OGE Energy : PUD 2021-00072 - ALJ Report

BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA

IN THE MATTER OF THE APPLICATION	)
OF OKLAHOMA GAS AND ELECTRIC	)
COMPANY FOR A FINANCING ORDER	) CAUSE NO. PUD 202100072
PURSUANT TO THE FEBRUARY 2021	)
REGULATED UTILITY CONSUMER	)
PROTECTION ACT APPROVING	)
SECURITIZATION OF COSTS ARISING	)
FROM THE WINTER WEATHER EVENT
OF FEBRUARY 2021
HEARING:	October 11, 2021, Courtroom 301
	2101 North Lincoln Boulevard, Oklahoma City, Oklahoma 73105
	Before Linda S. Foreman, Administrative Law Judge
APPEARANCES:	William L. Humes, Kimber L. Shoop and Jack P. Fite, Attorneys

representing Oklahoma Gas and Electric Company

Jared B. Haines and A. Chase Snodgrass, Assistant Attorneys General representing Office of Attorney General, State of Oklahoma

Jack G. Clark, Jr., and Ronald E. Stakem, Attorneys representing OG&E Shareholders Association

Thomas P. Schroedter and D. Kenyon Williams, Attorneys representing Oklahoma Industrial Energy Consumers

Rick D. Chamberlain, Attorney representing Walmart Inc. Deborah R. Thompson, Attorney representing AARP

Michael L. Velez, Deputy General Counsel and Lauren D. Willingham, Assistant General Counsel, representing Public Utility Division, Oklahoma Corporation Commission

REPORT AND RECOMMENDATION OF THE ADMINISTRATIVE LAW JUDGE

This Cause comes before the Oklahoma Corporation Commission ("Commission") on the Application of Oklahoma Gas and Electric Company ("OG&E") for a Financing Order pursuant to the February 2021 Regulated Utility Consumer Protection Act Approving Securitization of Costs Arising from the Winter Weather Event of February 2021.

1. RECOMMENDATION

It is recommended that the Commission approve and adopt in full the Joint Stipulation and Settlement Agreement ("Joint Stipulation"), attached hereto as Attachment "A" and incorporated herein, resolving all issues between OG&E, the Commission's Public Utility Division ("PUD"), Oklahoma Industrial Energy Consumer ("OIEC"), OG&E Shareholders Association ("OG&E S/H") and Walmart Inc. ("Walmart") (collectively, the "Stipulating Parties") and compliant with the February 2021 Consumer Protection Act (74 O.S. Section 9070), to the benefit of OG&E customers. The Attorney General and AARP did not sign the

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Joint Stipulation and Settlement Agreement. It is further recommended that the Commission adopt the form of the draft financing order included in Attachment "C"1 subject to further refinement and details necessary required to achieve the highest achievable bond rating.

1. WINTER WEATHER EVENT

On February 12, 2021, Governor Kevin Stitt declared a state-wide emergency due to "extreme freezing temperatures and severe winter weather including snow, freezing rain, and wind beginning February 7, 2021 and continuing." In his Declaration, the Governor stated the severe weather threatened the public's peace, health, and safety.

Subsequently, the Commission issued two emergency orders related to the extreme 2021 Winter Weather Event and resulting conditions including, but not limited to, limited natural gas supply, prioritization of electric and gas service for public health, welfare, safety and security and the need for conservation efforts. PUD 202100035, Order 716952.

When demand for natural gas escalated dramatically due to and as a result of the consequences of the extreme weather, natural gas markets throughout the region experienced a profound crisis. Natural gas prices escalated on the spot and daily index markets. Likewise, the Southwest Power Pool, Inc. ("SPP"), which operates a wholesale energy market called the Integrated Marketplace ("IM"), also experienced unprecedented increases in electric energy prices as a result of the high natural gas prices. As a result, OG&E purchased natural gas and wholesale energy at unusually high prices.

Normally, OG&E would pass fuel related costs to customers through its Fuel Cost Adjustment Rider ("FCA"). However, OG&E's cost of natural gas during the 2021 Winter Weather significantly exceeded the Company's entire fuel cost for calendar year 2020 which would have resulted in a burdensome outcome to ratepayers. To avoid this outcome, OG&E requested creation of a regulatory asset (Cause No. PUD 202100039) to defer all recovery of these costs as amortized over a longer and more manageable period of time and subject to a prudency review. Commission Order No. 717355, issued March 18, 2021, created a regulatory asset allowing an amortization of extraordinary 2021Winter Weather costs over a period of 10 years with a carrying charge based on OG&E's actual financing costs.

The Regulated Utility Consumer Protection Act (the "Act"), 74 O.S. 9070 et. seq. was drafted by the Oklahoma Legislature and enacted by Governor Stitt on April 23, 2021. This allowed affected utilities to securitize the right to recover extraordinary costs and expenses of the 2021 Winter Weather Event occurring from February 7, 2021 and ending February 21, 2021. The issuance of bonds pursuant to the Act thus enabled customers to pay these costs at a lower annual amount over a longer period. Pursuant to the Act, OG&E filed the current Application seeking securitization of its right to recover extreme winter weather costs.

1 The Draft Financing Order is on page 160 of 258.

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1. PROCEDURAL HISTORY

On April 26, 2021, OG&E filed its Application initiating this Cause, pursuant to the February 2021 Regulated Utility Consumer Protection Act Approving Securitization of Costs Arising from the Winter Weather Event of February 2021.

Also on April 26, 2021, the Attorney General of the State of Oklahoma ("Attorney General") filed an Entry of Appearance on behalf of Jared B. Haines and A. Chase Snodgrass.

On April 29, 2021, the Commission's Public Utility Division ("PUD") filed a Motion of the Public Utility Division to Engage a Financial Advisor(s) or Other Consultants, along with a Notice of Hearing setting the Motion of the Public Utility Division to Engage a Financial Advisor(s) or Other Consultants for hearing on May 6, 2021.

On May 4, 2021, OG&E Shareholders Association ("OG&E S/H") filed an Entry of Appearance on behalf of Jack G. Clark, Jr., and Ronald E. Stakem.

On May 5, 2021, Oklahoma Industrial Energy Consumers ("OIEC") filed an Entry of Appearance on behalf of Thomas P. Schroedter.

On May 6, 2021, the Motion of the Public Utility Division to Engage a Financial Advisor(s) or Other Consultants was heard and recommended.

On May 11, 2021, Order No. 718290, Order Granting Motion Public Utility Division's Motion to Engage a Financial Advisor(s) or Other Consultants, was issued.

Also on May 11, 2021, Walmart Inc. filed an Entry of Appearance on behalf of Rick D. Chamberlain.

On May 12, 2021, AARP filed an Entry of Appearance on behalf of Deborah R. Thompson.

On May 18, 2021, OG&E filed a Motion for Protective Order, along with a Notice of Hearing setting the Motion for Protective Order for hearing on June 3, 2021.

On May 19, 2021, OG&E filed a Motion to Establish Procedural Schedule, along with a Notice of Hearing setting the Motion to Establish Procedural Schedule for hearing on June 3, 2021.

On June 3, 2021, the Motion for Protective Order was heard and recommended and the Motion to Establish Procedural Schedule was continued by agreement of the parties to June 10, 2021.

On June 9, 2021, Order No. 718799, Order Granting Motion for Protective Order, was

issued.

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On June 18, 2021, the Direct Testimonies of Charles B. Walworth, Donald R. Rowlett, Richard G. Smead, Robert Doupe and Shawn McBroom on behalf of OG&E were filed.

Also on June 18, 2021, a Certificate of Service was filed.

On July 7, 2021, Order No. 719312, Order Granting Motion to Establish Procedural Schedule, was issued.

On July 8, 2021, OG&E filed a Motion to Determine Notice Requirements and Approve Form of Notice, along with a Notice of Hearing setting the Motion to Determine Notice Requirements and Approve Form of Notice for hearing on July 15, 2021.

On July 12, 2021, OG&E filed an Amended Notice of Hearing, setting the Motion to Determine Notice Requirements and Approve Form of Notice for hearing on July 22, 2021.

On July 22, 2021, the Motion to Determine Notice Requirements and Approve Form of Notice was heard and recommended.

On August 12, 2021, Order No. 720025, Order Granting Motion to Determine Notice Requirements and Approve Form of Notice, was issued.

On August 17, 2021, Public Comment was filed.

On August 19, 2021, Public Comment was filed.

On August 23, 2021, OIEC filed an Entry of Appearance on behalf of D. Kenyon Williams, Jr.

Also on August 23, 2021, the Responsive Testimony and Exhibits of Lisa V. Perry on behalf of Walmart Inc., the Responsive Testimony of Mark E. Garrett on behalf of Oklahoma Industrial Energy Consumers, the Redacted Responsive Testimony of Scott Norwood on behalf of Oklahoma Industrial Energy Consumers, the Responsive Testimony of Isaac D. Stroup, the Responsive Testimony of JoRay McCoy, CFE, MAFF, SMIA, CPO, the Responsive Testimony of Michael Bartolotta, the Responsive Testimony and Exhibit of Brian C. Collins on behalf of Oklahoma Industrial Energy Consumers, the Redacted Responsive Testimony of James P. Mosher on behalf of Oklahoma Industrial Energy Consumers, the Confidential Responsive Testimony of Scott Norwood on behalf of Oklahoma Industrial Energy Consumers and the Confidential Responsive Testimony of James P. Mosher on behalf of Oklahoma Industrial Energy Consumers were filed.

On August 27, 2021, the Attorney General's Statement of Position, OG&E Shareholders Association's Statement of Position and AARP Statement of Position were filed.

On September 13, 2021, the Rebuttal Testimony of Shawn McBroom on behalf of Oklahoma Gas and Electric Company, the Rebuttal Testimony of Robert Doupe on behalf of Oklahoma Gas and Electric Company, the Rebuttal Testimony of Richard G. Smead on behalf of

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Oklahoma Gas and Electric Company, the Rebuttal Testimony of William H. Wai on behalf of Oklahoma Gas and Electric Company, the Rebuttal Testimony of Donald R. Rowlett on behalf of Oklahoma Gas and Electric Company, the Rebuttal Testimony of Gwin Cash on behalf of Oklahoma Gas and Electric Company and the Rebuttal Testimony of Charles B. Walworth on behalf of Oklahoma Gas and Electric Company were filed.

On September 20, 2021, Public Comment was filed.

On September 21, 2021, Public Comment was filed.

On September 22, 2021, Public Comment was filed.

On September 23, 2021, Public Comment was filed.

Also on September 23, 2021, the Prehearing Conference was heard and recommended.

On September 24, 2021, Public Comment was filed.

On September 27, 2021, Public Comment was filed.

On September 28, 2021, Public Comment was filed.

On October 4, 2021, Public Comment was filed.

Also on October 4, 2021, OG&E filed an Entry of Appearance on behalf of Jack P. Fite.

On October 5, 2021, Public Comment was filed.

On October 6, 2021, Public Comment was filed.

On October 7, 2021, Public Comment was filed.

Also on October 7, 2021, the following documents were filed:

1. Summary of Responsive Testimony of Isaac D. Stroup;
2. Summary of Responsive Testimony of JoRay McCoy, CFE, MAFF, SMIA, CPO;
3. Supplemental Responsive Testimony of Michael Bartolotta;
4. Summary of Responsive Testimony and Supplemental Testimony of Michael Bartolotta;
5. Summary of The Responsive Testimony and Exhibits of Lisa V. Perry on Behalf of Walmart Inc.;
6. Testimony Summary of Gwin Cash;
7. Testimony Summary of Shawn McBroom;
8. Testimony Summary of Charles B. Walworth;
9. Testimony Summary of Donald R. Rowlett;
10. Testimony Summary of Robert Doupe;