Dive Brief:
- Officials at Oklahoma Gas & Electric say they were surprised when regulators rejected an application for pre-approval of costs related to its environmental compliance plan, believing they had put forth the lowest-cost option with a variety of fuels considered, the Oklahoman reports.
- The Oklahoma Corporation Commission voted 2-1 to reject the plan, finding the utility had not given sufficient consideration to wind generation or environmental regulations, especially given the state's potential for low-cost renewable power.
- The utility's plan, which included $700 million to meet the Regional Haze and Mercury and Air Toxics Standards rules and $400 million to replace a gas-fired plant, was expected to raise rates by up to 19% over the next five years.
Dive Insight:
A 2-1 vote against OG&E's plan to meet environmental regulations has taken the utility by surprise, and may put power providers around the country on notice that their plans need to take into account the changing regulatory landscape and evolving clean energy options.
"We believe we presented a very strong case with ample information to make a good decision," utility spokesman Randy Swanson told the Oklahoman. "The plan we offered met the mandates that we're facing from the federal government at what we believe to be the lowest-cost plan for the consumer that provides fuel diversity, which we think is very important. It also met the mandates for the reduction in coal."
But the commission's order included a finding that "because of the availability of the federal and state tax credits, there is a unique and immediate opportunity for low-cost wind energy in Oklahoma... OG&E's 'wait and see' approach to the addition of wind energy to its energy portfolio places customers at risk that OG&E will miss opportunities to obtain record-low cost PPA prices."
The commission noted that OG&E did not include a carbon tax in its base case, instead choosing to run a single analysis on carbon price sensitivity, and that carbon was the only future environmental regulation that OG&E analyzed in a sensitivity analysis.
Jim Roth, representing The Wind Coalition in the case, told the news outlet that “OG&E's plan had zero wind additions in it. ... My hope today is that OG&E goes back the huddle, regroups their thinking, looks at the market and brings some low-cost wind right here in Oklahoma into their portfolio as they go forward."
Earlier this year, Oklahoma lawmakers reached a compromise with wind advocates on tax breaks for the industry. The state Senate moved to terminate a 5-year property tax exemption for wind developers, though wind projects currently in production or put into production by the end of 2016 will keep the full exemption. The state’s $0.005 per kWh zero emissions production tax credit will remain available to developers through 2020, helping Oklahoma wind remain cost-competitive through that period.