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ENGROSSED SENATE
BILL NO. 998 By: Green and Gollihare of the
Senate
and
Caldwell (Trey) of the
House
An Act relating to public utilities; amending 17 O.S.
2021, Section 286, which relates to cost of
transmission upgrades; modifying application p rocess
for construction of certain facilities; establishing
cost recovery provisions; updating statutory
references; updating statutory language; referring
deference of certain assets by a public utility;
defining term; providing for Corporation Commission
prudence review process; establishing rate proceeding
procedures for certain utilities; providing
exceptions; providing for codification; providing an
effective date; and declaring an emergency .
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 17 O.S. 2021, Section 286, is
amended to read as follows:
Section 286. A. 1. The portion of costs incurred by an
electric utility, which is subject to rate regulation by the
Corporation Commission, for trans mission upgrades approved by a
regional transmission organization to which the utility is a member
and resulting from an order of a federal regulatory authority having
legal jurisdiction over int erstate regulation of transmission rates,
shall be presumed recoverable by the utility. The presumption
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established in this paragraph may be rebutted by evidence that the
costs so incurred by the utility for the transmission upgrades
exceed the scope of the project authorized by the regional
transmission organizati on or order issued by the federal regulatory
authority having jurisdiction over interstate regulation of
transmission rates. The Commission shall transmit rules to
implement the requirements of this subsection to the Legislature on
or before April 1, 2006 . The rules may authorize an electric
utility to periodically adjust its rates to recover all or a portion
of the costs so incurred by the utility for the transmission
upgrades.
2. Reasonable costs incurred by an electric utility for
transmission upgrade s:
a. needed to develop wind generation in this state,
b. approved by the Southwest Power Pool, and
c. placed into service before December 31, 2013,
shall be presumed recoverable through a period ic adjustment in the
rates of the utility, provided that the presumption of the recovery
of such costs or the recovery of such costs through a periodic
adjustment in rates may be rebutted by evidence presented to the
Commission. The determination of whether the costs shall be
recovered and whether the costs shall b e recovered through a
periodic adjustment of rates shall be made by the Commission
following proper notice and hearing in a cause to be filed by the
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electric utility in which it files such inform ation as the
Commission may require.
B. An electric utility subject to rate regulation by the
Corporation Commission may file an application seeking Commission
authorization of a plan by the utility to make capital expenditures
for equipment or facilities necessary to comply with the federal
Clean Air Act (CAA), th e Clean Water Act (CWA), the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980
(CERCLA), the Emergency Planning & and Community Right-to-Know Act
of 1986 (EPCRA), the Endangered Species Act of 1973 (ESA), the
National Environmental Policy Act of 1969 (NEPA), the Occupational
Safety and Health Act of 1970 (OSHA), the Oil Pollution Act of 1990
(OPA), the Pollution Prevention Act of 1990 (PPA), the Resource
Conservation and Recovery Act of 1976 (RCRA), the Safe Drinking
Water Act (SDWA), the Toxic Substances Control Act (TSCA), all as
amended, and, as the Commission may deem appropriate, federal,
state, local or tribal environmental requirements which apply to
generation facilities. If approved by the Commission, after notice
and hearing, the equipment or facilities specified in the approved
utility plan are conclusively presumed used and useful. The utility
may elect to periodically adjust its rates to recover the costs of
the expenditures. The utility shall file a request for a r eview of
its rates pursuant to Section 152 of this title no more than twenty -
four (24) months after the utility begins recovering the costs
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through a periodic rate adjustment mechanism and no mor e than
twenty-four (24) months after the utility begins recov ering the
costs through any subsequent periodic rate adjustment mechanism.
Provided further, that a periodic rate adjustment or adjustments are
not intended to prevent a utility from seeking cost recovery of
capital expenditures as otherwise may be author ized by the
Commission. However, the reasonableness of the costs to be
recovered by the utility shall be subject to Commission review and
approval. The Commission shall promulgate rules to impl ement the
provisions of this subsection, such rules to be tra nsmitted to the
Legislature on or before April 1, 2007.
C. 1. An electric utility subject to rate regulation by the
Corporation Commission may elect to file an application seeking
approval by the Commission to construct a new electric generating
facility, to purchase an existing electric generation facility or
enter into a long-term contract for purchased power and, capacity
and/or and energy, subject to the provisions of this subsection.
If, and to the extent that, the Commission determines there is a
need for construction or purchase of the electric generating
facility or long-term purchase power contract, the generating
facility or contract shall be considered used and useful and its
costs shall be subject to cost recovery rules promulgated by the
Commission. The Commission shall enter an order on an application
filed pursuant to this subsection within two hundred forty (240)
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days of the filing of the application, following notice and hearing
and after consideration of reasonable alternatives , unless the
electric generation facility utilizes natural gas as its primary
fuel source. If the electric generation facility uses natural gas
as its primary fuel source, then the Commission shall enter an order
on an application filed pursuant to this subsection within one
hundred eighty (180) days of the filing of the application,
following notice and hearing and after consideration of reasonable
alternatives.
2. Bids received by the utility through a competitive bidding
process within the twelve (12) months fol lowing the final bid due
date of such competitive bidding process shall be considered
substantial evidence to satisfy the consideration of reasonable
alternatives.
3. Following receipt of an application filed pursuant to this
subsection, the Corporation C ommission staff may file a request to
assess the specific costs, to be paid by the electric utility and
which shall be deemed to be recoverable, for the costs associated
with conducting the analy sis or investigation of the application
including, but not li mited to, the cost of acquiring expert
witnesses, consultants, and analytical services. The request shall
be filed at and heard by the Corporation Commissioners in the docket
opened by the electric utility pursuant to this subsection. After
notice and hearing, the Commission shall decide the request.
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3. 4. Additionally, following receipt of an application filed
pursuant to this subsection, the Office of the Attorney General may
file a request with the Corporation Commission for the assessment of
specific costs, to be paid by the electric utility and which shall
be deemed to be recoverable, associated with the performance of the
Attorney General’s duties as provided by law. Those costs may
include, but are not limited to, the cost of acquiring expert
witnesses, consultants and analytical services. The request shall
be filed at and heard by the Corporation Commissioners in the docket
opened by the electric utility pursuant to this subsection. Af ter
notice and hearing, the Commission shall decide the reque st.
4. 5. The Commission shall promulgate rules to implement the
provisions of this subsection. The rules shall be transmitted to
the Legislature on or before April 1, 2006. In promulgating rules
to implement the provisions of this subsection, the Commi ssion shall
consider, among other things, rules which would:
a. permit contemporaneous utility recovery from its
customers, the amount necessary to cover the
Corporation Commission staff and Atto rney General
assessments as authorized by this subsection,
b. establish how the cost of facilities approved pursuant
to this subsection shall be timely reviewed, approved,
and recovered or disapproved, and
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c. establish the information which an electric utility
must shall provide when filing an application pursuant
to this subsection.
5. 6. The Commission shall also consider rules which may permit
an electric utility to begin to recover return on or and return of
Construction-Work-In-Progress expenses prior to commercial operation
of a newly constructed electric gene ration facility subject to the
provisions of this subsection , provided the newly constructed
electric generation facility utilizes natural gas as its primary
fuel source. The Commission shall permit a separate rate adjustment
mechanism, adjusted periodica lly, to recover the costs described in
this section for new capacity in natural -gas-fired electric
generation facilities. The new natural-gas-fired electric
generation capacity eligible for thos e provisions shall also include
new natural-gas-fired capacity additions at an existing electric
generation facility. If a public utility implements a rate
adjustment mechanism pursuant to this section and subsequently
terminates the initiative to construct or acquire stake in a natural
gas electric generation faci lity, the public utility shall
automatically refund customers any amounts collected through such
rate adjustment mechanism plus interest at the one -year United
States Treasury Bill rate through t he mechanism, over a period not
to exceed ninety (90) days fr om the effective date of the
termination of the initiative .
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7. For any new natural-gas-fired electric generation facility
constructed pursuant to this section, an electric utility shall
secure a firm contract to transport natural gas to the generating
facility. Such contract shall be secured pursuant to a competitive
solicitation process conducted in accordance with applicable
Commission rules. The cost incurred for the contract shall be
presumed recoverable by the electric utility through its applicable
fuel adjustment clause. Costs assessed upon the electric utility by
the Commission for non -compliance with this section shall not be
recoverable from the customers of the electric utility. If the
electric utility does not receive a bid for firm transpor tation as a
result of its competitive solicitation, the electric utility shall
be considered compliant with the requirements of this section
provided that the Commission determines that the compe titive
solicitation is for a firm contract for transport of n atural gas
which could be reasonably provided by an available pipeline .
SECTION 2. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 286A of Title 17, unless there
is created a duplication in numbering, reads as follows:
A. 1. On and after the effective date of this act, a public
utility shall defer to a regulatory asset ninety percent (90%) of
all depreciation expenses and return associated with all qualifying
electric plants placed in service, provid ed the public utility has
provided notice to the Corporation Commission of the public
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utility’s election to make such deferrals pursuant to this section.
Deferral under this section shall begin on the effective date of
this act if the public utility notif ies the Commission of the
election prior to the effective date, or on the date that the
utility notifies the Commission of the election if such date is
after the effective date of this act.
2. For the purposes of this section, “qualifying electric
plant” means all incremental electric plants placed in service by a
public utility following the utility ’s last general rate case,
excluding transmission facilities or new electric generating units.
B. The Commission shall conduct a prudence review of the
associated qualifying electric plant resulting in the regulatory
asset balances prior to moving such balances into the public
utility’s rate base. The regulatory asset balances arising under
this section shall be adjusted to reflect any prudence disallowances
of the associated qualifying electric plant, following notice and
hearing, as ordered by the Commission.
C. Unless otherwise provided by this section, in each general
rate proceeding concluded on or after July 1, 2025, the balance of
the regulatory asset a s of the end of the test year shall be
included in the public utility ’s rate base without any offset,
reduction, or adjustment based upon consideration of any other
factor with the regulatory ass et balances arising from deferrals
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associated with the qualif ying electric plant placed in service
after the end of the test year.
D. Parts of regulatory asset balances created under this
section that are not included in rate base shall accrue carrying
costs at the public utility ’s weighted average cost of capital plus
applicable federal, state, and local income or excise taxes.
Regulatory asset balances arising under this section that are
included in rate base shall be recovered in rates through a twenty -
year amortization beginning on the date new rates reflecting such
amortization take effect.
E. Depreciation expenses deferred under this section shall
account for any qualifying electric plant placed into service.
Return deferred under this section shall be determined using the
weighted average cost of capital ap proved by the Commission in the
public utility’s last general rate case and applied to the change in
regulatory asset balances caused by the qualifying electric plant,
plus applicable federal, st ate, and local income or excise taxes.
In determining the re turn deferred, the public utility shall account
for changes in all plant -related accumulated deferred income taxes
and changes in accumulated depreciation, excluding retirements.
F. This section shall only apply to any public utility that has
elected to make the deferrals for which this section provides and
filed a notice with the Commission of such election.
SECTION 3. This act shall become effective July 1, 2025.
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SECTION 4. It being immediately necessary for the preserva tion
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and after its passage and approval.
Passed the Senate the 27th day of March, 2025.
Presiding Officer of the Senate
Passed the House of Representatives the ____ day of __________,
2025.
Presiding Officer of the House
of Representatives