A delay on upstream unbundling continued this week in Oklahomawhere regulators and Oklahoma Natural Gas are in a heated battleover some of the changes ordered by the commission in July. Theutility refuses to begin a competitive bidding process ontransmission and supply service to the state’s major cities. Itfiled an appeal of the unbundling order with the Oklahoma SupremeCourt last week, saying it raised a number of constitutionalissues. The two sides may reach a settlement, but a dispute overabout $11 million stands in the way.

“Everybody is waiting to see if they’ll come to agreement butthat’s just not happening,” said OCC spokesman Patrick Petrie. “Theappeal is stalling things because the Supreme Court isn’t even insession until Sept. 8. The commission has worked very hard to getunbundling in place for the winter heating season, but ONG seems tobe saying ‘we’re not going to let you run our company. The way thisthing seems to be written leaves us no choice but to block it.’ Soit’s kind of a standoff right now.”

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.

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 also filed a motion with the commission for a stayof its unbundling order, stating the order could not go forwardbecause of the appeal. During a hearing on Wednesday, thecommission took up the motion for a stay but stopped short ofmaking a decision.

Meanwhile, settlement negotiations are taking place, and acommission staffer said the utility is willing to withdraw itsappeal if a number of components in the order are changed. Themajor issue seems to be a dispute over about $11 million in thecost of service of OGT, the upstream transmission company. ONGmaintains the $59 million cost of service set by the commissionwill make it too fat to compete in the bidding process fortransportation service to the state’s largest cities. Others willcome in and easily underbid OGT, according to the utility, leavingit with stranded assets. ONG responded with a filing for a $48.4million cost of service for the upstream company, arguing some ofthe assets used in setting its rates are clearly not used inproviding transmission and therefore should be excluded in settingits costs.

Meanwhile, bidding has been put off on about 25 Bcf of wintergas supply and related transportation and storage service forOklahoma’s major cities.

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