The parent company of Oklahoma Gas and Electric Co. plans to use a state law to recover environmental compliance costs from customers if it loses a case awaiting possible review at the U.S. Supreme Court, executives at OGE Energy Corp. said Tuesday.
The court is expected to decide by some time early in the second quarter if it will review a regional haze case appealed by OG&E, Oklahoma Attorney General Scott Pruitt and a group of industrial energy consumers.
OG&E estimates following a federal plan for regional haze compliance could cost the utility more than $1.2 billion for installation of scrubbers on four coal units at two of its generating plants in Oklahoma.
“If we aren’t successful before the Supreme Court, we will promptly file for recovery of the associated environmental costs under House Bill 1910,” said OGE President and CEO Pete Delaney. “Passed in 2005, the law allows utilities in the state to recover mandated environmental expenditures.”
Delaney made the comments in a conference call as the company released fourth-quarter earnings.
HB 1910 has been on the books for almost nine years, but utilities haven’t used the law much to recover large environmental compliance costs from the Oklahoma Corporation Commission, which regulates utilities.
The law allows them to start recovering costs at the start of projects instead of waiting until upgrades are complete.
Delaney said the law doesn’t specify how a utility will get reimbursed for the compliance costs. Typically, costs are either folded into a utility’s asset base on which it’s allowed to earn a certain rate of return or put into a separate “rider” for a more direct, cash reimbursement over a specified period.
“So it’s actually pretty open in terms of how that recovery would go,” Delaney said. “Of course, we all know that we’re concerned about the impact on the customers and that the greater the cash earnings on our construction, the lower ultimate cost to customers, so we will strongly make that argument.”
Matt Skinner, spokesman for the Corporation Commission, said applications under the law would still be subject to commission review.
“Whenever a utility files for cost recovery, it is incumbent on the utility to prove what laws and regulations allow such recovery,” Skinner said.
OG&E said the law allows for pre-appoval of transmission expenses, new power plants and environmental compliance.
“What will be evaluated is our approach to that,” said Kathleen O’Shea, OG&E spokeswoman. “It is a formal process. There will be an opportunity for intervenors to weigh in, just like anything else.”
While a rate case for a utility is supposed to last no longer than 180 days, applications for pre-approval have no timeline, O’Shea said.
OG&E plans to ask the commission for an expedited review for regional haze compliance costs.
In the regional haze case, a three-judge panel of the 10th U.S. Circuit Court of Appeals in Denver ruled 2-1 against Oklahoma, OG&E and Oklahoma Industrial Energy Consumers in July.
The full appellate court declined a rehearing in October.
In January, a federal judge extended a stay for OG&E’s compliance with the Environmental Protection Agency’s regional haze rules, pending the application for review at the U.S. Supreme Court. Once the stay is lifted, OG&E will have 55 months to comply.
OGE said its fourth-quarter earnings rose 50 percent as it reported a profit of $57.6 million, or 29 cents per diluted share. That compared to net income of $38.5 million, or 19 cents per diluted share, in the fourth quarter of 2012. The company said its interest in Enable Midstream Partners LP and higher transmission earnings at OG&E helped drive fourth-quarter results. OG&E added about 9,000 new customers in 2013, bringing its total to almost 807,000.