Oklahoma Electric Restructuring: Status Report No. 1

1. Oklahoma Electric Restructuring: Status Report No. 1 Public Utility Division Electric Restructuring Team January 2, 2020 Status of Oklahoma Electric Restructuring - Report No. 1

2. Senate Bills 500 and 888 - Electric Restructuring Act of 1997 Purpose: “The purpose of this act is to provide for the orderly restructuring of the electric utility industry in the state of Oklahoma in order to allow direct access by retail consumers to the competitive market for the generation of electricity while maintaining the safety and reliability of the electric system in this state” Status of Oklahoma Electric Restructuring - Report No. 1

3. Senate Bills 500 and 888 - Electric Restructuring Act of 1997 Mandates: • Creates the Legislative Joint Electric Utility Task Force (JEUTF) • The JEUTF is directed to complete studies dealing with electric industry restructuring issues, including, 1) technical; 2) financial; and 3) consumer issues, and provide the results to the Legislature by Oct. 1, 1999 (the OCC/JEUTF together had previously completed the research on the independent system operator (ISO) issue) • The EUTF is authorized to direct the commission or “any other state agency or consultant as necessary to assist the task force in the completion of such studies” Status of Oklahoma Electric Restructuring - Report No. 1

4. Senate Bills 500 and 888 - Electric Restructuring Act of 1997 Joint Electric Utility Task Force: • Directs and oversees all restructuring research, including tax studies • Directs and oversees formation & work of all research working groups • Makes recommendations on restructuring to the Legislature and Governor, as necessary Status of Oklahoma Electric Restructuring - Report No. 1

5. Senate Bills 500 and 888 - Electric Restructuring Act of 1997 Organization of Working Groups: Collaborative working groups have been set up by the JEUTF, with the assistance of OCC staff, which include participation by all interested parties. These groups are intended to be a forum where consumer advocates, investor-owned and cooperative utilities, power marketers, legislators, regulators, and any other interested parties may exchange ideas and information; address major issues; and reach conclusions and recommendations, through consensus if possible, for submission to the JEUTF Status of Oklahoma Electric Restructuring - Report No. 1

6. Working Groups Responsibilities: • To provide a mechanism to look at the more than 80 research issues that Senate Bills 500/888 raise • Each working group will examine a variety of issues and will provide recommendations to the JEUTF regarding the best alternative or alternatives that the Legislature should consider Status of Oklahoma Electric Restructuring - Report No. 1

7. Working Groups • List: • Operating Issues • Regulatory Issues • Territorial/Competitive Issues • Market Structure and Behavior • Legal Issues • Groups meet through May 1999 Status of Oklahoma Electric Restructuring - Report No. 1

8. Operating Issues Working Group • Reliability & Safety (Majority Recommendations) • Utilities currently provide reliable & safe electric service (generation, transmission, & distribution) • Distribution Reliability & Safety: • OCC oversee all entities that may materially impact the reliability/safety of distribution systems • OCC perform cost/benefit analysis before implementing new distribution reliability standards • The Legislature to consider if and how the OCC may oversee reliability/safety on non-jurisdictional systems, or provide means to continue self-regulation Status of Oklahoma Electric Restructuring - Report No. 1

9. Operating Issues Working Group • Distribution Reliability & Safety (continued): • Reliability standards should be set on a company by company basis, rather than a single set of standards for all companies • Reliability related costs should continue to be recovered through regulated tariffs • If performance-based ratemaking is used, it should be based on detailed cost studies and cost/benefit analyses Status of Oklahoma Electric Restructuring - Report No. 1

10. Operating Issues Working Group • Transmission Reliability: • Distribution is defined as electric systems operating below 60 kV and meeting FERC’s seven part test • Retail Electric Energy Providers (REES) are expected to take transmission services under an “open access” FERC approved tariff • Legislature should require all distribution companies, OCC jurisdictional and others, to ensure through contract that REES have available generation related ancillary services (e.g., reserve generation, ) Status of Oklahoma Electric Restructuring - Report No. 1

11. Operating Issues Working Group • Generation Reliability: • Generation, inside and outside the state, used to serve load in OK must be controlled by NERC regulated control area, or a FERC approved ISO • Any generator directly serving retail load in OK must be certified as a REES • New generation on the system must pay for transmission interconnection in accordance with FERC rules • Distribution company must include in contract with REES requirement that REES demonstrate compliance with FERC, NERC, and OCC reliability standards Status of Oklahoma Electric Restructuring - Report No. 1

12. Operating Issues Working Group • Reliability & Safety Minority Position (International Brotherhood of Electrical Workers): • Utilities currently do not provide reliable & safe electric service (generation, transmission, & distribution) • Legislation should assign OCC to develop & enforce appropriate standards concerning licensing & certification of all personnel responsible for reliability & safety at OK utilities Status of Oklahoma Electric Restructuring - Report No. 1

13. Regulatory Issues Working Group • Role of group to examine key retail access issues related to regulation before, during & after restructuring • Issues to be reviewed by group include: • Financial issues of current providers • Role of the OCC • Transmission & distribution access • Unbundling policies • Transition issues, stranded investments Status of Oklahoma Electric Restructuring - Report No. 1

14. Regulatory Issues Working Group • No summary papers or recommendations yet developed • Topics under discussion: • Unbundling policies • Allocations, related primarily to transmission & distribution unbundling (subcommittee established) • Open access • Excess energy/distributed generation Status of Oklahoma Electric Restructuring - Report No. 1

15. Territorial & Competitive Issues Working Group • Primary topics under discussion include: • Territorial boundaries • Consumer/Competitive issues • Metering, billing ancillary services • Slamming/cramming • Consumer choice, education, & protection • Franchises • Universal service fund • Stranded benefits (public social costs) • Environmental issues Status of Oklahoma Electric Restructuring - Report No. 1

16. Territorial & Competitive Issues Working Group • Summary paper of positions on territorial boundaries prepared, incorporating three primary positions: • OG&E and cooperatives strongly favor firm territorial boundaries • Municipals oppose firm territorial boundaries, maintaining their unilateral right to annex territory • PSO favors such boundaries in unincorporated areas but opposes them in incorporated areas Status of Oklahoma Electric Restructuring - Report No. 1

17. Territorial & Competitive Issues Working Group • Cherry picking discussion ongoing, but no group paper has been developed on the issue • Current discussion topics are: • Metering • Billing • Ancillary services • Slamming & cramming (subcommittee established) Status of Oklahoma Electric Restructuring - Report No. 1

18. Market Structure Issues Working Group • Paper & recommendations on codes of conduct, market power enforcement, & related items • Topics under discussion include: • Proposed voluntary power exchange • Responsibilities of REES (no consensus position) • Licensing of REES (no consensus on standards) • Proposal to allow generators to sell at retail without licensing as a REES • Licensing of aggregators (no consensus standards) Status of Oklahoma Electric Restructuring - Report No. 1

19. Market Structure Issues Working Group • Topics under discussion include (continued): • Generally opposed to oversight boards • Generally accept need for consumer safeguards (no consensus position) • Proposal that standards of conduct focus on relationship between regulated & unregulated services Status of Oklahoma Electric Restructuring - Report No. 1

20. Legal Issues Working Group • Mission of group to provide legal research & assistance as requested by other working groups • Specific areas of focus include: • Compilation & review of all existing OK laws relevant to electric restructuring • Legal research as requested • Assist legislative staff in drafting statutory language • Advise JEUTF of potential impacts of Federal legislation on OK electric restructuring Status of Oklahoma Electric Restructuring - Report No. 1

21. Legal Issues Working Group • Research performed thus far includes: • Anti-fraud • OCC jurisdiction • Government Tort Claims Act • Consumer Protection Act & Green Guidelines • Siting of electric facilities • Municipal exemptions & franchise authority • Products liability exposure relative to electricity Status of Oklahoma Electric Restructuring - Report No. 1

22. Legal Issues Working Group • Other areas under review: • Solicitation issues • OK acquisition & merger laws • Eminent Domain • Electricity/Commodity of service • Jurisdiction over intrastate transmission Status of Oklahoma Electric Restructuring - Report No. 1

23. Oklahoma Electric Profile • Objectives • Snapshot of general features of OK generation, transmission, & distribution • Accessible database of OK electric power system • Production of reports to working groups & JEUTF on various aspects of OK electric power system Status of Oklahoma Electric Restructuring - Report No. 1

24. Oklahoma Electric Profile • Data Collection • Data from OK generation, transmission, & distribution providers • Data from published sources (federal & state) • PUD Staff performs data collection, verification, & and database development • PUD Staff preparing reports under supervision of JEUTF consultant Lee Paden Status of Oklahoma Electric Restructuring - Report No. 1

25. Oklahoma Electric Profile • Current Status • Data collection & verification approximately 75% complete • Database design complete • Report design & production now underway Status of Oklahoma Electric Restructuring - Report No. 1

26. Oklahoma Restructuring Web Site • Established by JEUTF Consultant Lee Paden • Objectives • Provide working group announcements & agendas • Provide working group documents - research & recommendations • Provide access to Oklahoma Electric Profile data • Provide access to Oklahoma restructuring laws Status of Oklahoma Electric Restructuring - Report No. 1

27. Oklahoma Restructuring Web Site • Address http://www.restructureok.net Status of Oklahoma Electric Restructuring - Report No. 1

28. Resources Committed • Staff time • Original estimate 25-40 hours per Staff member assigned per month • Actual average at this time -- approximately 45 hours per Staff member assigned per month • Future projection -- 60-80 hours per Staff member assigned per month • Other resources • Computer time & equipment • PUD support personnel Status of Oklahoma Electric Restructuring - Report No. 1

29. Goals for Next Review • Next update in approximately two (2) weeks • Staff can provide informal updates at any time • Goals for next update: • Review of considerations of working groups & any recommendations of groups to JEUTF • Identification of significant unresolved issues in the working groups • Review of status of OK Electric Profile • Review of Staff & resource commitments Status of Oklahoma Electric Restructuring - Report No. 1