News from the Oklahoma Corporation Commission

OKLAHOMA CITY — The Oklahoma Corporation Commission on Wednesday (Jan. 28) adopted new natural gas utility rules that change the way natural gas will be bought, transported and sold in Oklahoma.

The rules require the "unbundling," or separation, of integrated gas delivery systems into individual components of gas supply and gas gathering, transmission and storage services, with each priced and available for purchase on an individual basis.

The new rules also require most gas utilities to buy gas through a competitive bidding process administered by the Corporation Commission.

The rules approved Wednesday set requirements and timetables for implementing "upstream" activities — the acquisition, storage and transportation of gas before it enters the distribution system for delivery to customers.

Large gas utilities must file an application for an upstream unbundling plan by April 1, 1998. Smaller utilities and large utilities with fewer than 25,000 Oklahoma customers will have longer periods of time, and utilities serving fewer than 1,000 customers may request a complete waiver of the unbundling requirements.

The rules direct that a competitive bidding process for gas and gas services for the Oklahoma City and Tulsa markets be in place by Nov. 1, 1998, the start of the winter heating season. At least 10 percent of a competitive bid for gas supply will be awarded to an independent producer if the independent producer matches the lowest bid.

Oklahoma Natural Gas Co. serves both the Oklahoma City and Tulsa markets.

The rules also direct gas utilities serving more than 25,000 customers to begin development of "downstream," or retail competition, unbundling plans by Sept. 1, 1998. The target for implementing retail competition, which will give all gas customers the right to choose their providers of gas and gas services, is October 1999.

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Gas Rules-2

Deregulation of gas utility rates and gas service charges under Corporation Commission jurisdiction will not occur until the commission finds that effective competition has been achieved.

The Corporation Commission rules are subject to approval by the Gov. Frank Keating and the state Legislature.

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"I’m optimistic that on the upstream side, there are opportunities for the natural gas industry to provide choice for customers. On the downstream side, as one who lives in a rural area, I have some concerns that we must anticipate that competition will be attracted to the lucrative side of the industry and if it becomes a process of cherry-picking, the commission must be very vigilant to be certain that customers are not abandoned or left without service as a result of a lack of attraction for competition. My concern is that if existing monopoly utilities lose their best customers to competition, those utilities might be left with only their less profitable customers and potentially some rates might increase as a result of competition. So my attention will be directed to seeing that competition does not leave the existing utilities in a vulnerable position."

"In both rural and urban areas, school districts, groups of hospitals, grocery store chains, housing developments and other commercial users can negotiate their own rates and choose their own natural gas company under the retail competition rules adopted today. Oklahomans deserve retail natural gas choice. Utility monopolies will treat consumers better if people and businesses are allowed to choose their own gas supplier. Importantly, these rules do not allow deregulation of utility assets or gas distribution rates until the Commission first determines that effective competition has been achieved."

"Today, Oklahoma took a major step forward for business and consumers by restructuring the natural gas utility industry. This means opening up all gas services to competition to give Oklahomans greater access to this natural gas treasure we have lying under our own ground at even better rates.

"Oklahoma is one of the top three gas producing states in America. Yet, we export 70 percent of the natural gas we produce, unlike Texas and Louisiana which use almost of their gas at home. We want to open opportunities for Oklahoma business to use our gas here. We have not adequately marshaled this resource base to the advantage of Oklahomans.

"The old law provided for monopoly control of gas services. Our new rules will provide for competition, which will lead to a vibrant gas marketplace and, of course, we know that access to energy and low prices is what keeps business here and attracts new business."