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Oklahoma Orders ONG's Upstream Unbundling

Oklahoma Orders ONG's Upstream Unbundling

The Oklahoma Corporation Commission (OCC) at press time Friday was to issue its rule for upstream unbundling of the Oklahoma Natural Gas (ONG) system. The unbundling plan calls for ONG to remain a regulated utility providing distribution service. However, its existing services and assets upstream of the citygate - gas supply, gathering, storage, and transportation - would be separated and brought under a new company, ONEOK Gas Transmission (OGT). In addition, ONG will seek upstream services through competitive bid.

If no one bids against OGT, or if OGT is the winning bidder, all services would end up being provided under the existing regulated rates. The order would base the cost of upstream services on ONG's most recent rate case in 1994.

"The way we look at it is there is no downside," said Larry Lago, an aide to OCC Commissioner Bob Anthony. "The company already has rates in place, and if there are no bids received, those rates will remain in place, so the process will be revenue neutral."

Lago said the commission needed to get the order out Friday to stick with the planned unbundling schedule. Bidding for a percentage of upstream services, except storage, is to begin Nov. 1 for Oklahoma City and Tulsa, the state's largest cities. If competitive bids from suppliers other than OGT are accepted, savings stemming from Tulsa and Oklahoma City will be spread over the entire ONG system. The plan is for competitive bidding for upstream services for the rest of ONG's territory to begin April 1, 1999. This round would include storage as well as the other services. Storage also would be added to the subsequent round of competitive bidding for Tulsa and Oklahoma City.

Kathleen Magruder, vice president of rates and tariffs for Enron Energy Services (EES), said Friday before the commission's order came out that she couldn't say whether Enron would participate in competitive bidding. At recent oral arguments, she said Enron as well as Enogex and Transok said they would not be bidding if the package put out by ONG was included in the order. Magruder said the companies were hoping the commission would require the bid to be broader in scope than what ONG proposed.

Oklahoma's other major LDC, Arkla, already has been taking competitive bids. "They're kind of in a little more unique situation in that they are a distribution utility only, and they were getting no other services from their parent company, NorAm," Lago said. "They already kind of had a wall between NorAm and Arkla. In this case [with ONG], we're taking a fully integrated company and trying to divide it in two."

Joe Fisher, Houston

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