Rate cut approved for ONG - Reduction will save average household about $23 per year

by Gregory Potts

The Daily Oklahoman - May 31, 2000

Oklahoma Natural Gas will cut its annual base rates by $20.6 million and give residential and small-business consumers 70 percent of the savings in a plan unanimously approved Tuesday by the state Corporation Commission.

That means an annual savings of about $23 for an average household with the rate reductions beginning in June. ONG has about 800,000 Oklahoma customers.

The agreement also allows ONG to become the utility provider for about 35,000 Kansas Gas Service customers in northeast Oklahoma. Those customers will save about $85 a year on their base rate. ONG's parent company, ONEOK, acquired Kansas Gas last year.

Jim Palmer, a commission spokesman, said rate reductions don't happen often and usually involve special circumstances.

In this case, the commission requested a rate review as part of the process of restructuring the state's gas utilities. That restructuring could lead to further cost savings for customers by forcing ONG to take competitive bids on natural gas transmission.

As part of the plan approved Tuesday, ONEOK will create a new company called ONEOK Gas Transmission.

Oklahoma Natural Gas will continue to be ONEOK's distribution company while ONEOK Gas Transmission will take over the transmission part of the business.

Oklahoma Gas Transmission will be bidding against other gas transmission companies to supply ONG next winter.

"This is a balanced order that provides immediate ratepayer savings while opening the door to a competitive market in natural gas utility service in Oklahoma," commission Chairman Bob Anthony said.

Anthony said "customer choice" - in which customers will be able to choose among competing gas providers - is about two years away. But Tuesday's agreement is heading toward that goal.

Anthony said the agreement culminated a two-year process. It also calls for ONG to withdraw its state Supreme Court appeal of regulations that the commission established for the "unbundling" process.

Unbundling is the process of separating a company's functions into different companies.

"The important thing here today is that today's order brings to an end the process of the last two years," Anthony said.

Despite the rate reduction and market competition, there is no guarantee that bills will be smaller. That depends also on the price of gas, which in recent months has been rising.

Typically, the base service rate makes up about half of a customer's gas bill. The actual cost of the gas itself makes up the remainder.

Tuesday's commission order gave final approval to an agreement among ONG, the commission's Public Utility Division staff, the Office of the Attorney General and other parties in the gas industry. The agreement was approved by a pair of administrative law judges in late April and handed to Commissioners Anthony, Denise Bode and Ed Apple for final approval.

ONG is not worried that the company will be damaged by the $20 million rate cut, President Ed Farrell said.

Instead, the cut is a step to help the company better position itself for a more competitive energy marketplace, he said.

"We believe this plan accomplishes several goals, including lower costs for our customers," Farrell said. "We are preparing for a future that will include greater customer choice, in which Oklahoma Natural will be permitted to serve our customers with more flexibility than in the past. This is one of the important steps we are taking in that direction."

© 2000 The Daily Oklahoman

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