Today’s proposed settlement in Public Service Company of Oklahoma’s rate case is another reminder that utility rate increases aren’t approved overnight. Here’s how the process works.
OKLAHOMA CITY — News that Public Service Company of Oklahoma has reached a proposed settlement in its latest rate case may leave many customers wondering why the issue isn’t already settled.
The answer is that Oklahoma utility rate cases follow a detailed legal process designed to test evidence before the Oklahoma Corporation Commission decides whether customers should pay higher rates.
Although several parties have reached a proposed settlement in PSO’s base-rate case, the process is not over. The agreement still must undergo additional review before commissioners decide whether to approve it.
Utilities can’t simply raise rates
Unlike most businesses, regulated electric and natural gas utilities generally cannot raise rates whenever they choose.
Instead, they must file a formal application with the Oklahoma Corporation Commission explaining why they believe existing rates no longer cover the cost of providing service. Those filings often include financial records, engineering studies, forecasts of customer demand and information about investments in power plants, transmission lines, pipelines and other infrastructure.
The utility bears the burden of showing why the requested rates are reasonable.
More than one side participates
Once a rate case is filed, other parties may ask the commission for permission to participate formally in the case.
Those granted intervention may file testimony, present witnesses, cross-examine experts and submit legal arguments.
Depending on the issues involved, participants may include the commission’s Public Utility Division, the Oklahoma Attorney General, industrial customers, consumer organizations, oil and gas companies and other businesses that could be affected by the proposed rates.
Most evidence goes before an administrative law judge
One of the biggest misconceptions about utility rate cases is that commissioners personally hear every witness.
In most contested cases, the evidence is first presented before an administrative law judge. Hearings often resemble a bench trial, with sworn testimony, exhibits and cross-examination by attorneys representing the various parties.
Commissioners sometimes attend portions of those hearings or monitor them remotely, but the hearings themselves are generally conducted by the administrative law judge.
After reviewing the evidence, the judge prepares findings and recommendations for the three elected commissioners to consider.
Settlements can speed the process
Not every disputed issue is resolved during a hearing.
Parties frequently negotiate settlements that resolve some or even most of the issues before the commission reaches a final decision.
Even when multiple parties agree, however, a settlement does not automatically take effect. The administrative law judge reviews the agreement, and the Corporation Commission ultimately decides whether approving it serves the public interest.
Commissioners make the final decision
Before voting, commissioners review the hearing record, written testimony, legal briefs, recommendations from the administrative law judge and any objections filed by the parties.
The commission may approve a settlement or proposed order, modify it, reject it or send issues back for additional proceedings.
Only after the commission issues a final order do approved rate changes generally take effect.
Why the process takes time
Major utility rate cases often involve hundreds of millions of dollars and thousands of pages of financial and technical evidence.
Because the commission’s decisions affect both utility customers and the companies providing service, Oklahoma law provides multiple opportunities for evidence to be challenged before commissioners issue a final ruling.
That process can take several months, but supporters say it helps ensure decisions are based on a complete public record rather than a single filing by the utility.
The bottom line
When news reports say a utility has filed for a rate increase or that parties have reached a settlement, neither necessarily means customers will immediately see higher bills.
In most cases, the request still must complete Oklahoma’s regulatory review process before the Oklahoma Corporation Commission makes the final decision.
