Oklahoma Corporation Commission Chairman Bob Anthony still isnot satisfied that his state’s ratepayers are not getting the shortend of the stick in a 10-year supply contract between OklahomaNatural Gas (ONG) and Dynamic Energy Resources. In a press releaseissued earlier this week, Anthony charges under the contract ONG ispaying 50% more than it should be for some of its gas supply andpassing the cost on to consumers.

Anthony maintains an analysis of the agreement shows that sincethe contract took effect Nov. 9, 1993 and through September, ONGpaid an average price of $3.073/MMBtu. “By comparison, the samevolumes of natural gas could have been purchased during that timeframe on the spot market for an average cost of $2.024/MMBtu, asavings of $1.049/MMBtu. More than 29.7 million MMBtu was purchasedat the inflated price during the review period, Anthony said.

The 10-year contract between ONG and Tulsa, OK-based DynamicEnergy Resources is said to be worth about $175 million and runsuntil January 2004, Anthony said. The commissioner said thecontract specifies gas will be sold at whichever of three pricingprovisions is most attractive to the seller. One provision is spotprice plus 40 cents. Another specifies a flat price of $2.78/Mcf,and the third is a weighted average cost of ONG’s supply portfolio,including the cost of old and expensive gas contracts, Anthonysaid.

“Oklahoma Natural has demonstrated a history of diligentlytrying to provide high-quality service at some of the lowest ratesin the country,” Anthony said. “Company officials have said incourt that there is no obligation for the seller to deliver gasunder terms of the contracts and have indicated ONG would not behurt if the volume of supply represented by these agreements wasnot available.

“These contracts contain ‘regulatory out’ clauses allowing ONGto void the agreement should the price not be authorized as apass-through in its purchased gas adjustment clause. Traditionalmonopoly utility markets are opening to competition. It would seemin both the company’s stockholder and ratepayer best interest tohold costs as low as possible. You would think ONG would welcome anopportunity to present these agreements to the commission for aprudence review.”

Well, actually no, according to ONG spokesman Don Sherry. He hadharsh words for what he said his company considers a personalvendetta of Anthony.

“It is absolutely bogus. It is totally false. It is anabsolutely invalid comparison and the commissioner knows it orshould know it,” Sherry said of the comparison of the Dynamiccontract gas prices and spot market prices. “What he has done issuggest that we should have been buying gas on the spot market in1993…” Sherry said the Dynamic contract has been reviewed aminimum of three times and found to be prudent. “I wish there weresome end in sight of this continual campaign of harassment.”

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