A hearing over a proposed settlement to phase out the last two coal units operated by Tulsa-based utility Public Service Co. of Oklahoma will be delayed, the Oklahoma Corporation Commission ruled Thursday.
Commissioners voted 2-1 to grant a stay in the case, which was set for an April 23 hearing before an administrative law judge. Commissioners Patrice Douglas and Dana Murphy voted to issue the stay, with Bob Anthony casting the dissenting vote.
PSO, Oklahoma's secretaries of environment and energy, the Environmental Protection Agency and the Sierra Club agreed to the settlement in April. It was in response to federal regulations to limit haze traced to emissions from power plants.
PSO filed an application with the Corporation Commission in September asking it to approve the settlement plan to retire its last two coal units in Oklahoma by 2026. The utility wants permission to come back before the commission for reimbursement of environmental compliance costs from ratepayers.
Attorneys for the Oklahoma Industrial Energy Consumers asked to delay the hearing because they said there was too much uncertainty over a revised state implementation plan dealing with regional haze. Approval of that plan by the EPA and the state Department of Environmental Quality could take until February 2014. The EPA rejected the original state implementation plan in 2011.
“One of the main reasons to have the stay is to wait to hold the hearing until you have all the facts before you,” Tom Schroedter, an attorney for the consumers group, told commissioners Thursday.
Murphy and Douglas expressed frustration with the PSO settlement reached last year. Murphy said the settlement didn't involve all the parties that were interested, a departure from most settlements that come before the commission.
“This is one of the more unusual situations we've had brought to us,” Murphy said. “I don't like the feeling that somehow we're supposed to be moving forward really quickly, and there are time frames that other agencies and federal agencies have set.”
Douglas said the commission's options have been limited by EPA regulations.
“What a great position to be in if you're the EPA,” Douglas said. “You hand down all these requirements, and then you say, ‘You state commissioners are going to make all your ratepayers pay.' It's a very difficult situation to be in. You're hearing the frustration up here because we feel like we're being pushed into a position that is not one anyone would envy.”
Jack Fite, an attorney for PSO, said other agency deliberations on the revised state improvement plan for regional haze shouldn't affect the utility's case before the Corporation Commission. He said EPA requirements affect the utility and its shareholders, too.
“Whenever something like this comes along that increases costs, that puts more pressure on the company in other areas,” Fite said. “It could be on return on equity, for example, or other expenditures. It's not just the customers that are hung out, if you will, when the federal government acts in this manner. I think it's also the company.”
Oklahoma Secretary of Energy Mike Ming, whose office signed the PSO settlement, said the deal provides for cleaner air using Oklahoma-produced natural gas instead of coal from Wyoming.
“It is an Oklahoma solution to a set of rules that came out of a variety of administrations in Washington,” Ming said. “This is actually a thoroughly vetted settlement proposal that a lot of thought went into. From the governor's office perspective, the primary criteria was the impact on ratepayers. ... Doing nothing is not an option.”
All parties agree the proposed environmental settlement will increase rates for PSO customers. But they disagree on how much rates will increase. The utility has more than 530,000 customers in eastern and southwestern Oklahoma.
PSO said it expects customer rates to increase by at least 11 percent starting in 2016. The plan calls for it to retire one coal unit at its Northeastern Station near Oologah by the end of 2016. PSO will install emissions scrubbers on the other coal unit there before retiring it by 2026.
To make up for the loss of a coal-fired unit in 2016, PSO said it plans to buy natural gas generation from Calpine Corp. under a 15-year power purchase agreement.
Witnesses for Oklahoma Industrial Energy Consumers said in commission filings the settlement costs and other planned PSO rate increases by 2016 could cause customer rates to rise by almost 45 percent.
“In my opinion, a rate increase of this magnitude, over a short three-year period, constitutes rate shock, will impose an undue hardship on PSO's customers and will cripple industrial development in Oklahoma,” said Mark Garrett, a witness for OIEC, in a commission filing.
PSO said including other possible rate increases outside the proposed environmental settlement costs wasn't appropriate. The utility said its retirement plan for the coal units makes sense because current and future environmental regulations will make it increasingly costly to operate coal-fired units.
“We are the only ones responsible for making sure we have adequate power for our customers in 2016,” Fite said in Thursday's hearing. “We have to take some type of action. ... All we're asking is that the regulatory process moves forward in a parallel process with the environmental side.”
PSO spokesman Stan Whiteford said the utility would prefer to have the hearing in April. But he said PSO understands the commission's reasons to wait for final approval of the revised state plan for regional haze.
“We are confident the SIP (state improvement plan) will receive that approval and that the commission will then have the opportunity to thoroughly examine the reasonableness of our plan, which we believe to be the best and least cost option for meeting new environmental regulations while assuring continued reliability for our customers,” Whiteford said in an email after the hearing.