In Oklahoma, utilities have few fuel choices when it comes to
generating electricity. Natural gas and coal are by far the two most
prevalent fuel choices. And that choice has some of the state's most
powerful corporations fighting about power.
The state's two largest electric utilities - Oklahoma Gas and
Electric Company and Public Service Company of Oklahoma - say the
best way to ensure the lights stay on is to diversify, balancing the
use of the state's two main fuel sources. But the utilities face a
challenge in convincing the state that their plan to add another
coal-fired power plant to the mix is the best choice.
Hurricanes, train derailments, embargoes, pipeline failures and
other disasters both natural and manmade can cut off the supply of a
particular fuel without warning - and without a means to estimate
the duration of the shortage. Price fluctuations and political
forces can make a particular fuel source considerably more or less
attractive in a short period of time. PSO and OG&E officials contend
the best way to mitigate the state's risk against the unexpected is
to avoid over-reliance on any one type of fuel.
PSO and OG&E have partnered on a plan to build a 950 megawatt
coal-fired power plant in Noble County, a project known as Red Rock
that is estimated to cost $1.8 billion. The plan is opposed by
natural gas company Chesapeake Energy and others who have a stake in
the natural gas industry, and point to the environmental drawbacks
Oklahoma's electric utilities are barred from making a profit on
the fuel used to generate electricity. The cost of fuel used in
generation is passed through to the customer. But while the price of
fuel makes no difference on the utilities' bottom line, the
utilities have to answer to the Oklahoma Corporation Commission
regarding whether they've made the best decisions for ratepayers.
And when customers notice their monthly bills rising or disruptions
in service, they aren't likely make a distinction between the
utility and its fuel suppliers when calling to complain.
On the other hand, utilities are allowed to make money on their
power plants. If the utilities can justify the need for a new power
plant to the Corporation Commission, the cost of building the plant,
as well as the cost of operating and maintaining the plant over an
estimated 40-year lifespan, can be factored into the utility's rate
structure. When deciding how much a utility may charge its
ratepayers, regulators factor in all of the utility's assets and
allow the company to collect an established return on equity,
usually of about 10 percent.
Oklahoma's energy options
In Oklahoma, natural gas and coal are close competitors in the
field of electricity production. The Energy Information
Administration, part of the federal Department of Energy, reported
that in May, 2.6 million megawatts of electricity were generated
using natural gas, accounting for 3.9 percent of the U.S. natural
gas supply, while 2.7 million megawatts was generated using coal,
accounting for 1.7 percent of the U.S. coal supply. The EIA showed
more than 20 major natural-gas-fired electric power plants in the
state and six major coal-fired plants.
Very little electricity is generated in Oklahoma using other
fuels. In May, just 3,000 megawatts were generated in the state from
petroleum-fired plants, 357,000 megawatts from hydroelectric plants,
and 171,000 megawatts from other renewables, including wind power.
No nuclear power plants operate in Oklahoma.
Though Oklahoma has made great strides in the area of wind-
generated power in recent years, wind is one resource for which no
accurate predictions can be made. Utilities are allowed to use wind
power to meet peak demand, but regulators do not permit utilities to
rely on wind as part of their base load, the minimum level of
generation capacity the utilities are required to keep at the ready
at all times. …