Pro-solar advocates at a rally organized by the Sierra Club's Oklahoma Chapter outside the headquarters of Oklahoma Gas & Electric in Oklahoma City in February. Photo by Johnson Bridgewater.
Oklahoma may be the Sooner state, but its utility regulators are in no hurry to be the first state in the country to subject residential customers to demand charges. Earlier this week, the Oklahoma Corporation Commission issued an order rejecting the request by the state’s largest utility, Oklahoma Gas & Electric, to double the fixed customer charges for residential and commercial customers and impose default demand charges on those customers.
If the Commission had approved OG&E’s request to impose default demand charges on residential customers, it would have been the first commission in the country to do so. The Commission wisely chose not to go down that road. Although the Commission did not offer much reasoning for its decision to reject demand charges, its order requires specific studies that OG&E must undertake before ever again proposing a demand charge on residential customers. Specifically, OG&E will have to study customer acceptance and understanding of the demand charge, the impact on low-income and senior citizens, conservation and impacts on system peak, and bill stability. That language gives one a sense of the wide range of concerns that the Commission justifiably had about residential demand charges.
Not content to blindside consumers with demand charges, OG&E also proposed a fixed charge of $26.54, which would have been among the highest in the country. Together with other fixed riders on the bill, the average household served by OG&E would have about half of its electric bill predetermined each month, before consuming a single kilowatt hour. Such a bill structure drastically undercuts incentives for energy efficiency and distributed generation. A just-released report by Brendon Baatz at the American Council for an Energy-Efficient Economy (ACEEE) vividly documents how high fixed charges and demand charges dramatically increase the payback period for energy efficiency investments.
In yet another assault on clean energy, OG&E had also proposed to saddle net metering customers with doubled fixed charges and mandatory demand charges—a request that was carried over from OG&E’s rushed effort at the end of 2015 to impose this punitive rate structure on the handful of residential net metering customers in the state. OG&E’s effort to impose these fees purported to implement a 2014 statute requiring utilities to address any demonstrated intra-class subsidy of net metering customers. Yet OG&E’s own cost of service study, in which net metering customers were evaluated as a separate subclass, actually showed that it cost less to serve them than other residential customers and that under current rates, OG&E recovered a greater percentage of the cost of service from net metering customers than from other customers. In layman’s terms, net metering customers were subsidizing other residential customers. Unsurprisingly, OG&E’s own witness in support of its charges for net metering customers opted not to make any reference to the company’s cost of service study in his testimony.
During the month-long hearing over OG&E’s request, Sierra Club and almost every other intervenor in the case filed a stipulation opposing any change in the customer charge, any new demand charge, and any effort to single out net metering customers for such punitive changes. Ultimately, the Commission approved that stipulation in its entirety, with slight modifications, once against demonstrating to advocates the critical role that such agreements can play in the utility regulatory setting.
The Oklahoma Commission’s decision is consistent with a trend across the country of denying utility efforts to increased fixed charges, recognizing that such charges are a disincentive to energy efficiency and the adoption of innovative distributed generation and storage technologies. These commissions have also recognized that high fixed charges take away customer control over their bills and are particularly unfair to low income customers. Given Oklahoma’s above-average poverty rates and rampant cuts in state services for working families, the Commission’s rejection of regressive fixed and demand charges is a piece of very good news.