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OCC Approves Upstream Unbundling of ONG

OCC Approves Upstream Unbundling of ONG

The lengthy and at times acrimonious fight between Oneok and the Oklahoma Corporation Commission (OCC) over upstream unbundling appears to be over. On Thursday, the OCC voted 2 to 0, with one commissioner absent, to unbundle the upstream gas gathering and storage services of Oklahoma Natural Gas (ONG) and Kansas Gas Service, divisions of Oneok Inc.

The commission determined there is competition for ONG's gas gathering and storage assets and therefore they should be removed from utility regulation by the commission effective Nov. 1. The action is part of an agreement negotiated between ONG and OCC staff and consumer groups. ONG is to buy gas supply through a competitive bidding process, and suppliers will make their own arrangements for gathering and storage services.

Thursday's vote followed a hearing that included testimony that the bidding process will save customers about $11.3 million annually in gathering and storage costs. That is in addition to a one-time credit of $5 million to appear on customer bills in September.

The OCC last week approved a stipulation among ONG, commission staff, Enogex, Transok, Octagon Resources Inc., Williams Pipeline Central Inc., Oklahoma Industrial Energy Consumers and GPM Corp. The Office of the Attorney General participated in the discussions but did not sign the final agreement.

The stipulation guaranteed ONG residential customers a one-time $5 million dollar credit in lieu of an ONG interim rate hearing. The credit, about $7 per residential customer, covers the interim period of Sept. 1, 1999, to May 5, 2000.

ONG will request competitive bids for gas supplies for the 1999-2000 heating season and will seek competitive bids for transmission service effective Nov. 1, 2000.

ONG will seek a stay of its appeal of last summer's OCC unbundling order pending before the Oklahoma Supreme Court and will dismiss the appeal once final orders are issued in the new rate case. In the meantime, the company agreed to implement certain consumer protections from the unbundling order as part of the stipulation.

Commissioner Denise Bode pointed to the multi-million dollar rate reduction in Oklahoman's utility bills but also emphasized the importance of customers gaining greater access at competitive prices to gas that is now being exported.

"The $5 million rate reduction is the icing on the cake we expect with a new open gas market in Oklahoma. Right now, we export 70% of our gas out of Oklahoma. This agreement will allow greater access to that Oklahoma gas by Oklahoma consumers, large and small, with competition at better prices. The consensus that finally developed among the regulators, ONG, and its competitors and customers to move forward is great news for all Oklahomans."

This is an important, positive step forward in a process that we believe will benefit our customers and our state, as well as our company," said ONG President Ed Farrell. "Everyone involved has worked extraordinarily long and hard to create fundamental changes in how we serve our customers."

Removing gathering and storage from utility regulation is a beginning step in the move to unbundle gas services to introduce competition to Oklahoma. Later this year, the OCC is to examine the issue of competition and deregulation with respect to transmission pipelines that deliver gas to ONG's distribution system. ONG said it would implement a competitive bidding process for those services beginning next year. Utility rates for gas delivery are to remain regulated and under OCC jurisdiction.

Commissioners Bode and Ed Apple voted in favor of the order Thursday. OCC Chairman Bob Anthony was absent but concurred with the results of the order in a separate opinion.

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