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
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
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.