Newspaper article THE JOURNAL RECORD

No Blank Check: Consultant Says OG&E Should Bear Risks of Cost Overruns

Newspaper article THE JOURNAL RECORD

No Blank Check: Consultant Says OG&E Should Bear Risks of Cost Overruns

Article excerpt

OKLAHOMA CITY - Oklahoma Gas and Electric Co. should bear the financial risks of its costly proposed utility project, said Craig Roach, an economist and national electric power consultant. He said the Oklahoma Corporation Commission shouldn't write a blank check to the utility.

The case is unique because the company is asking for more than $1 billion from its ratepayers before the power plant projects are built. Also, the company didn't follow a competitive bidding process, he said

The utility's billion-dollar proposal includes $700 million to comply with federal air pollution requirements. It also includes an unrelated plan to upgrade an aging power plant. The utility has come under fire for the $414 million portion of the proposal, known as the Mustang Modernization Project. The company estimated the combined proposal would raise monthly bills by 15 percent to 19 percent by 2019, if approved by the OCC.

Read previous coverage of OG&E's preapproval hearing.

Roach testified Tuesday as an expert witness for the agency's Public Utilities Division, outlining his concerns with OG&E's proposal. The company didn't include wind power in its overall plan, missing an opportunity to minimize rate hikes. The OCC should reject the utility's environmental compliance plan unless it adds a request for proposal for wind power, Roach said.

"To reduce ratepayer impacts, to cut costs, that is the point of the wind RFP (request for proposals), from my perspective and from staff's," Roach said.

The company didn't conduct a competitive bidding process, so it's difficult to know if its environmental compliance plan is the lowest cost, he said.

The utility also underestimated future risks from proposed environmental regulation, including the U.S. Environmental Protection Agency's Clean Power Plan. Those proposed rules could make coal-fired power plants uneconomical, which could mean having to shut down those generators sooner than planned.

If those proposed EPA rules become effective, it could mean OG&E's plan to clean up air pollution isn't the most cost- effective, Roach said. …

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