OGE Energy : PUD 202100072 - Settlement Testimony of Donald Rowlett

BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA

IN THE MATTER OF THE APPLICATION	)
OF OKLAHOMA GAS AND ELECTRIC	)
COMPANY FOR A FINANCING ORDER	)
PURSUANT TO THE FEBRUARY 2021	)	Cause No. 202100072
REGULATED UTILITY CONSUMER	)
PROTECTION ACT APPROVING	)
SECURITIZATION OF COSTS ARISING	)
FROM THE WINTER WEATHER EVENT	)
OF FEBRUARY 2021	)

Settlement Testimony

of

Donald R. Rowlett

on behalf of

Oklahoma Gas and Electric Company

October 8, 2021

Settlement Testimony of Donald R. Rowlett	Page 1 of 7
Cause No. PUD 202100072

Donald R. Rowlett

Settlement Testimony

1. Q. Would you please state your name and business address?
2. A. My name is Donald R. Rowlett. My business address is 321 North Harvey, Oklahoma

3	City, Oklahoma, 73102.
4

5 Q. Are you the same Donald R. Rowlett that previously filed direct and rebuttal

6		testimony in this proceeding?
7	A.	Yes.
8

9 Q. What is the purpose of your Settlement Testimony?

10	A.	My testimony supports the Joint Stipulation and Settlement Agreement ("Joint
11		Stipulation") executed and filed by the Stipulating Parties in this proceeding on October 8,
12		2021. A copy of the Joint Stipulation is attached to my testimony as Settlement Exhibit
13		DRR-1. The Joint Stipulation resolves the disputed issues contained in this Cause and
14		represents a balancing of interests among the Stipulating Parties. I believe approval of the
15		Joint Stipulation is reasonable and in the public interest.
16

1. Q. Who are the Stipulating Parties in this Cause in the Cause?
2. A. The Stipulating Parties are OG&E, the Public Utility Division ("PUD") of the Oklahoma

19	Corporation Commission ("Commission"), the Oklahoma Industrial Energy Consumers
20	("OIEC"), OGE Shareholders Association, and Walmart Inc. The Oklahoma Attorney
21	General and AARP electing not to sign the Joint Stipulation.
22

1. Q. Please describe the present Cause and the relief requested of the Commission.
2. A. As explained in the Application, Direct, and Rebuttal Testimony, OG&E is requesting
3. approval of a financing order from the Commission authorizing the securitization of

26	OG&E's costs associated with the 2021 Winter Weather Event pursuant to 74 Okla. Stat.
27	§ 9070 et seq, the February 2021 Regulated Utility Consumer Protection Act ("Act"). That
28	statute was specifically crafted by the Oklahoma Legislature and enacted by the Governor
29	to provide the legislative framework to securitize the 2021 Winter Weather Event costs
	Settlement Testimony of Donald R. Rowlett	Page 2 of 7
	Cause No. PUD 202000021

1	incurred by utilities like OG&E. Securitization of the cost recovery allows highly rated
2	bonds to be issued to reduce the cost of financing cost recovery and lower customers' utility
3	bills. In addition, the Company is requesting approval of the Winter Event Securitization
4	("WES") Mechanism, which describes how cost recovery will occur.
5

1. Q. Are there any additional witnesses to the Joint Stipulation?
2. A. Yes. OG&E witness Gwin Cash has also filed Settlement Testimony, to address the details

8	of the WES Mechanism, specifically paragraphs seven and eight of Section I of the Joint
9	Stipulation.

10

1. Q. Please describe the process of settlement negotiations.
2. A. The parties met virtually on several occasions to discuss potential settlement. The first

13	meeting was on September 23, 2020, with subsequent meetings thereafter. Ultimately, the
14	Stipulating Parties reached an agreement and the Joint Stipulation was executed and filed
15	on October 8, 2021.
16

1. Q. Please describe the structure of the Joint Stipulation.
2. A. The Joint Stipulation has three components: (i) an introduction stating Stipulating Parties

19	believe the Joint Stipulation is a fair, just, and reasonable settlement of these issues, and is
20	in the public interest; (ii) Section I, specific agreements reached by the Stipulating Parties;
21	and (iii) Section II, certain "general reservations" typically included in settlement
22	agreements filed with the Commission. My testimony largely focuses on Section I and the
23	specific agreements reached by the Stipulating Parties.
24

1. Q. Please describe the general reservations.
2. A. The general reservations specify the Joint Stipulation is the outcome of negotiations and

27	compromise that resolve the issues in this Cause and reflects a balancing of positions
28	among the parties. The general reservations also state the Stipulating Parties will not
29	remain bound by the Joint Stipulation unless the Commission issues an order approving all
30	of its terms and provisions. Finally, the Stipulating Parties agreed the Joint Stipulation

Settlement Testimony of Donald R. Rowlett	Page 3 of 7
Cause No. PUD 202000021

1	shall have no precedential value in future proceedings, except as necessary to enforce the
2	provisions of the Joint Stipulation.
3

4 Q. What are the specific agreements reached by the Stipulating Parties, regarding

5	extreme costs and purchases?

6 A. The Stipulating Parties agree that OG&E's total extreme purchase costs (for natural gas

7	and wholesale energy purchases) are currently estimated to be $748.9 million based on the
8	details provided with both the Direct and Rebuttal Testimony of OG&E Witness Donald
9	Rowlett. The Stipulating Parties agree that $739 million of OG&E's extreme purchase
10	costs incurred during the February 2021 Winter Weather Event should be deemed prudent
11	and reasonable by the Commission.
12

1. Q. Did OG&E acted prudently in incurring the extreme purchase costs?
2. A. Yes. I believe the actions taken by generation personnel to maintain the availability of the

15	generation fleet, the fuels groups to purchase fuel and ensure delivery of that fuel, the work
16	of the market operations group with SPP were important factors in the provision of safe,
17	reliable service to our customers.	The most important priority was to maintain the
18	integrity of the grid and ensure power remained on as much as possible for the safety and
19	benefit of our customers, and that our fuel and purchased power were procured at
20	reasonable costs based on the mechanisms available. In both cases, my colleagues did an
21	outstanding job for the benefit of customers. Therefore, this Commission should determine
22	that the $739 million in extreme purchase costs incurred during the February 2021 Winter
23	Weather Event were fair, just, and reasonable expenses and prudently incurred.
24

25 Q. What are the specific agreements reached by the Stipulating Parties, regarding the

26		Act?
27	A.	The Stipulating Parties agree that the Commission should find that OG&E has provided
28		the requisite information specified in Section 4.A of the Act. Also, the Stipulating Parties
29		agree that the Commission should find, pursuant to Section 4.C of the Act, that
30		securitization will provide benefits to customers as compared to traditional utility
31		financing.
	Settlement Testimony of Donald R. Rowlett	Page 4 of 7
	Cause No. PUD 202000021

1 Q. What are the specific agreements reached by the Stipulating Parties, regarding the

2	Financing Order amount and term?

3 A. The total amount of OG&E's extreme purchase cost recovery, including financing costs

4	and upfront securitization costs authorized for recovery, is estimated to be $760 million,
5	subject to change based on final costs and carrying costs until securitization. The
6	Stipulating Parties agree that the Commission should issue a Financing Order as proposed
7	by Staff witness Bartolotta, including the revisions proposed by OG&E witness
8	Walworth's rebuttal testimony to the draft financing order, for the securitization of that
9	approximately $760 million and authorize a 28-year amortization for cost recovery, or a
10	shorter period if deemed necessary by the Oklahoma Development Finance Authority to
11	obtain the most favorable securitization terms for customers. The Financing Order issued
12	by the Commission should also incorporate the terms of this Joint Stipulation.
13

14 Q. What is the Stipulating Parties' intent with the provision related to a 28-year

15		amortization period?
16	A.	The Stipulating Parties believe the Commission should specify a 28-year amortization
17		period. However, the Stipulating Parties recognize ODFA may need to issue bonds with a
18		shorter term to obtain the most favorable term for customers that will result in the lowest
19		reasonable monthly charge for customers.
20

21 Q. What are the specific agreements reached by the Stipulating Parties, regarding Make

22		Whole Payments?
23	A.	OG&E agrees to use best efforts to diligently and expeditiously pursue SPP Make-Whole
24		Payments ("MWP") and resettlement amounts. If additional MWP and resettlements are
25		received, or if any insurance proceeds related to winter weather event claims are received,
26		those amounts will be credited to customers pursuant to Section 4.G of the February 2021
27		Regulated Utility Consumer Protection Act.

Settlement Testimony of Donald R. Rowlett	Page 5 of 7
Cause No. PUD 202000021