In the wake of last week’s Oklahoma Corporation Commission (OCC)order on upstream unbundling, an appeal filed Thursday by OklahomaNatural Gas (ONG) promises to at least put a damper on upstreamcompetition and possibly delay it while the case winds through thecourt.

ONG filed a petition with the Oklahoma Supreme Court appealingthe OCC’s July 31 interim order directing the unbundling of itsupstream gas services. The company also asked the OCC to stay itsorder until the court rules on ONG’s appeal.

ONG said the OCC order, issued last week, is unconstitutional”in that it exceeds the commission’s jurisdiction and authority andconstitutes an invasion of internal management direction.” ONG alsomaintains commission unbundling rules and administrative andhearing procedures also are unconstitutional. ONG spokesman DonSherry said the order gets into such areas as the construction ofbids for gas supply, asking the company to reduce takes fromcertain existing contracts in order to bid out larger volumes.”There is case law here in the state of Oklahoma having to do withthe extent to which the Corporation Commission can get into theactual management of a utility.”

ONG President Jim Kneale said his company is not trying to stallcompetition. In fact, as existing contracts expire, ONG will goahead and solicit bids for supply for this winter’s heating seasonto serve the Oklahoma City and Tulsa areas. “It’s vitally importantto both consumers and Oklahoma’s natural gas industry that thesechanges are achieved in a reasonable, prudent and legal fashion.Taking apart a sophisticated, fully integrated system such as ONG’smust be done with caution. We have long supported the concepts ofgreater competition and customer choice in the natural gasbusiness. But this order was based in large measure on the proposalof a major competitor [Transok].”

The interim order was approved by the OCC Friday in a 2-to-1vote with commissioners Denise Bode and Bob Anthony voting in favor and Chairman Ed Apple dissenting. Bode said the OCC remainscommitted to providing ONG customers with savings from competitivebidding. “Time is important to make these customer savings possibleby the start of the winter heating season, which begins Nov. 1,”she said. Bode and Anthony said the order is designed to allow ONGto work with the commission on “the best possible way to configurethe necessary changes to transition Oklahoma’s natural gas utilityindustry into the era of savings through competitive bidding.”

The unbundling plan calls for ONG to remain a regulated utilityproviding distribution service. However, its existing services andassets upstream of the citygate — gas supply, gathering, storage,and transportation — would be separated and brought under a newcompany, ONEOK Gas Transmission (OGT). ONG is ordered to seekupstream services through competitive bid (See Daily and Weekly NGIAug. 3, 1998). Tulsa and Oklahoma City are to be the first citiesreceiving competitively bid gas supply and services; however, anysavings generated would be spread across the entire ONG system,according to the commission’s order.

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