The Oklahoma Corporation Commission said, “No More” to Oklahoma Natural Gas’ continuing 75-cent/Dth surcharge on customer bills related to its recovery of last winter’s high gas costs. In a final order issued last Tuesday, the commission told the utility that starting Dec. 1 it will no longer be allowed to recover those costs. The final order follows a similar preliminary ruling on the matter earlier this month.

The unrecovered gas purchase costs amount to about $34.6 million, and the ruling should save average residential customers about $12/month this winter, according to Commission Chairwoman Denise Bode.

ONG said it is requesting that the commission postpone enforcing the order while the company makes its appeal to the Oklahoma Supreme Court. Earlier this month, ONG President Sam Combs said he thought ONG had been “taken to the woodshed unfairly” by the commission on this matter. He said that last year ONG bought 60% of its winter gas supply from its sister company, ONEOK Energy Marketing and Trading (OEMT), and had paid a fair and reasonable price. 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, he said.

Ironically, the Commission’s vote came on the same day that the OCC staff reported that a review of the records of two ONEOK companies demonstrated that ONG customers were treated fairly by its affiliate, and, in fact, paid less on average than OEMT’s other customers.

Earlier this year, the commission slowed ONG’s recovery of its gas costs from last winter. Rather than the full amount being collected, the commission ordered the company to only pass through a portion of the costs incurred, pending further review of the matter. In a review of ONG’s purchasing practices, 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. In a preliminary order earlier this month, the commission considered the staff’s findings and ordered ONG to halt its winter cost recovery by Dec. 1.

Bode called the final order a step “not taken lightly.” She said the “fact remains that as a result of the company’s failure to prepare for what were expected to be high gas prices for the winter of 2000, consumers face a continued charge on their bill as ONG seeks to be reimbursed for its gas costs of the past winter. It is wrong for the consumer to pay for ONG’s failure to take action to protect consumers against tight supplies and rising prices.”

Commission Vice-Chair Bob Anthony said the order simply corrects a situation in which consumers were paying for ONG’s mismanagement in preparing for the predicted high gas costs that became reality last winter. “Over $30 million of ONG’s gas costs last winter were excessive and imprudent. In fairness to consumers, today’s order disallows pass-through of these charges to the consumer.”

ONG’s Combs labeled the OCC decision “an unjustified attempt to blame ONG for last winter’s record-setting high natural gas prices, which affected customers throughout the country — not just here in Oklahoma. Following a commission-mandated and closely-monitored competitive bidding process, Oklahoma Natural Gas was able to meet its customers’ needs during a difficult period. And it did so at prices that were at or below the regional average, as testimony in the case demonstrated, the company said.

The Commission’s authority to examine the business records of unregulated affiliates with companies other than ONG became the focus of an earlier conflict that prompted two Commissioners to cite ONEOK for contempt. That matter is also before the state supreme court; in the meantime, ONEOK voluntarily agreed to disclose the documents to the staff while the legal issues are addressed.

“This order comes at the end of many months of inquiry in an exercise that at best is described as 20/20 hindsight,” said Oneok CEO David Kyle. “Now, after months of accusation and innuendo, the truth is finally acknowledged: Our business practices are above reproach. So all that is left is a desperate last effort to deflect understandable customer unhappiness by blaming ONG. This order has no basis and is utterly outrageous,” Kyle said.

Commissioner Ed Apple was not present at the meeting and did not vote on the matter, but has issued a dissenting opinion. “Two wrongs do not make a right,” Apple said. “Woeful is the elected official who can only apply a static ‘letter of the law’ concept to a multi-dimensional situation. Edmund Burke characterized the duty of an elected official this way: ‘One who owes you not his industry only, but his judgment; and he betrays instead of serving you, if he sacrifices it to your opinion.’ Blind adherence to words displays either an unwillingness to understand the facts or a bias so set that logic and reason are ignored. In either case, ‘fair, just and reasonable’ are merely crutches for the pre-determined outcome. Judgment in this cause has been sacrificed.”

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