Oklahoma Empire customers will receive an approximate 31 percent increase in base rates and 20 percent increase in their electric bills if the OCC approves the recommendation.
OKLAHOMA CITY – There's just one last opportunity for Empire electric utility customers to put up a fight against an unprecedented, large rate hike coming their way.
In a 38-page report filed June 9 by Administrative Law Judge (ALJ) Ben Jackson supports Empire’s rate hike, finding one of the largest rate increases in Oklahoma history “reasonable and just.”
All Oklahoma Empire customers will receive an approximate 31 percent increase in base rates and 20 percent increase in their electric bills if the OCC approves the ALJ’s recommendation.
“I was shocked when I heard the amounts requested thinking my budget would be hit big time,” Commerce resident and tribal member Grace Goodeagle said. “And if I could foresee difficulty with such a large increase, what about family, friends schools, churches and businesses?”
Jackson issued the report to the Oklahoma Corporation Commission (OCC) after completing a full evidentiary hearing on the application of Empire District Electric (EDE) Company for a general rate request. The three OCC Commissioners; Chairman Dana Murphy, Vice-Chairman Todd Hiett, and Commissioner Bob Anthony, will make the final decision on Empire’s proposal at the end of July.
Empire is asking for a rate increase for 4,689 customers in 10 cities and towns in Ottawa, Delaware and Craig counties in Oklahoma.
“We are pleased that the Administrative Law Judge recognized the need to address the Company’s current revenue deficiency within the context of the current case and rejects the environmental rider alternative proposed by OIEC, noting that this alternative would only result in further rate shock for customers in the future. As we have stated in the past, we are not opposed to a phase-in approach for new rates in this case. The ALJ’s recommendation is consistent with this position,” Empire Spokesperson Julie Maus said on Thursday.
Empire's rate request to the OCC started in 2016 with a $3.8 million increase, which they later dropped to $2.6 million or a 22.39 percent rate increase. The ALJ's proposal is an increase totaling $2,629,281 allocated equally to all customer classes, residential, power transmission, and general power, in a stepped phase-in process over three years.
Attorneys for all parties presented legal arguments at the proceedings before the ALJ including Jack Fite for Empire, Deputy Attorney Dara Derryberry and Oklahoma Assistant Attorney General Jared Haines, Thomas Schroedter for the Oklahoma Industrial Energy Consumers and Deputy General Counsel Natasha Scott and Assistant General Counsels Olivia Waldkoetter and Patrick Ahren for the Commission's Public Utility Division (PUD.)
The parties made differing recommendations to the ALJ with Empire seeking a $3,024,940 annual increase, the Commission Staff a $2,844,138 annual increase, the OIEC offering two options; Option A $804,205 annual increase recovered through a rider, or Option B $576,701 annual increase and the Attorney General recommended a $866, 968 annual increase recovered through a rider.
Under the ALJ’s proposal, Empire will recover an increase of $1,314,641 in one year, plus carrying charges.
In response to low income and fixed income customers concerns about whether they can pay their electric bills under Empire's proposed rate increase Jackson wrote, “The ALJ finds that proposal to be reasonable and just.”
Goodeagle and many other Empire customers are shocked at the ALJ’s report and his support and justification of such a large rate increase.
“It seems as if the focus of the report was on the business interests, and not the impact to customers,” Goodeagle said. “ I received a Social Security cost of living increase this year, but that was canceled out because of a premium increase for Medicare. Rates and fees increase, but our incomes remain unchanged…We need affordable electricity. I agree Empire should receive an increase, but not in the exorbitant amounts it is requesting. ”
Empire's request was applied for to recoup and address $669.5 million in federal environmental compliance equipment costs and capital expenditures, a drop in the return on equity, changes in an incentive compensation and payroll and rate design adjustments.
The question has been raised of the timing of the rate increase with Empire’s acquisition by a Canadian company Algonquin. Concerns from the opposition include the fact that the request for the rate increase came during Empire’s Jan. 1, 2017 acquisition and merger by and with Liberty Utilities. Based in Joplin, Missouri, Empire is an investor-owned, regulated utility providing electric, natural gas, and water service, with approximately 218,000 customers in Missouri, Kansas, Oklahoma, and Arkansas.
Liberty is wholly owned by Algonquin Power & Utilities Corp., a publicly traded, investor-owned utility conglomerate headquartered in Canada. Algonquin is focused on delivering reliable earnings, cash flow and dividend growth for its shareholders. The requested increase is based on an overall rate of return of 7.59% and a proposed return on equity of 9.9% for the foreign- owned company.
Also in question is the amount of Empire’s investment used to improve reliability and distribution of service to Oklahoma customers who complain of no such reliability return or improvement to their service.
Miami Regional Chamber of Commerce/Miami Area Economic Development Executive Director Steve Gilbert who has been part of the active efforts to push back against the rate increase was disappointed in the outcome and the ALJ’s recommendation and the potential impact on the local economy.
“It seems in the final report recommendations of the ALJ it was heavily tilted toward the position of Empire and of the Corporation Commission’s staff, and that really surprised me,” he said. “I’m thankful for the companies that have stepped up, and the Quapaw Tribe, the AARP, and local school districts affected. There’s been a great coalition formed to try to advocate for some rational decisions.”
“In some ways, it makes it more frustrating we put so much into it and got very little in return,” Berrey said
Gilbert points out GRDA, and other electric power producers have made federal compliance investments as well and were able to recover their costs through much less shocking increases to customers.
“School districts are getting a double whammy with state budget cuts and will lose again with an onerous increase in electric bills,” Gilbert said. “Industry and small businesses and area towns will be hit… This is a big barrier to economic development.”
Gilbert compares the foreign ownership of Empire to local ownership by other companies and coops.
“It’s like an absent landlord,” Gilbert said. “Their customer service and operations are in Joplin, and then they’re owned by a Canadian conglomerate. It appears they just don’t care.”
“The impact to Empire’s customers of the ALJ’s recommendation, if adopted, will be devastating,” OIEC’s Schroedter said. “Customers will suffer rate shock. Economic development efforts will be substantially, adversely impacted and rate impacts on the elderly and the poor will be significant.”
The Quapaw Tribe joined in the fight early on, concerned with the negative impact on tribal ventures and its members.
“We’re frustrated, and we don’t understand why this crazy thing’s even happening,” Berrey said. “It’s very disheartening. We’re totally frustrated with the system and the lack of concern for the implications this will have on the people, not caring for poor people especially on fixed incomes who are going to have a tremendous hit to pay their electric bills.”
Berrey said the investment return recommended by the ALJ also seems in excess in comparison. The judge generally adopted PUD's position, but lowered the return on equity from PUD's 9.9 percent to 9.5 percent and rejected any recovery for long-term incentive compensation and payroll adjustments.
“I don’t understand why it’s so important that investors of a Canadian company get nine percent return on their money,” he said. “The school systems are probably going to lose a teacher. The whole thing is being put on the backs of poor people and tribal members, and it’s an awful feeling.”
Berrey also cited the lack of quality improvement in electric service to the community as another issue that has him scratching his head.
“It’s a pure money grab!” Berrey said. “We really need people to go down to Oklahoma City during the next hearing and voice their opinion and step up for the poor people and disadvantage and people in our area that are going to suffer the most from this, and help us fight it.”
Jackson's writes in his report to the OCC, “The ALJ recommends going forward with a general rate order because the Commission needs to address the EDE's revenue deficiency as well as customer rate shock concerns seen in public comments.”
On June 16 the OIEC, AG and other parties will file any exceptions they have with the ALJ’s report with the OCC, and subsequently, a final hearing is set to hear these points, and oral arguments on July 26 in Oklahoma City before the OCC makes a final decision.
“The report must not be adopted as it will cause severe harm to the ratepayers of Empire and to The entire economy of northeastern Oklahoma,” Schroedter said.
Empire's last general rate case occurred in 2011.
The Miami Regional Chamber of Commerce is making arrangement for transportation by bus to customers interested in attending the July hearing in Oklahoma City.
‘We will arrange for and let everyone know through our email list,” Gilbert said. “We want as many people as possible to come who are impacted to be a presence of the customer base.”
Anyone interested in attending, for more information, or to added to the email list of updates call 918-542-4481 or email the Chamber at firstname.lastname@example.org.
Melinda Stotts is the associate editor of the Miami News-Record. She can be emailed at email@example.com or followed on Twitter @MelindaStotts1.