Another Oklahoma winter storm-related bond issue challenged

A court battle over bonds the Oklahoma Development Finance Authority issued for utility companies in the wake of a fierce 2021 winter storm has spread to a third debt deal.

State lawmakers, who are already contesting Oklahoma Corporation Commission (OCC) authorization for $1.45 billion of taxable ratepayer-backed bonds sold in two deals, filed a brief Wednesday with the state Supreme Court targeting $1.35 billion of bonds issued for Oklahoma Natural Gas (ONG).

A total of $2.89 billion of 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.

In order to ease the financial impact on ratepayers while allowing the utilities to pass the costs on to them, a 2021 state law allowed OCC to authorize securitizations backed by a special monthly fuel cost charge collected by utilities over a longer time period.

The latest brief, filed by Republican State Representatives Tom Gann and Kevin West, contends OCC failed to perform lawful audits of ONG's bonds in every rate case since the bonds were issued and that the utility's original storm-related costs that were securitized in the bond issue were never audited.

"The representatives assert the audit failures are fatal in all four cases, making the OCC's orders void," a statement from the lawmakers said.

ONG declined to comment on the court filing, but said the company complies with all OCC orders and follows the established regulatory process.

OCC said it does not comment on pending litigation.

In response to appeals the lawmakers filed with the high court challenging bonds sold for Oklahoma Gas and Electric Company and Public Service Company of Oklahoma, OCC and the utilities warned impairing the debt would disrupt the bond market. They also argue the lawmakers lack standing, their challenges are moot and that the OCC compiled with the type of audits required under the state's securitization law.

Bonds in all four deals were approved by Oklahoma's Council of Bond Oversight and validated by the state Supreme Court prior to issuance.

They 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.