Oct 12 - The Daily Oklahoman

It's back to the planning room for the state's largest electric utilities.

Oklahoma Gas and Electric Co., Public Service Co. of Oklahoma and the Oklahoma Municipal Power Authority officially scrapped plans for their proposed $1.87 billion coal-fired power plant near Red Rock after the Oklahoma Corporation Commission on Thursday refused to allow OG&E and PSO to recover construction costs before the facility becomes operational.

"We continue to believe that a jointly-owned Red Rock plant represented a unique opportunity for three Oklahoma utilities to maintain a balanced generation portfolio and hold down future energy costs," said Pete Delaney, OGE Energy Corp.'s chairman, president and chief executive officer. "Unfortunately, as we said consistently throughout this process, it is not feasible to construct a plant of this size without the commission's blessing. We will now turn our attention to developing alternative, albeit less attractive, baseload generation options."

The utilities repeatedly have said the Red Rock plant was the least expensive option. Plant opponents, however, say the commission's decision likely will save Oklahoma consumers money.

"We think for customers this is a big win," Assistant Attorney General Bill Humes said. "They said the Red Rock plant was the least expensive alternative, but they could never conclusively prove that. There was a great deal of testimony to the contrary. The sad fact is they never presented to the commission the cost of a second alternative."

The Oklahoma Corporation Commission voted 2-1 Thursday to refuse preapproval for the proposed 950-megawatt coal-fired power plant near Red Rock. Commissioners Jeff Cloud and Jim Roth voted to deny preapproval of the plant. Commissioner Bob Anthony did not sign the order, but issued a separate opinion agreeing in part and disagreeing in part.

Anthony agreed with the other two commissioners that PSO needs 450 megawatts of new baseload capacity and OG&E needs 300 megawatts by 2012. He also agreed on the need for consumer protections and demand of energy efficiency programs.

The commissioner said he voted against denying the applications because "only in the years to come will we know for sure whether a coal plant or gas-fired facility would have provided Oklahoma the cheapest baseload electric power for the next few decades."

He pointed out the administrative law judge found that nominal savings to ratepayers over a 40-year project life would be $5.5 billion.

Besides cost issues, Red Rock opponents also said the coal plant would be too dirty and that state utilities should use Oklahoma natural gas rather than Wyoming coal.

"This decision will give us all an opportunity to look to find a better, more environmentally friendly answer for the energy needs in the state," said Tom Price Jr., senior vice president of corporate development at Oklahoma City-based Chesapeake Energy Corp. Chesapeake was one of the most vocal members of the Quality of Service Coalition, which challenged the plant at the corporation commission and the Oklahoma Supreme Court.

All three corporation commissioners said Thursday the utilities have a legitimate need for more power generation and invited the companies to return to the commission with a future plan.

"Because this decision is not a surprise, we've been focused already on how to meet the generation needs we're going to have," Public Service Company of Oklahoma spokesman Stan Whiteford said. "We're focused on meeting that need and determining how best to go about that. There are a lot of alternatives out there. It would be speculative to say which way might go on that, but we already have our leadership team looking at that."

The utilities likely also will return to the commission to ask if they may recover costs of the design and development phase of the project. Delaney said OG&E will ask to pass the $18 million to $20 million price tag onto customers. PSO has not yet determined whether it will try to recover its costs.

The company did not say how much it spent, but Anthony estimated the total price tag to be about $50 million.

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