Oklahoma Gas and Electric Co. officials look to the positives in

Journal Record, The (Oklahoma City), Jul 18, 2005 by Janice Francis-Smith

Oklahoma Gas and Electric Co. officials said Friday they are glad to have a final decision from the Oklahoma Corporation Commission regarding fuel procurement - even if it wasn't quite the decision they had been hoping for.

OG&E will have to refund to customers the difference between what the electricity utility paid pipeline company Enogex Inc. for natural gas transportation services, and what the commission says they should have paid - a difference of $4.9 million a year for the duration of the contract. Since the contract went into effect in 2003, the full amount of the refund is estimated at between $8.5 million and $10 million, which will be credited to customers' bills.

We had hoped the commission would place a higher value on the service our electric ratepayers receive from OG&E's contract with Enogex, which enables us to maximize the utilization of our coal- fired plants, which provide significant fuel savings for our customers, said Steven E. Moore, chairman, president and CEO of OGE Energy Corp., parent company of both OG&E and natural gas pipeline company Enogex Inc.

But having a unanimous commission order is a positive outcome, said Moore. We are pleased to have an order in this case, so we can move forward with more certainty in the operation of our business.

The commission again urged OG&E to implement a competitive bidding process for its fuel purchases. Though OG&E officials contend the company has been getting the best deal by purchasing power from Enogex, that contention could be more easily verified if a bidding process were put in place, ruled the commissioners.

Brian Alford, spokesman for OG&E, said the utility's contract with Enogex is special because it allows OG&E to integrate its fuel transportation system, allowing OG&E the flexibility to ramp up or shut down individual power generation facilities at a moment's notice. That causes OG&E to pay more per unit for natural gas through Enogex, but it also allows the utility to use more coal, which costs about one-sixth the price of natural gas.

Once the term of this current contract nears its end, we will have to look at all of our options at that point, said Alford, including a competitive bidding process for fuel procurement.

The commission's decision regarding OG&E's fuel purchases has no bearing on OG&E's request for an $89.1 million rate increase to fund infrastructure improvements, which is also pending at the commission.

OG&E is involved in yet another case pending at the commission. The commission is considering whether to compel the utility to implement a competitive bidding process for purchased power contracts, buying power on the open market when it is available at a cheaper price than the utility could generate the power itself - a process referred to in the industry as economic dispatch.

Intergen, an independent power company that built a power plant in Luther but has had some difficulty selling its power in Oklahoma under the current system, has appealed to the commission to adopt economic dispatch in Oklahoma. Cheryl Vaught, an attorney representing Intergen, praised Thursday's decision on fuel purchases as a good precursor of what the commission may decide in the arena of purchased power contracts.

Alford, however, said one decision of the commission couldn't be so easily translated to apply to other areas.

Many of these issues are somewhat interrelated, but I don't think that we want to make any suppositions on the part of the staff or the commissioners, Alford said.