Fuel Switching Plan Threatens Ratepayers in Oklahoma

Oklahoma has had a somewhat schizoid response to EPA’s war on coal. On the one hand, Attorney General Scott Pruitt and the state’s largest utility are fighting EPA in federal courts. On the other, the state’s second largest utility, PSO, sought a settlement.

Unfortunately, PSO’s settlement gave away the farm to EPA and the Sierra Club, which was involved in the negotiations. In order to achieve compliance with the agency’s ridiculous regulations, the utility agreed to shutter almost 1,000 megawatts of coal-fired electricity capacity, decades early.

Last week, Americans for Prosperity-Oklahoma published a study by me on the PSO-EPA-Sierra Club fuel switching plan. Relative to retrofitting existing coal units, PSO’s settlement will:

• Increase costs to PSO ratepayers by $529 million in net present value and $3 billion in nominal dollars;
• Reduce PSO system capacity by 210 megawatts, thereby stressing reserve margins—a key reliability metric—through at least 2021; and
• Eliminate fuel diversity on the PSO system, rendering ratepayers vulnerable to rate shock.

I posted the entire study below. On Thursday last week, I spoke about the study in Oklahoma City at a panel discussion with Oklahoma Attorney General Scott Pruitt and Rep. James Lankford (R-Okla.). Click here, here, and here for news accounts of the panel discussion.

What can PSO ratepayers do? At this point, the settlement agreement is in EPA’s hands. Last Wednesday, the Agency opened a public comment period on the fuel switching plan. Click here to comment. Meanwhile, Attorney General Pruitt continues to fight EPA’s nonsensical regulations in court. I wrote about the most consequential of his legal battles two weeks ago. The litigation remains in flux.

Ratepayers’ best hope is to win over Oklahoma Governor Mary Fallin. She signed off on the settlement at the outset, before it became apparent how costly it would be. Given that PSO used a number of budget gimmicks to suppress the actual cost of fuel switching–this is the subject of the report below–Governor Fallin would have plenty of cause to change her mind.

William Yeatman – EPA Overreach: Higher Cost, Less Energy, Greater Risk