The clock is ticking for Oklahoma Gas and Electric Co. as the utility has a rash of projects to complete before major environmental compliance deadlines hit in 2016 and 2019.
OG&E filed a $1.1 billion application this week with Oklahoma regulators to recover those costs from ratepayers. Residential customers could see their monthly bills rise 15 percent by 2019 from the environmental compliance plan.
OG&E wants to install scrubbers on coal units at its Sooner plant and convert two of its three coal units at Muskogee to natural gas. The utility also plans to replace its aging Mustang natural gas steam units with quick-start combustion turbines.
Utility executives said Thursday the capital expenditures ramp up and peak in 2018.
“Some of this can be attributed to the long lead items and construction time frame, but the other part of the driver is that we intend to run the Muskogee coal units as long as possible for the benefit of our customers,” OG&E President and Chief Financial Officer Sean Trauschke said in a conference call with analysts to discuss second-quarter earnings.
The utility requested a final order from the Oklahoma Corporation Commission by February. Unlike a rate case, where the commission has 180 days to make a decision, there are no deadlines for environmental compliance plans.
OG&E wants commission approval to begin collecting charges for its plan starting in 2015. The utility is applying under a 2005 state law that allows charges for environmental mandates to be passed through to customers.
“We have to be in compliance and we want to make sure that everybody had a fair amount of time to get their arms around this,” Trauschke said. “And so we’re in constant communication with the staff and the commission. Everybody is aware of the timeline and the need to be in compliance here.”
To complicate matters, Commissioner-elect Todd Hiett takes office in January. He replaces outgoing Commissioner Patrice Douglas, who stepped down to run for Congress. Commissioners Bob Anthony and Dana Murphy also serve on the three-person commission.
“Our experience with the commissioner-elect is that he is a quick study and a hard worker,” OGE Energy Corp. Chairman and CEO Pete Delaney told analysts. “We do not anticipate any delays in the case because of his election.”
OGE Energy reported net income of $101 million, or 50 cents per diluted share, in the second quarter. That compared to $91.7 million, or 46 cents per diluted share, in the same period in 2013.
The company said transmission projects and new customers at OG&E helped increase gross margins at the utility to $341 million in the second quarter, compared to $327 million in the second quarter of 2013.
OGE, which holds a 26.3 percent limited partnership interest in Enable Midstream Partners LP, said the partnership contributed $24 million in net income, compared to $15 million in the same period last year. The increase came from higher gross margins in the transportation and storage divisions of the natural gas midstream partnership.
“Higher earnings over the same quarter last year are primarily driven by our natural gas midstream partnership, Enable Midstream Partners,” Delaney said in a news release. “The utility is performing in line with expectations and focused on implementing our regional haze compliance plan.”
OG&E added 9,000 customers in the last year and now serves more than 810,500 customers in Oklahoma and Arkansas.
OGE shares fell 14 cents Thursday to close at $34.99 per share on the New York Stock Exchange.