
flies in the face of the evidentiary record and leaves ratepayers on the hook for untold millions.
The OCC's Bond Financing Order Requires OCC "Control" of PSO's OnaoinR Costs.
Note that in its description of the Bond Financing Structure and related ordering statements, the
Final Financing Order in the PSO securitization case acknowledged that:
The actual bond issuance costs and certain onaoina financing costs will not be
known until on or about the date the Bonds are issued, other bond issuance and
ongoing financing costs may not be known until such costs are incurred.6
Note too that PSO's Final Financing Order stated that:
ODFA has no control over bond issuance costs incurred pursuant to a financing order
under the Act, apart from ODFA-related issuance costs. The only bond issuance
costs to be incurred directly by the Utility are servicer set up costs, costs related to
regulatory proceedings,miscellaneous administrative costs, external servicing costs
and the costs of Utility's accountants, and financial and legal advisors,which are
referred to as Utility Issuance Costs. The Non-Utility Issuance Costs will be outside
the control of the Utility because the issuer of the Bonds, the ODFA, is an
instrumentality of the state. The Commission will have control over Utility Issuance
Costs through its jurisdictional control over the Utility,but in a manner which does
not affect the securitization property.'
As I documented in detail in my April 2023 "Dissent, Part I" in the 2021 Fuel Cost and Prudence
Review cases,' debunking the myth that somehow everything related to the 2021 Winter Storm
costs and bonds had already been dealt with in earlier cases, the securitization cases' Final
Financing Orders pre-approved the bond terms and expenses (based on estimates) but never
audited them or found them to be prudent—nor could they have. The actual amounts of the
Securitization Expenses (including PSO's eventual $10.5 million in Bond Issuance Costs)would
remain unknown until the bonds were actually issued months later.
Sadly, once they were known, those actual Securitization Expenses for PSO's Winter Storm bonds
came in $200 million hiiiher than had been estimated.9 That fact alone should have prompted an
immediate audit. It did not, and more than a year later, the Cornoration Commission has vet to
author anv explanation of that outrageous cost overrun. Among many problematic and disturbing
5 Oklahoma Constitution,Article IX,Sections 28 and 18.
6 PSO Final Financing Order(OCC Order No. 723434),pages 24-25,paragraph 74:
httns://imaRinR.occ.ok.2ov/AP/Orders/occ3O453173.ndf.
7 Ibid,page 24,paragraph 71.
'Anthony,Bob. "Dissenting Opinion of Commissioner Bob Anthony[,Part I]"filed Apr.20,2023 in OCC Case Nos.
PUD 2022-000057/77/89: httDs://public.occ.ok.aov/WebLink/DocView.asnx?id=13594470.
9 See my"2021-2022 Oklahoma Ratepayer-Backed Bond Data-Estimates v.Actual"table(most recently filed on page
15 here:httos://public.occ.ok.eov/WebLink/DocView.asDx?id=14031966).
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CASE PUD 2022-000093 ENTRY NO.302 FILED IN 0CC COURT CLERK'S OFFICE ON 11/03/2023- PAGE 3 OF 6
discoveries uncovered by my own analysis (based largely on information from non-OCC and non-
utility sources), I have identified millions in"Issuance Cost Discrepancies"that I detailed in a
February 24, 2023 filing,10 raised again in the courtroom on March 28, and reiterated with
additional specifics in my September 6 "Deliberations Statement" in this case.
The evidence of potential wrongdoing I have repeatedly cited that remains totally unaddressed by
this Commission includes:
(1) The underwriters for PSO's bond issuance were paid some $250,000 more than
they bid to do the work, and $900,000 more than the lowest bid received from a
qualified underwriter. If not corrected by this agency [the OCC], when financed at
4.545% over 20 years, I calculate this sinele overvavment alone will cost PSO's
ratepavers some$2.2 million!
(2) Two expenses totaling $310,000 that appear to have exceeded PSO's $700,000
cap for"Utility Issuance Costs"were apparently recategorized as "Non-Utility
Issuance Costs" and passed through to ratepayers anyway. Again, if not corrected
by this agency, when financed at 4.545% over 20 years, I calculate these two
inappropriate charees will cost PSO's ratepayers more than $750,000.
(3) More than $1 million of the various Issuance Costs for PSO's bonds, including
legal fees, advisor fees, accounting fees and administrative costs, do not appear at all
on the State Treasurer's "Statement of Approval" for PSO. If not the State
Treasurer, who approved payment of these costs (all of which were apparently
securitized and passed through to the ratepayers)?
The section of PSO's Final Financing Order addressing"Ongoing Financing Costs" (page 15, Sec.
VI B.) says, in part:
The Utility has proposed an annual servicinLy fee equal to 0.05% of the original
principal amount of the Bonds for acting as initial servicer. This fee will be fixed for
the life of the Bonds and continuing thereafter until all WSC Charges have been
billed and collected or written off as uncollectible as long as the Utility continues to
act as servicer. In addition, the Utility, as initial servicer, has requested that it should
be entitled to receive reimbursement for its out-of-pocket costs for external
accounting services to the extent external accounting services are required by the
servicing agreement, as well as for other items of cost(excluding external
information technology costs, bank wire fees and legal fees,which are part of the
servicing fee)that will be incurred annually to support and service the Bonds after
issuance. As later discussed,the Utility is directed to include the servicing fee, as
well as servicing costs, as Dart of the Utilitv's subsequent General rate proceeding, as
applicable, to ensure that the Utility does not collect more than its incremental costs.
10 Anthony,Bob. "Commissioner Bob Anthony Questions Millions in Cost Discrepancies"filed Feb.24,2023 in OCC
Case Nos.PUD 2022-000057/77/89:httos://public.occ.ok.2ov/WebLink/DocView.aspx?id=13468654.
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CASE PUD 2022-000093 ENTRY NO.302 FILED IN 0CC COURT CLERK'S OFFICE ON 11/03/2023- PAGE 4 OF 6
For those who have not been paying attention, this PSO rate case is "the Utility's subsequent
general rate proceeding" as a part of which in 2021 the OCC ordered itself"to ensure that the Utility
does not collect more than its incremental costs."
PSO's Final Financing Order continues (page 24-25, Sect. V I D.):
73. Other than the servicing fee (which will cover external information technology
costs,bank wire fees and the fees of the Utility's legal counsel), the ongoing
financing costs that will be incurred in connection with a financing are outside the
control of ODFA, since ODFA cannot control the administrative, legal, rating
agency and other fees to be incurred by the Utility on an ongoing basis. However, the
Commission will have control over some of these ongoing financing costs through
its iurisdictional control over the Utility,but in a manner which does not affect the
securitization property.
77. The ODFA and the Utilitv shall report to the Commission through PUD, as set
forth in the Issuance Advice Letter, the final estimates of bond issuance costs and
ongoing financing costs for the first year following issuance.
And yet, according to the PUD director, the OCC does not have access to actual"data for the
requested fees and costs" or"the identity of the entities that have received funds as a result of the
Ongoing Financing Costs"! To point out the obvious, there has been no audit of the bonds'
Ongoing Financing Costs either—for PSO or any of the other"regulated"public utilities that used
bonds to finance their 2021 Winter Storm costs.
PSO has estimated that, in addition to $371 million in interest expenses, securitizing its 2021 Winter
Storm debt with ratepayer-backed bonds will cost its customers some $700,000 annuallv in
Ongoing Financing Costs for 20 vears. About half(0.05% of the original principal amount of the
bonds—or about $348,460) goes to PSO itself as a"servicer fee,"in addition to which PSO also
receives "reimbursement for its out-of-pocket costs." When a company is paid more than its costs
to provide a service, the excess is called PROFIT! Could it be that after two years of promising that
the OCC would not allow the utilities to "profit" on their Winter Storm fuel costs," the OCC is
ignoring the very existence of these Ongoing Costs out of fear that acknowledging them would
attest to what may be only just a part of the true profitability of securitization for these
utilities?
i t Hiett,Todd and Dana Murphy. "Commission approves order on PSO's February 2021 storm costs."OCC Media
Advisory(Feb. 10,2022):httDs:Hoklahoma.izov/occ/news/news-feed/2022/commission-aDDroves-order-on-Dso-
februarv-2021-storm-costs.html
"State law allows regulated utilities to recover their fuel costs,at no Drofit,through a separate monthly
charge on the bill."
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CASE PUD 2022-000093 ENTRY NO.302 FILED IN 0CC COURT CLERK'S OFFICE ON 11/03/2023- PAGE 5 OF 6
Comprehensive, Independent Auditing of PSO's Winter Storm Bonds
Is Required by the Securitization Act.
The Securitization Act(74 O.S. § 9070 et seq.),by which the governor and legislature authorized PSO
to apply to the OCC to securitize its 2021 Winter Storm debt, requires an audit"shall be part of any
general rate case filed by a regulated utility currently affected by a financing order with outstanding
ratepayer-backed bonds."12 This is a"general rate case," and PSO is unquestionably"a regulated
utility currently affected by a financing order with outstanding ratepayer-backed bonds."
In my September 18, 2023 "Opinion of Corporation Commissioner Bob Anthony Regarding the So-
Called `Audit' of ONG Sent by the OCC to the Governor, Legislative Leaders and ODFA,"13 I pointed
out that:
Whether willful or witless, a general state of confusion appears to exist at the Oklahoma
Corporation Commission, even in its Public Utility Division ("PUD"), about just what
constitutes an"audit"under Oklahoma law.14
Commissioner Todd Hiett has further exacerbated this state of confusion with his recent statements to
lawmakers and the news media.
On September 15, 2023, Commissioner Hiett sent a one-nacre"audit" of more than $1.3 billion of
ONG's February 2021 Winter Storm ratepayer-backed bond financing to the governor and legislative
leaders. In his cover letter, Hiett declared,
The audit was conducted by Public Utilities Division during Oklahoma Natural Gas
Company's annual performance-based rate case review.
12 74 O.S. § 9078:
In any proceeding where the issue is properly before it,the Oklahoma Corporation Commission may
require an audit of all amounts received from customers under an irrevocable and nonbypassable
mechanism and paid to a utility,the amounts paid by the utility to the Oklahoma Development Finance
Authority or other holder of securitization property. An audit,as Drovided in this section,shall be Dart of
anv general rate case filed by a reeulated utilitv currently affected by a financing order with outstandine
rateDaverbacked bonds. Any audit conducted pursuant to this section shall be provided to the Governor,
the Pro Tempore of the Senate,the Speaker of the House of Representatives and the Authority;provided,
however,any part or parts of the audit deemed confidential pursuant to federal or state law or as
determined by the Commission,shall be redacted.
13 Anthony,Bob. "Opinion of Corporation Commissioner Bob Anthony Regarding the So-Called`Audit'of ONG Sent by
the OCC to the Governor,Legislative Leaders and ODFA"filed Sept. 18,2023 in OCC Case No.PUD 2023-000012:
httDs://Dublic.occ.ok.eov/WebLink/DocView.aSDX?id=14031966.
14 Pertaining to State Agencies,74 O.S. §212(B)4 describes four specific kinds of audits("financial,""operational,"
"performance,"and"special or investigative")and a general audit"engagement,"all of which are"conducted in
accordance with applicable Government Auditing Standards."
Like the American Institute of Certified Public Accountants(AICPA)Code of Professional Conduct and the most recent
Generally Accepted Government Auditing Standards(GAGAS)(2018 Revision,Technical Update April 2021,aka"the
Yellow Book")from the U.S.Government Accountability Office(GAO),the Generally Accepted Accounting Principles
(GAAP)established by the Governmental Accounting Standards Board(GASB)(the accounting standards authority
identified in 74 O.S. §212)identifies the independence of auditors,both in fact and in appearance,as a fundamental
requirement. (See httDs://Dub.aicDa.oriz/codeofconduct/ethics.asDx?tareetdoc=et-cod&tarRetr)tr=et-codO.400.21.)
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CASE PUD 2022-000093 ENTRY NO.302 FILED IN 0CC COURT CLERK'S OFFICE ON 11/03/2023- PAGE 6 OF 6
The following Monday, I issued a 14-page Opinion labeling the OCC's so-called"audit" for ONG
"ludicrous," "pitiful,""farcically inadequate," and"another attempt at whitewash and cover-up,"
pointing out that what was sent to the governor and legislative leaders did not meet the criteria for an
"audit" as defined by State Statute.15
Dismissing my criticism, Hiett told The Oklahoman, "It's a matter of semantics. ,16 He elaborated to
the audience of OETA's "Oklahoma News Report":
I didn't name it an audit. The Corporation Commission didn't name it an audit. The
statute itself calls it an audit, so therefore,we have referred to it as an audit. But it's
really just a simple financial calculation to assure that the proper collections were made
of ratepayers."
That's right. Commissioner Hiett apparently believes that when the law requires something, as long as
you refer to your offering by the same name, you have met the requirement.
If the law requires you to have a driver's license to drive a car, and your ten-year-old takes her school
photo,makes her own license,takes the car, gets pulled over, and hands her homemade "driver's
license"to the officer, is he going to buy the argument that"The statute requires a driver's license, so
therefore I refer to this as my driver's license."? The absurdity of Hiett's statement is self-evident.
The true cost to ratepayers of his lackadaisical attitude about the Corporation Commission's duties to
actually regulate monopoly public utilities has yet to be calculated.
As I have already pointed out, when it comes to auditing PSO's Winter Storm bonds, including the
utility's Ongoing Financing Costs that the OCC itself explicitly required to be subject to its own
jurisdictional control"as Dart of these very Droceedings, the evidentiary record is just as deficient for
PSO here as it was for ONG's one-page "audit." Despite a billion-dollar cost overrun versus the
estimates, $200 million of which is specifically attributable to PSO's bond issuance,18 in the year since
the 2021 Winter Storm bonds were issued, no audit of the actual costs—original or ongoing—has
ever been conducted. The silence of today's order on this subject is deafening.
At a minimum, one might think the OCC could avail itself of the provision of 74 O.S. § 9082 that
provides for an audit of"Any other information deemed appropriate by the Oklahoma Corporation
Commission"to address the overpayments and other discrepancies I have already identified. Alas, no.
PSO's customers should be appalled by the disgraceful, ongoing regulatory delinQuencv of their
"Honorable" Corporation Commissioners. And they should be outraged that 2.5 years after the
February 2021 Winter Storm, the state agency responsible for overseeing the charges on their monthly
utility bills still can't tell them specifically"Who got paid how much for what?" or how much it will
all ultimately cost them. (By my math, the total for PSO customers is nearing $1.08 billion.)
is Ibid.
16 Carter,M. Scott. "Oklahoma commissioner demands better audit of utility company,$1.3 billion spent in winter storm."
The Oklahoman(Sept.25,2023):httDs://www.oklahoman.comistorv/news/Dolitics/izovemment/2023/09/25/oniz-2021-
winter-storm-better-audit-billion-dollars-needed-commissioner-says/70911215007.
11"Corporation Commissioner Bob Anthony calls for independent audit of Oklahoma Natural Gas."OETA"Oklahoma
News Report"(Sept.29,2023):https://www.voutube.com/watch?v=cNYnADIBNVO.
18 Supra Note 9.
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