Plugged out: What if state had deregulated power?

The Oklahoman Editorial

Published: August 26, 2007

A sidebar in the dispute over a proposed coal-fired power plant is the presence of underused natural gas-fired power plants in Oklahoma. Seven years ago, the plants weren't the sidebar but a main feature in the state's aborted attempt to deregulate electricity.

We were among those urging the state to implement deregulation. This was before dereg got the bad rap it did from the experience in California. Even most of the ardent fans of deregulation weren't vocal after that, and Oklahoma lawmakers weren't about to enter the brave new world of deregulation.

Now that time has passed and cooler heads can prevail, we wonder if Oklahoma would be better off today had the Legislature not shied away from dereg. A deregulated environment would have provided a market for power produced at the aforementioned plants, turning a raw material (natural gas) into a value-added commodity (electricity).

Opponents of the $1.87 billion coal-fired plant proposed near Red Rock say the smaller gas plants should be tapped for power before a new mega-plant is built. The gas plants were built on speculation in anticipation of deregulation that was supposed to start in 2002.

At the time, Oklahoma was exporting 70 percent of the natural gas it produced without adding to its value. Yet it's not the fault of the three power companies proposing the Red Rock plant that the gas-fired facilities are underused.

Those opposing the Red Rock plant have raised serious environmental concern about using coal to make power. The irony is that when a wave of gas plants was announced in 2000, others raised serious environmental concerns. The red herring of acid rain was even raised.

The Red Rock consortium says the plant will keep electricity costs lower because coal is abundant and prices can be locked in for the long term. Gas prices are volatile. Had deregulation occurred, more of Oklahoma's natural gas would have gone toward making power, increasing state revenue.

We can only speculate on what the power environment would be today had deregulation entered the picture. Recent reporting in USA Today says power prices in deregulation states rose 35.7 percent from 2002 to 2006, compared with 20.8 percent in states with rate regulation. Still, the four-year price change in Oklahoma was 25.3 percent in the absence of deregulation. That's a greater increase than the ones recorded in 12 of the 18 states that have some form of regulation.

We can't say if Oklahoma's power rates would be higher or lower had deregulation proceeded. The issue is off the table for now but is sure to return.

Meantime, the Red Rock partners have cleared a hurdle through an Oklahoma Corporation Commission official's recommendation that the plant proceed. That fight is far from over. The fight for deregulation may be just beginning.

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