ONG, Regulators Continue Fierce Battle Over Gas Unbundling
Negotiations between the Oklahoma Corporation Commission and
Oklahoma Natural Gas over the fate of unbundling in the state
reached an impasse once again last week and probably will remain
stalled until an Oklahoma Supreme Court decision is issued on the
matter. The stalemate further delays implementation that was
originally scheduled to start Aug. 1.
Regulators and the utility have been in a heated battle since
July over some of the changes ordered by the commission in its
upstream unbundling interim order. ONG filed an appeal of the order
with the state Supreme Court two weeks ago, saying it raised a
number of constitutional issues. The Supreme Court won't be in
session until Sept. 8 and observers believe it could be a long wait
before a decision is handed down.
"The commission has worked very hard to get unbundling in place
for the winter heating season, but ONG seems to be saying 'we're
not going to let you run our company. The way this thing seems to
be written leaves us no choice but to block it.' So it's kind of a
standoff right now," said OCC spokesman Patrick Petrie.
On Aug. 17, the OCC filed a motion with the state Supreme Court
to dismiss the appeal on grounds its order was an interim ruling.
ONG subsequently filed a motion with the commission for a stay of
its unbundling order, stating the order could not go forward
because of the appeal. During a hearing last Wednesday, the
commission took up the motion for a stay but stopped short of
making a decision.
"ONG is trying to get the commission to voluntarily stay the
effectiveness of the order, and all the commission has done is
listen to arguments and say 'Okay we'll take that under
advisement,'" said Petrie. ONG maintains it requested the stay as a
mere formality. It argues the order was automatically stayed when
it appealed to the Supreme Court. "There's even disagreement among
the commissioners," said Petrie. "That's been going on since the
unbundling order came out. We originally started with three
different versions and finally hammered out something the two could
live with. It was a two-to-one vote."
The OCC took an unusual approach to unbundling in the state,
ordering ONG to separate into upstream (supply, transmission,
storage) and downstream (distribution) companies. Most of the
current dispute focuses on how costs and assets are allocated
between the two divisions because the upstream company will have to
compete with others, and ONG wants it as lean and low-cost as
It appeared a dispute over about $11 million was the only thing
standing in the way of a settlement agreement late last week. That
apparently was not the case as ONG declared a stalemate with the
commission Friday over what it called the OCC's meddling in its
"There was significant concern on the part of our management
about some of the aspects of the order that, as we said in our
Supreme Court appeal, invade management's discretion," said ONG
spokesman Don Sherry. "Specifically, there was contention about
where certain assets belong with respect to whether certain parts
of the pipeline system should be part of Oklahoma Natural Gas Co.,
which is the regulated LDC, or whether they should be part of our
affiliate, which is ONEOK Gas Transportation. Both asset and cost
issues between these two entities had been areas of contention. By
[Friday] we were virtually at agreement on the allocation of costs
between these two entities. But there were actually issues relative
to which systems ought to belong to the pipeline. The commission
was attempting to impose its direction in this, and we felt it was
beyond their jurisdiction."
As it stands now, the utility refuses to begin a competitive
bidding process on upstream transmission service to the state's
major cities. But a spokesman said Friday ONG will move forward on
competitive bidding for a portion of its supply needs for this
winter despite the impasse.
"Consumers who wonder what all this means should know this:
Oklahoma Natural Gas Co. is going ahead with competitive bidding.
If there are savings as a result of this process, they will be
passed along," said ONG President Jim Kneale. "Any claim that
customers are going to suffer because we are pursuing our legal
rights is not accurate."