Negotiations between the Oklahoma Corporation Commission andOklahoma Natural Gas over the fate of unbundling in the statereached an impasse once again last week and probably will remainstalled until an Oklahoma Supreme Court decision is issued on thematter. The stalemate further delays implementation that wasoriginally scheduled to start Aug. 1.

Regulators and the utility have been in a heated battle sinceJuly over some of the changes ordered by the commission in itsupstream unbundling interim order. ONG filed an appeal of the orderwith the state Supreme Court two weeks ago, saying it raised anumber of constitutional issues. The Supreme Court won’t be insession until Sept. 8 and observers believe it could be a long waitbefore a decision is handed down.

“The commission has worked very hard to get unbundling in placefor the winter heating season, but ONG seems to be saying ‘we’renot going to let you run our company. The way this thing seems tobe written leaves us no choice but to block it.’ So it’s kind of astandoff right now,” said OCC spokesman Patrick Petrie.

On Aug. 17, the OCC filed a motion with the state Supreme Courtto dismiss the appeal on grounds its order was an interim ruling.ONG subsequently filed a motion with the commission for a stay ofits unbundling order, stating the order could not go forwardbecause of the appeal. During a hearing last Wednesday, thecommission took up the motion for a stay but stopped short ofmaking a decision.

“ONG is trying to get the commission to voluntarily stay theeffectiveness of the order, and all the commission has done islisten to arguments and say ‘Okay we’ll take that underadvisement,'” said Petrie. ONG maintains it requested the stay as amere formality. It argues the order was automatically stayed whenit appealed to the Supreme Court. “There’s even disagreement amongthe commissioners,” said Petrie. “That’s been going on since theunbundling order came out. We originally started with threedifferent versions and finally hammered out something the two couldlive 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 thecurrent dispute focuses on how costs and assets are allocatedbetween the two divisions because the upstream company will have tocompete with others, and ONG wants it as lean and low-cost aspossible.

It appeared a dispute over about $11 million was the only thingstanding in the way of a settlement agreement late last week. Thatapparently was not the case as ONG declared a stalemate with thecommission Friday over what it called the OCC’s meddling in itsinternal operations.

“There was significant concern on the part of our managementabout some of the aspects of the order that, as we said in ourSupreme Court appeal, invade management’s discretion,” said ONGspokesman Don Sherry. “Specifically, there was contention aboutwhere certain assets belong with respect to whether certain partsof the pipeline system should be part of Oklahoma Natural Gas Co.,which is the regulated LDC, or whether they should be part of ouraffiliate, which is ONEOK Gas Transportation. Both asset and costissues between these two entities had been areas of contention. By[Friday] we were virtually at agreement on the allocation of costsbetween these two entities. But there were actually issues relativeto which systems ought to belong to the pipeline. The commissionwas attempting to impose its direction in this, and we felt it wasbeyond their jurisdiction.”

As it stands now, the utility refuses to begin a competitivebidding process on upstream transmission service to the state’smajor cities. But a spokesman said Friday ONG will move forward oncompetitive bidding for a portion of its supply needs for thiswinter 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 bepassed along,” said ONG President Jim Kneale. “Any claim thatcustomers are going to suffer because we are pursuing our legalrights is not accurate.”

Rocco Canonica

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