MIAMI — A short reprieve from a huge rate hike was granted for Empire District Electric, a Kansas corporation, for customers in Oklahoma.
The Oklahoma Corporation Commission rejected Empire's request to use a state rule, which would have allowed the company to raise Oklahoma customer's rates to Empire's Missouri customer rates and charges last week.
The OCC ruled by rejecting Empire's rate hike request to now require the electricity producer and utility service provider to go through the rate change hearing process to address any revisions and directing all parties to establish a procedural schedule. Oklahoma Empire customers could still see the rate hike, but the Empire will now have to prove justification for the rate changes through evidence in a hearing.
OCC spokesperson Matt Skinner said he could not speak directly about the proposed Empire case for the biggest part, but could give information about the rate case hearing process in general.
“This is still a pending case,” OCC spokesperson Matt Skinner said. “What happened Thursday was another step on the road to begin this case. The commission denied Empire's application to have treatment under a rule, which would have allowed the imposition of Missouri's rates for Empire customers. The idea behind the Oklahoma rule was efficiency, but it still has consumer protections in it.”
Empire was asking the OCC for a rate increase of up to 45.37 percent per month per 1,000-kilowatt hours to its Oklahoma customers.
“We’ve been working with the commission staff and the other parties to the case to develop a procedural schedule and establish a process to move forward with ne rates for Oklahoma customers so while they decided against applying the Missouri rates in Oklahoma, there was a rule in place that allowed us to file and request that,” Empire’s Director of Corporate Communications Julie Maus. “So, that is what we did versus incurring the costs associated with conducting a full Oklahoma rate case, that was the thought process behind that, to save some cost there for customers in terms of rates case expense. They did reject that filing and so what we are doing now is working with the commission staff to determine the process going forward in probably an abbreviated rate case process, because we still need to move forward with new rates for Oklahoma customers. It’s been several years since that has taken place and we still need to begin recovery of the costs that we have incurred for all of the improvements that have been made to the system.”
Empire is based in Joplin and is an investor-owned, regulated utility providing electric, natural gas (through its wholly owned subsidiary The Empire District Gas Company), and water service. Empire serves approximately 218,000 customers in Missouri, Kansas, Oklahoma and Arkansas.
Empire completed $400 million in capital expenditures for environmental compliance upgrades associated with mercury as required by the EPA at its Asbury, Missouri, station in 2014 and recent completion of an overhaul of its Riverton, Kansas, plant.
In its proposal, Empire asked the OCC to grant rate hikes for Oklahoma customers, which make up 2.7 percent of its entire customer base.
OCC rules provide when an electric company serves less than 10 percent of its total customers in the state, the Oklahoma customers can be prescribed the same rates as the adjacent state.
Empire filed with OCC on Sept. 23 for approval to charge Oklahoma customers the same rates approved by the Missouri Public Service Commission; an increase per month for 1,000 kWh of 45.37 percent for residential customers equaling an increase of approximately $42.62 a month, $34.19 for the average commercial customer and $21,545 for the average industrial customer.
“We probably needed to do a little better job communicating this information to our customers in Oklahoma prior to this filing,” Maus said. “We have had some historic expenses with the environmental mandates that we have had to meet from the Environmental Protection Agency.”
Skinner said the Oklahoma rule was first enacted during a time when phone service companies had customers in various states.
“The idea behind these rules was, you know to have a full blown rate case, every time, for a small percentage of a particular customer base was not efficient,” he said. “Rate cases are expensive, someone's got to pay for that, rate payers pay for that. So, that was the idea behind the rule and you fast forward and that was eventually put in place for electric utilities that have a small customer base in Oklahoma, but I stress, as can be shown by what's happened, it's not an automatic deal. Anybody can come forward and lodge a protest and so that's what's happened.
“The protest actually came in the form of our Public Utility Division filing and saying, ‘no, we need a rate case.’ Part of their argument was the complaints that they have received from Empire customers. The rule is not automatic, it really isn't.”
The Oklahoma rule
“There's no other electric company that rule applies to in Oklahoma that's regulated,” Skinner said. “There are some electric coops like that, but electric cooperatives have long been allowed to opt out of commission regulation and most of them have. So there's no rate regulation for electric coops.”
Skinner could not speak directly about the proposed Empire case, but said in general in a utility rate increase case; a procedural schedule is established to set out for all parties the process and the timeline of the process.
“It is done in a judicial manner, I emphasize the word manner, because it's not a judicial case, but they're handled in a judicial manner,” Skinner said. “The attorney general always represents the consumer before the commission in a rate case. Then everyone else that's a party to the case has their own attorney, for instance our OCC Public Utility Division has to have its own lawyer representing it before the three commissioners. Empire would have its own lawyer, and anyone else involved in this.”
Arguments are then made before an administrative law judge with sworn testimony, expert witnesses and evidence, according to Skinner.
“At the end of that, the administrative law judge makes a recommendation to the commissioners and the commissioners have the final say in the matter and decide what to do with that recommendation,” he said. “The utility has to notify its customers of the rate case and once the procedural schedule is established we'll also have a link to that information about the case on our website as well.”
Customers can then comment on the case by email, mail or telephone.
“That goes right into the public file to become part of the court case documents. They actually do read all of them. An attorney and our general council office is assigned the task of reading them, and each commissioner, usually their aids, will go through them as well,” Skinner said. “In the end the commission has to make its decision, by law, on what has been admitted as evidence in the case.”
Oklahoma Empire energy users impacted, including business leaders, school districts and residents, met with Oklahoma Industrial Energy Consumers Attorney (OIEC) Tom Schroedter and Oklahoma Lobbyist Steve Edwards last week with Oklahoma State Representative/ Miami City Attorney Ben Loring and Miami Regional Chamber of Commerce President and CEO Steve Gilbert for a round table discussion regarding the proposal.
“We have been monitoring the process,” Gilbert said. “We’ve had an update call with Tom (Schroedter) this morning and this Thursday there’s a follow up hearing where they will talk about setting up the procedural schedule. What we believe will happen is they’ll set a date, probably in November for Empire to re-file, and once they file there will be 90 days for objection. We will know more on Friday morning.”
Once the timeline is established OIEC is asking Empire business customers to join in as parties to the rate hearing, according to Gilbert.
“Our focus is trying to facilitate the conversation among the industrial users and encourage them to join with OIEC,” he said. “My understanding is when the filing is made by Empire, they will make their case of the costs they incurred and those costs being the basis for their requested rate increase.”
Gilbert stressed the importance of Empire customers to be aware and vigilant that there is also the potential for Empire to make an interim rate increase request to the OCC, which although refundable, could potentially raise electric utility rates for Oklahoma customers.
— Melinda Stotts is the associate editor of the Miami News-Record. She can be emailed at firstname.lastname@example.org. or followed on Twitter @MelindaStotts1