OGE Energy : 18-046-FR Order

APSC FILED Time: 3/9/2021 9:56:23 AM: Recvd 3/9/2021 9:54:20 AM: Docket 18-046-FR-Doc. 237

ARKANSAS PUBLIC SERVICE COMMISSION

IN THE MATTER OF THE FORMULA RATE	)
PLAN FILINGS OF OKLAHOMA GAS AND	)	DOCKET NO. 18-046-FR
ELECTRIC COMPANY PURSUANT TO APSC	)	ORDER NO. 15
DOCKET NO. 16-052-U	)

ORDER

In this Order, the Arkansas Public Service Commission (Commission) approves the Non-Unanimous Settlement Agreement (Settlement Agreement) filed on January 28, 2021, by Oklahoma Gas and Electric Company (OG&E), the General Staff (Staff) of the Commission, and the Attorney General of Arkansas (AG) (collectively, the Settling Parties).1 The Commission notes that approval of the Settlement Agreement will, on a net basis, result in the average residential customer in Arkansas seeing an increase of 4.00 percent, or $3.48 per month, on the total bill.2

I. Procedural History

On October 1, 2020 (with errata filed on October 8, 2020), OG&E filed an Application for approval of its 2020 Formula Rate Plan (FRP) in compliance with the provisions of OG&E's Tariff Sheet No. 80, Formula Rate Plan Rider (Rider FRP), including Attachment F, the Formula Rate Protocols; Ark. Code Ann. §§ 23-4-1201, et seq.; and the applicable Commission Rules of Practice and Procedure (RPPs). Included with its Application was the OG&E Rider FRP 2020 Evaluation Report, which evaluates OG&E's earnings for the formula rate review test period. In support of its Application, OG&E filed the Direct Testimonies and Exhibits of Donald R. Rowlett, Bradley S.

1 The Arkansas River Valley Energy Consumers (ARVEC) is not a signatory to the Non-Unanimous Settlement Agreement but does not object thereto and agrees with the proposed submission of this matter to the Commission on the record, to excuse all witnesses and waive the hearing.

2 Settlement Testimony of OG&E witness Donald Rowlett at 6.

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Cochran, Robert J. Burch, Zac Hager (with errata and inadvertently omitted exhibits filed on November 9, 2020), Usha-Maria Turner, Jeremy K. Schwartz, Gwin Cash, and Zachary Gladhill.

On November 2, 2020, OG&E, the AG, ARVEC, and Staff filed a Joint Motion for Procedural Schedule, which was granted by Order No. 13 on November 9, 2020. On December 31, 2020, the AG filed a Statement of Errors and Objections (E&O) and the Direct Testimonies and Exhibits of Michael P. Gorman and Scott Norwood; ARVEC filed an E&O and the Direct Testimony and Exhibits of Mark E. Garrett; and Staff filed a Presentation of E&O along with the Direct Testimonies and Exhibits of William L.

Matthews, John G. Athas, and Jeffrey J. Roberts. OG&E responded on January 14, 2021, with the Rebuttal Testimonies of Mssrs. Rowlett, Cochran, Hager, Gladhill, Cash, and Brian Huckabay.

On January 28, 2021, the Settling Parties filed a Joint Motion to Approve Non-Unanimous Settlement Agreement, Waive Hearing, and Excuse Witnesses (Joint Motion) and the Settlement Testimonies of Mr. Rowlett for OG&E, Mr. Clayton Layson for the AG, and Ms. Regina Butler for Staff.

On January 29, 2021, by Order No. 14, the Commission granted the Joint Parties'

Joint Motion and request that the Commission cancel the hearing and decide this matter on the record as filed. No public comments were filed in this Docket concerning the filing of OG&E's 2020 Application and Report.

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II. Summary of Parties' Positions Before Settlement

A.

OG&E's Application and Direct Testimony

In its Evaluation Report, OG&E states that its Earned Rate of Return on CommonEquity is 5.59 percent and proposes a Rider FRP Revenue Change of approximately $13.55 million, netted against the FRP 2018 Evaluation Report of $3.27 million, which results in an FRP Rider Revenue Change of $10.28 million in order to achieve a Target Rate of Return of 9.5 percent. OG&E notes that the revenue constraint calculation3 only allows for a Revenue Change of approximately $7.0 million. Application ¶ 5.

Mr. Rowlett provides overviews of OG&E's third FRP filing and the Environmental Compliance costs included in this FRP filing. He provides customer impacts and the calculation of the changes in rates resulting from this proceeding that will take effect on April 1, 2021. Rowlett Direct at 3-9 (Doc. #181).

Mr. Cochran presents the results of the FRP 2020 Evaluation Report and describes the significant drivers of the proposed FRP Revenue Change between the settlement agreement results of the 2018 Evaluation Report and the 2020 Evaluation Report. He also describes how the information included in this filing satisfies the Settlement Agreement in the 2019 Evaluation Report. He describes the mechanics of the FRP 2020 Evaluation Report, including its results, and the Attachments required by Rider FRP, including the adjustments to Rate Base, Expenses, and the Benchmark Return on Rate Base, and he discusses the information included in this filing that satisfies the Settlement Agreements from the 2018 and 2019 Evaluation Report.

3 The revenue constraint calculation limits each Rate Class to a plus or minus 4 percent of Filing Year revenue bandwidth.

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Cochran Direct at 3-9 (Doc. #182). He explains how OG&E complies with Rider FRP and the adjustments OG&E is proposing. Id. at 10-22.

Mr. Burch provides an overview of the OG&E generating facilities that are affected by the Regional Haze Rule (RHR), specifically those that are affected by the Environmental Protection Agency (EPA) Federal Implementation Plan (FIP) for sulfur dioxide (SO2) emissions. He details the various technological options for compliance and how OG&E evaluated these options based on effectiveness, cost, and timing. Burch Direct at 3-11 (Doc. #183). He testifies that OG&E completed Sooner Units 1 and 2 projects for approximately $445 million and both were operating in compliance on January 2019. He testifies that OG&E completed Muskogee Unit 4 and 5 projects for approximately $54 million and both went into service in March 2019. Id. at 12-15.

Mr. Hager discusses the integrated resource planning (IRP) process that OG&E used to develop its environmental compliance plan for the RHR. He provides the results of this process, the 2014 IRP Update, which he also refers to as the "Scrub/Convert" plan. Hager Direct at 2-3 (Doc. #184). He testifies that the Scrub/Convert plan was the least cost option in the Base Case, performed well under all scenarios, and provided stability against risk of high natural gas prices and carbon regulation. Id. at 13-14. He testifies that OG&E implemented the Scrub/Convert plan in order to meet the EPA compliance deadlines. He testifies that this plan included installing dry scrubber technology at the Sooner units and converting Muskogee Unites 4 and 5 to natural gas.

Id. at 15.

Ms. Turner discusses OG&E's compliance with existing federal RHR and the compliance plan for that rule. She details the EPA FIP relating to SO2 emission limits