About The Author:
Robert A. Olson is a partner in the law firm of
Brown, Olson & Gould, P.C. which maintains a nationwide practice in energy law,
public utility law and related commercial transactions.
He can be reached at:
Brown, Olson & Gould, PC
2 Delta Drive
Concord, NH 03301
Oklahoma: Restructuring Legislation Calls For
Retail Competition By July 1, 2002
by Robert Olson -- Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine:
On April 25, 1997, the Oklahoma Legislature enacted
the "Electric Restructuring Act of 1997" (the "Act"). The Act
delegates most of the details of electric utility restructuring to the Oklahoma
Corporation Commission (the "Commission") and a joint legislative task force
known as the Joint Electric Utility Task Force (the "Task Force").
The Act requires the Commission to study all issues relating to electric utility
restructuring and to develop a framework for the implementation of retail competition. In
developing this framework for the transition from a regulated to a competitive
marketplace, the Commission is required to act under the direction of the Task Force and
is expressly prohibited from promulgating any rules or issuing any orders relating to
restructuring without the prior approval of the Oklahoma Legislature.
The Act requires that competitive power suppliers meet certain undefined minimum standards
to ensure reliability and financial integrity. The Act also states that suppliers must
register with the Commission, but the Act does not include any details on the registration
process. Rather, the Act requires the Commission to begin a study of licensing
requirements for competitive power suppliers by July 1999. In addition, the Act states
that a utility's generating assets must be functionally separated from its transmission
and distribution assets and requires that such generational services be subject to minimal
The Act also states that a transition period from a regulatory to competitive model shall
be established which will enable the parties involved to fully comply with requirements of
a restructured industry. During this transition period, electric rates for all consumers
shall not rise above existing levels.
Regarding stranded costs, the Act provides that a procedure shall be established for
identifying and quantifying stranded costs and that mechanisms shall be proposed for the
recovery of prudently incurred, unmitigable, verifiable stranded costs. The Act also
states that as part of this process, utilities must establish the level of their
unmitigable and verifiable stranded costs and that such costs should be recovered in
expeditious fashion. The Act, however, imposes the following limits on the recovery of
stranded costs: First, the stranded cost recovery charge cannot cause the total cost of
electric power, including transmission and distribution costs, to exceed the present cost
of electricity and second, utilities will only be permitted to recover stranded costs for
a period of not less than three nor more than seven years.
The Act requires the Commission to engage in a series of studies regarding the
restructuring of the electric utility industry. The Commission is required to study the
use of a statewide independent system operator and to report to the Task Force by February
1, 1998. In addition, by January 1, 1999, the Commission is required to examine the
financial issues related to electric utility restructuring, including stranded cost
recovery, and to report to the Task Force.
The Act directs the Oklahoma Tax Commission (the "Tax Commission") to study the
impact of restructuring on state tax revenues and examine the feasibility of establishing
a uniform tax system. The Tax Commission is directed to report its findings to the Task
Force and is prohibited from issuing any rule or order applicable to restructuring without
the prior consent of the Oklahoma Legislature or the Task Force. The Act states that
unless a uniform tax policy is developed which permits all power suppliers to be taxed on
a fair and equal basis prior to July 1, 2002, retail competition shall be delayed until
such uniform policy is established.
Pursuant to these timetables, Oklahoma ratepayers should be able to select a competitive
power supplier by July 1, 2002.
Robert A. Olson is a partner in the law firm of Brown, Olson &
which maintains a nationwide practice in energy law, public utility law and related
commercial transactions. He can be reached at:
Brown, Olson & Gould, PC
2 Delta Drive, Suite 301
Concord, NH 03301
firstname.lastname@example.org | (603) 225-9716