The Oklahoma Corporation Commission (OCC) has voted 2-to-1 to prevent the state’s largest utility, Oklahoma Natural Gas Co. (ONG), from collecting unrecovered gas costs associated with last winter’s costs. The vote will prevent ONG, which had already begun to collect the costs, to stop collecting an estimated $45 million in total costs from customers beginning Dec. 1, but the commission did not vote to give customers any refunds. ONG said it may appeal.

Denise Bode, the OCC chairwoman, said ONG’s “failure to act last year” resulted in customers having an “outstanding balance for gas costs. I don’t believe the company put forth the extra effort to do everything possible to protect ratepayers.”

Dissenting commissioner Ed Apple, who thinks the case against ONG should be dismissed, said ONG’s costs had skyrocketed along with every other utility’s costs last winter, said the higher costs were “justified by free-market conditions.” He said last winter’s prices were the result of low supplies and record cold temperatures which, in turn, increased demand.

“If we had a mild winter last year, we wouldn’t be here today,” said Apple. “I’m almost embarrassed,” he said, to be “talking about this issue.”

OCC’s vote followed a review of ONG’s gas purchasing practices. The OCC staff found that ONG was “imprudent” and that its purchasing practices had led to excessive charges for customers. The staff said ONG’s failure to purchase winter gas supplies in the summer beforehand attributed to the higher costs.

Bode concurred, noting that ONG would have saved customers an estimated $46 million last winter if it had acquired gas storage in September 2000. “The company has a responsibility to use its management discretion for the benefit of its consumers,” she said. “As of now, they claim none, and that’s not right.”

ONG President Sam Combs said the company may appeal the ruling to the Oklahoma Supreme Court, but he did not know what the next course of action would be. “At this point,” he said, “we’re not sure what our next move is going to be.” He added that he thought ONG had been “taken to the woodshed unfairly,” and noted that OCC had the “potential to injure the company. Winter is looming. We still have a job to do.”

Combs noted that last year, ONG bought 60% of its winter gas supply from its sister company, ONEOK Energy Marketing and Trading (OEMT). ONEOK Inc., ONG’s parent company, also has opened the books to regulators, he said, and the review found that ONG had paid a fair and reasonable price for the gas it bought from OEMT. In fact, said Combs, regulators noted that for every 1,000 cubic feet of gas bought from OEMT, ONG paid 56 cents less than OEMT’s actual cost. OEMT ended up bearing the increased cost.

ONG has announced that gas bills in 2002 should be on average about 20% lower than this year’s bills because of decreased commodity prices and an expected normal winter. ONG serves about 800,000 customers in Oklahoma.

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