Oklahoma justices reject challenge to winter storm-related bonds

Bloomberg News

The Oklahoma Supreme Court shot down an attempt to invalidate ratepayer-backed bonds issued in 2022 to enable a utility company to recover extraordinary costs it incurred during a fierce 2021 winter storm. 

The high court's Tuesday ruling involving nearly $697 million of bonds sold for Public Service Company of Oklahoma (PSO) affirmed a final order issued by the state's corporation commission (OCC) and found that Republican State Rep. Tom Gann, who filed an appeal with the court last year, was statutorily prohibited from contesting a winter storm cost charge OCC approved to pay off the debt.

The decision also noted justices had approved conduit issuer Oklahoma Development Finance Authority's application for the bonds prior to their sale and that matters appealed by Gann "were not raised and exhausted" before OCC previously.

Gann, who was seeking to overturn OCC's orders authorizing PSO rate increases and its financing through a securitization, did not immediately respond to a request for comment. He asked the court on Wednesday to reconsider its ruling, writing "clairvoyance would have been required for appellant to have anticipated the OCC's errors of law in time to meet the OCC's 90-day intervention deadline in the appealed case."

OCC said the ruling reinforces its authority as the state's constitutionally designated body for utility rate-making and affirms the integrity of its regulatory process.

"I appreciate the court's swift decision to affirm the corporation commission's decision and the certainty it will provide PSO and the people they serve," OCC Chair Kim David said in a statement. "The court's affirmation reflects the extensive record, stakeholder participation, and careful consideration that went into this case."

A statement from PSO said: "We understand and recognize the impact that Winter Storm Uri had on our customers and communities. Our priority has always been to ensure safe and reliable service while following the guidance and approval processes set by the Oklahoma Corporation Commission. We respect the role and authority of the OCC and Oklahoma Supreme Court and will continue to adhere to all rules and regulations."

The high court's ruling could affect similar appeals Gann and other Republican lawmakers filed targeting rate increases and securitizations for two additional utility companies.

A total of $2.89 billion of taxable bonds were sold in 2022 through the Oklahoma Development Finance Authority to enable four utility companies to recover extraordinary costs they incurred when the natural gas spot market price spiked during February 2021's Winter Storm Uri. 

Oklahoma enacted a law in 2021 allowing OCC to authorize securitizations backed by a special monthly fuel cost charge collected by utilities over a longer time period as a way to ease the financial impact on ratepayers while allowing the utilities to pass the costs onto them.

All of the bonds were rated triple-A based on an "irrevocable" ability to collect winter storm cost charges from the utilities' Oklahoma customers, as well as a "true-up" mechanism to ensure collections cover debt service. Two of the utilities have used that mechanism after tapping reserve funds to help make debt service payments.