New law for utilities now tested

Jeff Elkins

The Oklahoman USA TODAY NETWORK

PSCO files first case to use deferral accounting

A law that allows utilities to recover costs from customers on facility construction projects before they’re operational will result in rate shock for consumers and has already drawn opposition, leaders say.

Senate Bill 998, authored by Sen. Grant Green, R-Wellston, became law on Aug. 28. The measure adds cost recovery provisions for public utilities. More specifically, it allows a utility to start recovering work-in-progress expenses prior to the commercial operation of a new or newly expanded natural gas facility.

Before the implementation of SB 998, if a utility made upgrades to electric plants, they would have a regulatory lag of not being able to recover any depreciation costs until the rate case, then it would start at that time, Commissioner Kim David said earlier this month. Now, ratepayers may have to pay for the construction of new utility

plants before they’re operational.

“It helps the utility company, because now it reduces their regulatory lag,” David said. “It’s less risk for them. It’s great for the utility company, but it will be a little bit of a rate shock for the consumer, for the rate payer.”

According to bill language, a public utility shall defer to a regulatory asset 90% of all depreciation expenses and return associated with all qualifying electric plants placed in service, provided the public utility has provided notice to the Corporation Commission of the public utility’s election to make such deferrals pursuant to this section.

The commission has historically handled Construction Work In Progress (CWIP) with a case-by-case approach.

David said there’s a “dramatic increase in need” for power with data centers, AI projects and Emirates Global Aluminum’s smelter coming to the Port of Inola. She said that’s great for economic development, but it’s important to make sure costs aren’t being pushed off onto ratepayers, and the CWIP issue goes against a century of ratemaking principles, essentially usurping the constitutional duty of commissioners to keep rates fair.

According to a release, commissioners have multiple concerns about the negative impact of the law: they say it limits OCC’s ability to oversee rate cases by shortening review time. If the electric generation facility uses natural gas as its primary fuel source, then the OCC shall enter an order on an application filed within 180 days of the filing of the application.

Additionally, commissioners opposed the bill as it made its way through the legislature in the 2025 session because it shifts authority away from the OCC.

David said she “has heartburn with the entire bill” because legislators are lobbied daily and told over dinner and wine how good the law change will be for utility companies and bringing businesses to Oklahoma.

“I’ve always had an issue with how the legislature can pass a statute that tells me how to do my job, when I cannot be lobbied or wined and dined because it’s a conflict of interest, and yet you’re over there writing laws to tell me how to do my job. I have a real problem with that, because constitutionally, it’s my job,” David said. “I’ve been given that job, and held to a different ethical standard because of that job.”

Public Service Company of Oklahoma was the first to file a NOI under the new law in August, giving notice to the commission that the utility plans to utilize deferral accounting as authorized.

AARP plans to challenge PSO’s preapproval case, which in October will test the parameters of the new law. Sean Voskuhl, state director of AARP Oklahoma, said the law removes risk for utilities and puts it all on Oklahomans, and that’s especially concerning for those on fixed incomes like senior citizens.

“We will be intervenors in the case when the opportunity arises,” Voskuhl said. “We think the new law is constitutional.”

Green did not respond to multiple requests for an interview regarding SB 998.