Wednesday, December 8, 2021

Oklahoma Proposes To Allow Utilities To Charge $ 1,400 Exit Fee To Switch To Electricity

Oklahoma’s largest gas company could soon charge customers who switch to electric stoves and heating systems a “shutdown fee” of nearly $ 1,400 to shut down services, HuffPost found, setting a precedent that could help the industry lock down fossil fuel use for millions. Americans. decades.

The offer is part of a larger offer from Oklahoma Natural Gas to sell debt that arose from the soaring fuel prices during the historic cold snap last February. This is currently being discussed by a judge at the Oklahoma Corporation Commission. The regulation, which will only apply to customers who are discontinuing services specifically to switch to electricity, could be approved as early as December and will take effect no later than June.

The fee could be more than double the cost of replacing a gas stove with a new appliance, forcing homeowners unloading their last gas unit not only to buy a new one, but also to say goodbye to the utility by paying the rest of their cost. the debt of the company. The fee is also fixed for almost all customers, so the cost does not reflect the amount of gas the household used during the severe frosts last winter.

If approved, the measure is likely to serve as a model for regulators across the country, proponents say, providing a new tool to prevent consumers from shifting from fossil fuels to zero-carbon alternatives. Texas and Kansas are already considering their own proposals, according to one source, who spoke on condition of anonymity as they were not authorized to speak publicly about the plans.

Sooner State has already helped pursue such a policy when it passed one of the country’s first “proactive laws” prohibiting its cities and towns from banning new gas connections to buildings. Oklahoma passed legislation last year, shortly after Berkeley, California, became the first city in the United States to require all new construction to switch to electricity.

Since then, more than 20 states, most of which are controlled by Republicans, have passed similar laws banning the use of natural gas, and cities including San Francisco, Seattle, and Brooklyn, Massachusetts, have banned gas appliances from new or refurbished buildings. The effort comes as cities and states are rushing to cut climate change-causing pollution, roughly 13% of which is in buildings in the United States. Electrification poses a major threat to gas companies, which have responded with aggressive lobbying for preemptive laws and misleading advertising campaigns featuring Instagram influencers.

“Tolls are just another example of barriers being put in place that make it difficult for consumers to electrify their homes and reduce greenhouse gas emissions,” said Charlie Spatz, a researcher who monitors proactive laws at the Energy and Policy Institute’s watchdog group. “As gas prices rise and consumers become more concerned about their carbon footprint, this exit fee could become a major financial obstacle blocking consumers in the gas system.”

Paramedics in Oklahoma City treat Eugene Rich for frostbite amid record cold and snow on February 16.

The Washington Post via Getty Images

Unlike the state priority law that Oklahoma Natural Gas lobbied, the utility, which serves roughly 90% of the state, did not initially ask for exit fees. The problem stems from a severe winter storm that plunged temperatures in Oklahoma, Texas and neighboring states below freezing for two weeks in February last year. Across the region, gas pipelines froze as taxpayers increased capacity, while power plants also consumed more natural gas to meet growing electricity demand. With high demand and low supply, the price of natural gas rose sharply. To cover the cost of buying fuel, Oklahoma Natural Gas brokered a hasty $ 1.5 billion loan from Bank of America.

The utility, owned by the $ 4 billion publicly traded giant ONE Gas, did not want the debt to be on its books because it could incur additional fees and affect the company’s credit rating. Oklahoma Natural Gas’s allies in the state legislature came to the rescue. While the state’s residents were still freezing to death, lawmakers introduced a bill to allow a company to convert its debt into government bonds – a process called securitization. Republican Governor Kevin Stitt signed the law came into force in April.

Shortly thereafter, Oklahoma Natural Gas approached the Oklahoma Corporation Commission with a proposal to convert its debt into bonds. After buyers of Wall Street bonds purchased the debt, the company asked the government for permission to charge about $ 8 each month from the vast majority of its taxpayers. The fees and exit fees will be the same for small and large clients, no matter how much gas they used during the winter storm, and the fees will be in effect for the full 25 years the bonds were in stock. The monthly payments of taxpayers will essentially serve as collateral.

But there is no guarantee that these payments will last that long. Electric stoves and ground source heat pumps are becoming more popular as technology improves and climate policies create incentives for the transition. Concerns about global warming are far from the only motivation. Mounting research indicates that gas stoves are causing dangerous amounts of indoor air pollution, and the rising cost of natural gas means that using electricity in many places is simply a cheaper option.

This reality threatens the future of gas supply as a business.

“This shameful proposal will punish customers trying to ditch the risky, expensive and dirty fuel in the form of crushed gas, which has driven energy prices soaring and led to this securitization ledger in the first place.”

– Cheyenne Sky Brunskum, Sierra Club Oklahoma

Fearing that the looming exodus of gas payers would make Oklahoma Natural Gas’s bond debt so risky that interest rates would be astronomical, an employee of the Oklahoma Commission’s utilities department proposed an exit fee.

In testimony presented in the case in response to the Oklahoma Natural Gas bid, Isaac Stroup, the regulator of the Regulatory Commission, warned that the growing number of cities banning gas “could lead to natural gas being viewed as more uncertain than electricity. at least more in the long term, “although he believed that” natural gas in Oklahoma should be treated differently than natural gas from a national point of view. ” Referring to the state’s priority law, he said that “industry is an integral part of Oklahoma’s economy and the chances of being banned in Oklahoma are very slim.”

However, he said, “Given that securitization costs have been reimbursed over the years, some investors may be concerned about the natural gas company’s ability to cover total costs over the life of the bonds.”

“This, in turn, could lead to a downgrade of the bond rating and, consequently, to higher interest rates.”

Oklahoma Natural Gas and its parent company said in court proceedings that they have no objection to this measure.

The company is one of four parties to this case. The other three are the Utilities Division that offered the fee, the state attorney general and retail giant Walmart, which said in its filing that it was joining the case as part of routine monitoring to assess its interests as a major gas buyer.

Oklahoma Corporation Commission spokesman Matt Skinner declined to comment on the ongoing case, but said it was “a normal part of the negotiation process,” with regulators proposing solutions that companies did not ask for.

Due to the growing reasons for the switch from gas appliances to electric ones, utilities are faced with a reduction in demand for natural gas.
Due to the growing reasons for the switch from gas appliances to electric ones, utilities are faced with a reduction in demand for natural gas.

Picture Alliance via Getty Images

Since exit fees were not listed in Oklahoma Natural Gas’s original filing, environmental groups and consumer watchers said they were overwhelmed and could not oppose the proposal early on.

“This shameful offer will punish customers trying to ditch the risky, expensive and dirty fuel in the form of crushed gas, which has driven energy prices soaring and led to this securitization ledger in the first place.” Cheyenne Sky Brunskum, chair of the Oklahoma branch of the Sierra Club, said in a statement.… “Getting ONG clients into financial clutches runs counter to the freedom narratives we regularly hear from utilities and fossil fuel corporations.”

Amy Turner, senior fellow at Columbia University’s Sabine Climate Change Law Center, said the proposal “is consistent with efforts to protect the privileged status of natural gas in our domestic energy markets.”

“Whether it’s legal protections for their ability to serve customers, abandoning local electrification policies, or financial incentives and barriers, the gas industry demands and often gets legal protections from a shrinking customer base,” she said.

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