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NewsOK Q&A: Anyone can take part in utility rate cases

Eric Davis

Eric Davis is an attorney in the Firm’s Clean Energy Practice Group and the Government Relations and Compliance Practice Group. He represents clients in a range of regulatory and energy matters.

In this article, Oklahoma City Attorney C. Eric Davis discusses the process utility companies must go through to request rate increases and how different parties can participate.

Q: Oklahoma’s two largest electric utilities have rate cases ongoing at the Corporation Commission. How does the rate case process work?

A: In Oklahoma, investor-owned electric companies are “rate-regulated” by the Oklahoma Corporation Commission. Regulating the rates of investor-owned utilities is necessary based on their monopoly status, i.e., customers generally can’t choose among other competing utilities for the same service. As a result, companies like Oklahoma Gas and Electric Co. and Public Service of Oklahoma must seek approval from the three elected Corporation Commissioners before increasing rates. When a utility requests a rate increase, the resulting procedure is referred to as a “rate case.” A rate case is a formal, evidence-based, court-like process, open to the public. In a rate case, the commission determines the amount of revenue a company reasonably needs to operate, and then decides how best to allocate any increase (or decrease) among the company’s customers. This allocation process involves dividing customers into classes (such as residential, commercial, industrial, municipal, public schools), and even subclasses, and then, ideally, assigning rates across classes in an equitable manner.

Q: What types of issues exist in OG&E’s and PSO’s current rate cases?

A: Primary drivers in any rate case include the utility’s operational costs, costs associated with plant investments, and the utility’s right to earn a fair profit. On the generation side, national trends evidence a shift toward renewable and natural gas resources, and conflicts abound concerning how utilities should deal with their existing fleets, including coal plants. In its current rate case, OG&E has requested about $54 million annually to recover the cost of retrofitting its Sooner coal plant to reduce air pollution. Meanwhile, historically low load growth and other market trends are causing electric utilities to reconsider the manner in which they obtain rate increases from the commission. In PSO’s ongoing rate case, the company is proposing a “performance-based rate plan,” in which its earnings would be subject to more frequent, annual reviews, allowing for periodic rate adjustments. Such annual reviews, while occurring with more regularity, would be structured differently and allow for less in-depth analysis than a traditional rate case. However, PSO has proposed a backstop, stating it would file a full-blown rate case after three years.

Q: Who may participate in rate cases?

A: Anyone can take part in a rate case, whether by emailing public comment to the commission, or formally intervening as a party. Formal parties have the right to issue discovery, present witnesses, and cross-examine witnesses of other parties, including the utility’s witnesses. Common parties include the commission’s staff, the attorney general, large industrial customers, AARP, and the Department of Defense. Intervening parties may aim to influence utility policies, or ensure the utility’s costs are reasonable. Parties also may advocate on behalf of particular customer classes during the rate design process, ensuring costs are fairly apportioned among customers.

 

Published: 2/6/19; by Paula Burkes
Original article: https://newsok.com/article/5622090/qa-by-c-eric-davis-anyone-can-take-part-in-utility-rate-cases

The wrong approach

Gavel to Gavel appears in The Journal Record. This column was originally published in The Journal Record on June 1, 2017.


Eric Davis is an attorney in the Firm’s Clean Energy Practice Group and the Government Relations and Compliance Practice Group. He represents clients in a range of regulatory and energy matters.

By Phillips Murrah Attorney C. Eric Davis

Oklahoma! Where the wind comes sweepin’ down the plain – and if some lawmakers have their way, it will be further taxed as it blows through.

For the wind industry, the tax landscape in Oklahoma changed dramatically in 2017. First, the five-year exemption from ad valorem taxes was allowed to expire beginning Jan. 1. Then the Legislature repealed the tax credit for electricity produced from zero-emission facilities powered by wind. These two tax changes represent millions of dollars annually, which will now be applied to mitigate the state’s revenue shortfall.

Now, a third major proposal has emerged: a per-kilowatt-hour production tax on wind energy, a rarity in the United States. At first blush, a production tax on wind energy may seem sensible. After all, natural gas is used to generate electricity, and it is subject to a gross production tax, so why not also impose such a tax on wind? A closer look, however, shows that the comparison is clearly strained.

Presently, the state’s gross production tax, or severance tax, as state law interchangeably refers to it, applies to the production of mineral resources. Such activities are extracting, or severing, non-renewable mineral resources. However, wind is not severed from the land. Theoretically, Oklahoma can benefit from wind energy for as long as the wind blows.

Also, Oklahoma’s gross production tax on mineral production is imposed in lieu of ad valorem taxes. Wind energy is presently subject to ad valorem taxes, which represent a major source of funding for local governments and schools. Oklahoma State University researchers have estimated that, when considering past and forecasted payments for planned projects, the wind industry will pay more than $1 billion in ad valorem taxes to local communities. If a production tax is levied on wind energy in lieu of ad valorem taxes, this could reallocate that revenue away from local communities.

If a production tax were imposed in addition to ad valorem taxes, it would amount to a double-tax on wind energy. This could discourage further capital investment and raise electricity bills for Oklahomans.

Tax policy is not easy. However, imposing this tax on wind energy because others in the energy industry pay a gross production tax is the wrong approach.

C. Eric Davis is an attorney with Phillips Murrah. His practice focuses on clean energy as well as government relations and compliance.

Phillips Murrah attorneys address wind energy impacts on real property

Jim Roth and C. Eric Davis are attorneys in the Energy and Natural Resources Practice Group at Phillips Murrah.

Phillips Murrah Director Jim Roth and attorney C. Eric Davis spoke about clean energy in Oklahoma at recent presentations hosted by the Oklahoma Bar Association.

The OBA’s Real Property Section hosted the Cleverdon Round Table event on May 18 in Oklahoma City and on May 19 in Tulsa.

The presentation outlined Oklahoma’s potential as a national leader in wind resources noting that Oklahoma generates the third most electricity from wind energy nationwide.

In discussing real property law impacts, Roth and Davis noted wind energy can be viewed as involving competing interests of landowners and how to respectively balance the rights of those landowners receiving compensation versus those out of proximity of wind facilities or turbines.

Roth presented in Oklahoma City, and Davis presented in Tulsa.

Phillips Murrah welcomes two new oil and gas attorneys

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Molly E. Tipton

Phillips Murrah is proud to welcome Molly E. Tipton and C. Eric Davis as oil and gas attorneys.

Tipton represents both privately-owned and public companies in a wide variety of oil and gas matters, with a strong emphasis on oil and gas title examination.

In her practice, Molly has prepared numerous drilling, division order, and acquisition title opinions and conducted due diligence in the acquisition and divestiture of oil and gas properties.

Born and raised in Bismarck, North Dakota, Molly moved to Oklahoma on an athletic scholarship to compete on the Women’s Equestrian Team at Oklahoma State University.  Molly now lives in Oklahoma City where she enjoys running, cooking, and cheering for the Thunder, the Cowboys and the Sooners.

C. Eric Davis

C. Eric Davis

Davis represents clients in a range of regulatory and energy matters in the Firm’s Clean Energy Practice Group and the Government Relations and Compliance Practice Group.

His governmental experience includes serving as an Assistant Attorney General for the State of Oklahoma. Davis was also an attorney for the Oklahoma Corporation Commission and the Oklahoma Tax Commission.

Born and raised in Stillwater, Oklahoma, Eric now lives in Oklahoma City with his wife, Nadine, and their son, Nathan. He enjoys music, hiking, and spending time with family.