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OK Governor Gives Green Light to Unbundling

OK Governor Gives Green Light to Unbundling

A road block to retail competition in Oklahoma was smashed last week when Oklahoma Governor Frank Keating vetoed Senate bill 565, a last-minute attempt to derail gas unbundling in the state. The bill would have pushed back the effective date for unbundling until October 2001 and erased the final rules completed by the Oklahoma Corporation Commission in April and approved by the legislature and the governor.

"I have vetoed [this bill] because the provisions of this legislation would be a step backward for the deregulation of the natural gas industry and slow benefits gas consumers in Oklahoma are expecting," Keating said. "The [OCC] has spent nearly two years in promulgating rules which encourage competition in the natural gas industry, including provisions for the deliberate and careful transition to competitive markets. The requirement in [SB 565] that the [OCC] 'promulgate rules implementing unbundling of natural gas services,' renders the current rules in effect a nullity., [mandating] that the rulemaking process begin all over again."

Enron's Kathleen Magruder, president of rates and tariffs for Enron Energy Services, said the governor "did the right thing. We're very pleased he decided to veto it and we're looking forward to going forward with the collaborative discussions to restructure the natural gas industry in Oklahoma and to begin retail competition. It was inappropriate for the legislature to come back in the 11th hour and try to change what interested parties had spent two years putting together."

Under the OCC's current rules, downstream unbundling, including offering a choice of suppliers to all retail customers, is scheduled to take place in November 1999. Upstream unbundling, including and auction of upstream capacity, is scheduled to begin this November.

ONG and Arkla, the state's two largest gas distributors, were the main forces supporting the bill. "It addressed some problems we felt existed in the rules developed by the OCC," said ONG spokesman Don Sherry. "Much of our concern was directed at the upstream portion of the rules. Specifically, there was an issue regarding the ability of our affiliate to compete on an equal basis with other companies when a competitive situation existed. We [are] under a heavier regulatory prove in effect there [is] a competitive situation that allows us to compete.

"With respect to the downstream part of it, we felt this was a very aggressive timetable. There were simply some logistical situations that would have been better met had there been more time. There also are some issues that are not yet fully resolved, some tax implications." He noted in Oklahoma LDCs collect either a franchise tax or a gross receipts tax based on the total fees in customer bills. "When we get into downstream unbundling and the customer is buying the commodity elsewhere, obviously our bill is going to be smaller, therefore the amount of the taxes collected will be [lower]. Those were our concerns. Our position now is we're going to move forward and do everything we can to make this transition smooth and make unbundling work."

Rocco Canonica

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