OGE Energy : PUD 202000021 - Responsive Testimony Staff Kathy Champion

BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA

IN THE MATTER OF THE APPLICATION OF	)
OKLAHOMA GAS AND ELECTRIC COMPANY	)
FOR AN ORDER OF THE COMMISSION	)	CAUSE NO. PUD 202000021
APPROVING A RECOVERY MECHANISM FOR	)
EXPENDITURES RELATED TO THE	)
OKLAHOMA GRID ENHANCEMENT PLAN	)

RESPONSIVE TESTIMONY

OF

KATHY CHAMPION

AUGUST 25, 2020

BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA

RESPONSIVE TESTIMONY
OF
KATHY CHAMPION
AUGUST 25, 2020
TABLE OF CONTENTS
EXECUTIVE SUMMARY ..........................................................................................................	3
INTRODUCTION.........................................................................................................................	5
PURPOSE......................................................................................................................................	6
PUD'S REVIEW PROCESS........................................................................................................	6
OG&E GRID ENHANCEMENT PLAN ....................................................................................	8
OG&E SERVICE RELIABILITY............................................................................................	13
PROPOSED RECOVERY MECHANISM ..............................................................................	23
RECOMMENDED LIMITATIONS ON PLAN......................................................................	28
RECOMMENDATION..............................................................................................................	32
LIST OF EXHIBITS...................................................................................................................	35

Responsive Testimony - Champion

Oklahoma Gas and Electric Company - Cause No. PUD 202000021

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1	EXECUTIVE SUMMARY
2	On February 24, 2020, Oklahoma Gas and Electric Company ("OG&E") filed its
3	Application in this Cause requesting the Oklahoma Corporation Commission

1. ("Commission") approve a recovery mechanism for expenditures related to its Oklahoma
2. Grid Enhancement Plan ("Plan"). In this Plan, OG&E proposes to recover the return on
3. and of $810.2 million in capital projects through a rate rider, until such time OG&E files a
4. base rate case and the costs will be reviewed for prudence. OG&E proposes this Plan
5. would improve reliability by reducing average customer outage duration by 60%. The Plan
6. would take place over a five-year period in which OG&E would file annual spending plans
7. with the Commission and submit quarterly revisions of its rider tariff to the Public Utility
8. Division ("PUD") for recovery of in-service projects.
9. PUD reviewed the Application, Direct Testimony, the Errata to Direct Testimony, the
10. Supplemental Direct Testimony, and the workpapers filed in this Cause. PUD also
11. reviewed the data requests issued by all parties and the responses to those data requests
12. from OG&E. PUD conducted live video conferences with the Company to better
13. understand OG&E's workpapers and supporting documentation. PUD conducted an
14. analysis of OG&E's Aging Infrastructure Contributing to System Average Interruption

18 Duration Index ("SAIDI"), comparisons of OG&E's Plan to other utility grid

1. modernization plans and government initiatives, compared OG&E's reliability statistics to
2. regional and national averages, and assessed the cost of the Plan in context with OG&E's
3. other investment projections. PUD weighed the customer rate impact of this Plan, current
4. economic situation in the U.S. and Oklahoma, reliability improvements to OG&E's

Responsive Testimony - Champion

Oklahoma Gas and Electric Company - Cause No. PUD 202000021

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1. customers, and alternative regulatory recovery options for Plan expenditures to reach its
2. recommendations.
3. Following this review, PUD finds the following:

4	•	Rider Request: The OG&E Plan, as filed, does not meet the three criteria for
5		establishing a rider, which requires that costs be: (1) largely outside the control
6		of a utility; (2) unpredictable and volatile; and (3) substantial and recurring.
7		OG&E distribution capital replacements program is a normal utility
8		expenditure that is within the Company's control, stable, and a part of its base
9		rate recovery. Unpredictable weather event costs already receive extraordinary
10		cost recovery through the Storm Cost Recovery Rider. The Rider would need
11		to be modified to cover only those expenses that meet the criteria for rider
12		recovery.
13	•	Review Costs in General Rate Case Prior to Cost Recovery: OG&E has
14		been investing in grid enhancement for over a decade through its System
15		Hardening and Smart Grid programs. While these programs were granted riders
16		for cost recovery, this was in response to special circumstances which were
17		substantial and outside the utility's control. General rate cases will allow the
18		Commission to review the costs of used and useful Plan projects in conjunction
19		with any avoided costs or other offsetting savings in OG&E's Cost of Service.
20		OGE must provide additional support as to why the costs would not be properly
21		handled through a general rate case filing.
22	•	Reduce Annual Plan Cost: OG&E's Plan could cause the average residential
23		customer bill to increase by $7.06 per month or $84.72 per year in the year 2025
24		in order to experience an hour and half decrease to average outage duration.
25		OG&E also intends to make non-Plan related investments during the same
26		period which could lead to additional rate increases. Furthermore, it is not clear
27		that OG&E's reliability is worse than national or regional averages or is
28		worsening due primarily to aging infrastructure. The combined impact of the
29		Company's Plan, additional base rate increases, and possible unusual expense
30		recovery and customer impacts related to COVID-19 should be considered.
31		Reducing the annual Plan cost would allow the Company to make needed
32		investments while limiting rate increases.

1. If the Commission approves a rider for OG&E, PUD recommends the rider include the
2. following provisions:

35	1.	Limit Scope: The rider should only include special recovery of distribution
36		projects related to safety and reliability, such as distribution projects that are
37		not normal distribution replacements, recovery of capital related costs (i.e., no
38		operations and maintenance expense, distribution projects directly related to
39		reliability and/or safety).
40	2.	Hard Cost Cap: Limit recovery to a maximum revenue requirement cost cap

Responsive Testimony - Champion

Oklahoma Gas and Electric Company - Cause No. PUD 202000021

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