Opinion
120707
11-06-2024
THE CITY OF OKLAHOMA CITY, Plaintiff/Appellant, v. OKLAHOMA CORPORATION COMMISSION, Defendant/Appellee.
Kenneth Jordan, Laura K. McDevitt, and Jerod A. Beatty, Oklahoma City, Oklahoma, for Appellant City of Oklahoma City Niles Stuck, A New Energy, LLC, Oklahoma City, Oklahoma, for appellant City of Oklahoma City Patricia L. Franz, General Counsel, and Daniel P. Boyle, Deputy General Counsel, Oklahoma Corporation Commission, Oklahoma City, Oklahoma, for Appellee, Oklahoma Corporation Commission Curtis M. Long, J. Dillon Curran, and Anna H. McNeil, Connor & Winters, LLP, Oklahoma City, Oklahoma, for Summit Utilities Oklahoma, Inc. Daniel McClure and Christian Rinehart, Oklahoma City, Oklahoma, for Oklahoma Municipal League
THIS OPINION HAS NOT BEEN RELEASED FOR PUBLICATION. UNTIL RELEASED, IT IS SUBJECT TO REVISION OR WITHDRAWAL.
APPEAL FROM OKLAHOMA CORPORATION COMMISSION
Kenneth Jordan, Laura K. McDevitt, and Jerod A. Beatty, Oklahoma City, Oklahoma, for Appellant City of Oklahoma City
Niles Stuck, A New Energy, LLC, Oklahoma City, Oklahoma, for appellant City of Oklahoma City
Patricia L. Franz, General Counsel, and Daniel P. Boyle, Deputy General Counsel, Oklahoma Corporation Commission, Oklahoma City, Oklahoma, for Appellee, Oklahoma Corporation Commission
Curtis M. Long, J. Dillon Curran, and Anna H. McNeil, Connor & Winters, LLP, Oklahoma City, Oklahoma, for Summit Utilities Oklahoma, Inc.
Daniel McClure and Christian Rinehart, Oklahoma City, Oklahoma, for Oklahoma Municipal League
EDMONDSON, J.
¶0 Corporation Commission issued an order preventing certain utilities from billing customers for certain municipal franchise fees and municipal gross receipts taxes by application of the February 2021 Regulated Utility Consumer Protection Act. The City of Oklahoma City appealed. The appeal was retained sua sponte by the Court for appellate review. The Corporation Commission filed a motion to dismiss. The motion to dismiss was previously denied by the Court. We hold: The Oklahoma Municipal League possesses standing in the controversy; and the Commission's determination that the February 2021 Regulated Utility Consumer Protection Act changed, amended, or altered a utility's legal obligations concerning municipal franchise fees and gross receipts taxes is a determination not sustained by law and must be reversed.
¶1 This appeal involves an order of the Oklahoma Corporation Commission (Commission). The Public Utilities Division of the Commission (PUD) filed an application for the Commission to prevent named regulated utilities from billing customers for any franchise fees, municipal fees or taxes, and/or 68 O.S. §2601 gross receipts taxes based upon specific "securitized revenue." This securitized revenue is paid by utility customers for servicing ratepayer-backed bonds issued pursuant to the "February 2021 Regulated Utility Consumer Protection Act," originally codified at 74 O.S. §9070-§9081, inclusive. This Court reviewed applications for approval of bonds issued pursuant to this Act in four recent opinions. The Commission granted the application of the PUD.
Counsel for Oklahoma Natural Gas stated municipal franchise fees and gross receipts tax calculations: "So typically, for us, if your gross receipts, that statute caps at two percent. And then our standard franchise is at three percent." Hearing Transcript, (Aug. 11, 2022), O.R. at 48. 68 O.S.2021, §2601: "The power is hereby vested in the governing body of any city or town in the State of Oklahoma to levy and assess, by ordinance, an annual tax upon the gross receipts from residential and commercial sales of power, light, heat, gas, electricity or water in said city or town in an amount not exceeding two (2%) per cent of the gross receipts from residential and commercial sales, which tax shall be in lieu of any other franchise, license, occupation or excise tax, levied by such city or town."
O.R. at 124, 126, Application of Public Utilities Division of the Corporation Commission, P.U.D. 2022-000073, July 28, 2022.
74 O.S.2021, §9070-§9081, inclusive (Laws 2021, c. 204, §§ 1-12, inclusive, emerg. eff. April 23, 2021); 74 O.S.2021 § 9070 ("This act shall be known and may be cited as the 'February 2021 Regulated Utility Consumer Protection Act.'"). Section 9082 concerning reports on "any audits or true-ups performed under Section 9074 or 9078" of the Act was added by Laws 2022, c. 56, § 1, eff. Nov. 1, 2022. The Legislature also created the "February 2021 Unregulated Utility Consumer Protection Act,"codified at 74 O.S. § 9050-§9059 (inclusive), (Laws 2021, c. 203, §§1-10, inclusive, emerg. eff. April 23, 2021).
1 . In re Application of the Okla. Dev. Fin. Auth. for Approval of Not to Exceed $95,000,000 Ratepayer-Backed Bonds, 2022 OK 49, 511 P.3d 1044 (Summit Utilities Oklahoma) (Summit); 2. In re Application of Okla. Dev. Fin. Auth. for Approval of $725,000,000 Ratepayer-Backed Bonds, 2022 OK 48, 511 P.3d 1048 (Pub. Serv. Co. of Okla.) (PSO); 3. In re Application of Okla. Dev. Fin. Auth. For Approval of $1,450,000,000 Ratepayer-Backed Bonds, 2022 OK 47, 511 P.3d 1052 (Okla. Nat. Gas Co.) (ONG); 4. In re Application of Okla.Dev. Fin. Auth. For Approval of Not to Exceed $800,000,000 Ratepayer-Backed Bonds, 2022 OK 41, 510 P.3d 165 (Okla. Gas & Elec. Co) (OG&E).
¶2 We conclude that the Oklahoma Municipal League possesses standing in the controversy. The Commission decided extraordinary 2022 winter storm fuel costs that were subject to municipal franchise fees and municipal gross receipts taxes at the time of the winter storm would not be collected by utilities from customers due to application of the February 2021 Regulated Utility Consumer Protection Act. The effect of the Commission's order made these franchise fees and taxes related to extraordinary fuel costs to be unlawful for the purpose of Commission approved utility tariffs because of the Act. We also conclude the Commission's determination that the February 2021 Regulated Utility Consumer Protection Act changed, amended, or altered a utility's legal obligations concerning municipal franchise fees and gross receipts taxes is a determination not sustained by law and must be reversed.
I. Summary of Corporation Commission Proceeding and Final Order
¶3 The PUD's application was filed July 28, 2022. The same day the PUD also filed motions for oral argument on its application and to advance the date of the argument. The PUD gave notice of its filings to the Office of the Oklahoma Attorney General, Oklahoma Natural Gas (ONG), Oklahoma Gas & Electric (OG&E), Public Service Company of Oklahoma (PSO), and Summit Utilities, Oklahoma, Inc. (Summit). Oklahoma Natural Gas (ONG) and the Oklahoma Municipal League (OML) filed public comments in response to the PUD's application. OML also filed a request to intervene in the proceeding. OML requested a hearing and proceedings before an administrative law judge prior to the matter being decided by the Commissioners.
¶4 The PUD, the individual utilities, and the OML filed briefs. A hearing was held before the Commission on August 11, 2022. Counsel appeared for the individual utilities, OML, and the Office of the Oklahoma Attorney General. OML's motion to intervene was granted at the hearing. No evidence was introduced and the hearing consisted entirely of argument by counsel. The Commission took the PUD's application under advisement for a ruling at a later date.
¶5 The PUD's brief includes an attached letter from the Office of the General Counsel for the Oklahoma Tax Commission. The letter was a response by the Tax Commission to a request from OG&E and PSO concerning sales tax related to the February 2021 Regulated Utility Consumer Protection Act.
¶6 The Tax Commission's letter commented on the jurisdiction of the Corporation Commission and stated it is "required to review the qualified costs of the utility and determine whether the amounts incurred would otherwise be recoverable from customers as fair, just, and reasonable expenses and prudently incurred." O.R. at 165. The Tax Commission explained: "Pursuant to the Financing Orders and the Act, the utilities will charge customers under a [Corporation] Commission-approved tariff on behalf of the ODFA [Oklahoma Department of Finance Authority] and remit those receipts to the ODFA for payment of the Bonds." O.R. 165-166. The Tax Commission concluded: "The payment of the charge by customers does not constitute consideration received by a utility from the sale of electricity or natural gas because amounts received from the charge are received by ODFA and merely collected by the utilities acting as agent for ODFA." O.R. at 166.
¶7 The Tax Commission relied upon Oklahoma Administrative Code (O.A.C.) § 710:65-19-2-34(e), stating: "[c]harges which are separately stated and are unrelated to the amount of gas or electricity used such as fees for meter reading, installation, initiation, disconnection, or restoration of service, as well as charges for returned checks or for late payment, are not subject to sales tax." O.R. at 167. The Tax Commission noted the tariffs "while based roughly on a customer's monthly consumption of gas and electricity, are separately stated charges paid by ratepayers pursuant to the Final Financing Orders.... [and] [a]ccording to the Final Financing Orders of the Utilities, the relation to the amount of gas or electricity used is only so far as to provide a general reference for the fair assessment and equalization of tariffs between customers across districts." Id.
Generally, a public utility tariff is a published document setting forth services provided by the utility to its customers and a schedule of rates for those services, and this tariff is approved by the Corporation Commission. See, e.g., O.A.C.165:45-15-2 and 165:135-5-1, and AviComm, Inc. v. Pub. Utils. Comm'n, 955 P.2d 1023, 1031 (Colo.1998) ("Tariffs are the means by which utilities record and publish their rates along with all policies relating to the rates.").
¶8 The Tax Commission concluded "securitization property" is a "right to payment" and not collected for the sale of gas or electricity, and "unrelated to the amount of gas or electricity used" and "as such the collection of the tariff charges [for securitization property] are not subject to sales tax. Id. O.R. at 167. The unrelatedness referenced by the Tax Commission is based upon conclusions: (1) The actual gas and electricity used by, and sold to, a particular customer is not an actual measured amount that may be used for the "securitization payment" that is billed to the particular customer; and (2) This securitization payment is not a sale for the purpose of a "sales tax." The Tax Commission's letter did not address municipal franchise fees or a municipal gross receipts tax or how these fees and taxes relate to the actual gas and electricity sold to customers and attributed to the 2021 severe winter event.
A "consumer sales tax" is one type of tax upon gross proceeds of a sale at the time of a "taxable transaction," paid by a consumer and collected by a vendor. Duncan Med. Serv's. v. State ex rel. Okla. Tax Comm'n, 1994 OK 91, ¶¶10-13, 911 P.2d 247, 251-52; First Nat. Bank of Stillwater v. State ex rel. Okla. Tax Comm'n, 1970 OK 33, ¶10, 466 P.2d 644, 646-47. The municipal gross receipts tax states it is an "annual tax upon the gross receipts from residential and commercial sales" and "levied for a term of not less than one (1) year; shall be payable monthly." See 68 O.S.2021, §§ 2601, 2603, supra note 1 and infra at note 7.
¶9 The brief filed by ONG included an attached Final Financing Order for ONG issued by the Corporation Commission pursuant to the February 2021 Regulated Utility Consumer Protection Act. O.R. at 239-320 (including appendices, attachments, and opinion of dissenting Commissioner). This order is attached for the purpose of explaining the fuel costs associated with the winter storm were paid by ratepayer-backed bonds and not by the usual billing procedure. A finance order determines a "mechanism under which the regulated utility will recover from customers an amount necessary to service, repay and administer the ratepayer-backed bonds... [and a] customer's monthly billing charges collected pursuant to the nonbypassable mechanism established under a financing order shall be based upon the then-current monthly billing of the customer." 74 O.S. 2021 § 9074 (A)(3). The Commission urged the ODFA to issue the bonds "and provide ONG with the resulting funds as soon as feasible in 2022 and recommends such funds be provided no later than December 31, 2022." O.R. at 264.
¶10 ONG's Order states commencement of a proceeding on April 29, 2021, by filing an application for a Financing Order. This Order was issued by the Commission in January 2022. In re Application of Oklahoma Development Finance Authority For Approval of $1,450,000,000 Ratepayer-Backed Bonds, 2022 OK 47, ¶6, 511 P.3d 1052, 1055. Various docket events including appearances, motions, testimony, and hearings are listed in the Order. No entry of appearance for a municipality or OML is stated in the Order. The Order is part of the appellate record to show how the Commission previously made winter storm fuel costs obligations to be paid by bonds.
¶11 Representatives from utilities explained municipal franchise fees were not billed to customers for franchise fees associated with the portion of unusual fuel costs during the February 2021 winter weather event. A representative for ONG stated it charged customers franchise fees upon fuel costs that were based upon "a typical amount [that] would have been outside of the storm, and they were charged at that fuel amount." O.R. at 46. A representative for PSO also clarified that franchise fees were paid for the previous customary amounts for this period of time by using a "normalization process for fuel" calculation of franchise fees. Summit explained that Its "predecessor in interest, Centerpoint engaged in a normalization effort... and the franchise fees were paid on those ordinary costs." Id. O.R. at 50-51.
¶12 The PUD explained its position in support of its application with the following testimony and argument concerning payments made by utility customers to service debt created by these rate-payer backed bonds.
[T]he utility company is merely a servicer of the debt... all the utility does is routine billing, collection and reporting duties on behalf of the authority who is the owner of the securitization property.
Funds collected are paid over to the ODFA and the State Treasurer and then deposit those funds into a special fund with a bond trustee for servicing the bonds. And as compensation for his role as an initial servicer, the utility is entitled to earn a servicing fee payable out of the monthly tariff charge collected from the customers.
Additionally, the Oklahoma Tax Commission rulings... state that the collection of separately stated charges under the OG&E and PSO tariffs on behalf of the ODFA for servicing taxpayer bonds, are not subject to Oklahoma sales tax, and that is further evidence that the utilities are merely servicers of the debt...
[T]he cost of securitization property is a right to payment. It is collected by the --- it is not collected by the utilities in exchange for the sale of natural gas or electricity, and is therefor, unrelated to the amount of gas or electricity used.
The Act, as well as the financing orders clearly limit any collection and billing by the regulated utility to only those items set forth in each utility's respective, irrevocable and non-bypassable mechanism. And that does not include franchise fees, municipal fees or taxes or gross receipt sales taxes.
... Franchise fees were paid during the event, but because utilities keeps [sic] on file a regulatory asset, those fuel costs were pulled out of those bills. And as a result, franchise fees were not paid on those [extraordinary] fuel costs.
Hearing Tr. Aug. 11, 2022, O.R. at 37-40 (explanation added). The PUD explained, a Commissioner agreed, that fuel extraordinary fuel costs due to the winter storm had never been approved as a fuel cost to be collected from a customer.
¶13 One Commissioner opined franchise fees are tied to, or contingent upon, fuel costs approved by the Commission for ratepayer payment.
I think for the most part, the franchise agreements are specific, that it has to be a charge passed along to the ratepayer by the utility that has been approved by the Commission. In this case, there was never a Fuel Adjustment Clause, which would have been the normal process in that. So the utilities we never authorized the utilities to collect that fuel cost until we took it out and put it over into a securitization bucket, at which time it's no longer the property of the utilities.
... [O]ur role is to authorize the utilities or not authorize the utilities for collection from the ratepayers. In this case, we never authorized the utilities to collect those fuel costs because that never even became an issue because we went a different direction and we placed it into a securitization bucket, which the utility at that time, it's no longer the property of the utility.
Hearing Transcript, O.R. at 60-61. A different Commissioner noted this approach raised an important issue: "Is the obligation to pay for fuel the day it was consumed, the day that it was purchased from some past supplier, the day that it might have got billed later to the customer?" Id. O.R. at 62.
¶14 OML argued if a municipality improperly assessed "some huge finance -- franchise fee" and a utility objected, then "[t]hey need to take that to District Court... [because] whether or not that is in accordance with the agreement in Oklahoma is not within the jurisdiction of this Commission to determine." Hearing Transcript, O.R. at 67. OML argued the essence of the PUD's application was a request for the Commission to "decide which part of those franchise fees are properly assessed." Id. O.R. at 69. OML stated franchise fees are set by a contract, i.e., the terms of the franchise agreement between a municipal government and the utility provider. Further, "fuel costs were subject to the franchise fees that were in place at the time of the winter storm." Id. at 55. However, the terms of the many municipal agreements are not uniform. OML explained the following.
So in this particular incident there are hundreds, if not thousands, of [franchise] agreements [in effect at the time of the winter storm]. I can't speak to a thousand different agreements and what those individual terms were. So I can't tell you specifically this one said all revenue versus only fuel cost or a percentage of this or that.
Hearing Transcript, at 56. OML concluded with the point concerning the authority of the Commission: "[t]he whole concept of this body here determining when a franchise fee applies and when it doesn't is a new and novel approach." Id. O.R. at 60. OML further noted variations in franchise agreements between municipalities and utilities, and municipalities "then bill the fee to utilities."
"[W]e've got tons and tons of agreements. There is no way that anyone can sit there and tell you what they all say.
As I understand the way these franchise fee assessments go about, are that the municipalities review those agreements... that they assess the fee and then bill the fee to the utilities.
Of course that fee is subject to their tariffs. And the passing of that fee to the customer has been approved, to my knowledge, in every tariff at issue in this case.
Hearing Transcript, O.R. at 64. OML stated the franchise fees are part of a tariff in the sense that the fee is billed to the customer by a utility, but argued these franchise fees are not subject to being altered by the Commission, unlike a tariff being created by the exercise of a legislative power possessed by the Commission. OML also argued the Commission "cannot change the obligation of the municipalities to assess the franchise fee in accordance with the franchise agreement." Id. O.R. at 73. OML stated franchise fees are owed by the utility to a municipality based upon the utility's sale of fuel regardless of the Commission including the fee in a tariff based upon a fuel assessment cost or a securitized revenue cost. Id. O.R. at 72-73. OML appears to state the securitized revenue cost for payment of the bonds and billed to the customer is also a fuel cost subject to a franchise fee.
¶15 OG&E and Summit explained why franchise fees may not be collected contemporaneously to a customer's purchase. OG&E argued that franchise fees are not applied to gas costs when incurred, because the Purchase Gas Adjustment Clause (PGA) and the Fuel Adjustment Clause requires a calculation "that's done over a period of time," Id. O.R. at 77. OG&E further explained a tariff states "exactly how we handle our gas costs purchases and it flows through that PGA in a very specific manner to bill its customers...[a]nd then the franchise fee is charged on our bills itself, which includes the fuel costs." Id. O.R. at 77-78. Summit explained its recovery of gas costs from customers occurs through its Gas Supply Recovery rider and costs associated with the February 2021 storm "were not to be collected until, to start with, in the fall of 2021." O.R. at 89. He noted the Regulatory Asset Order pursuant to the February 2021 Regulated Utility Consumer Protection Act occurred prior to fall 2021, and the extraordinary winter storm fuel costs did not then exist for application of the GSR as a "fuel cost" and calculation of a franchise fee. Id.
¶16 The record appears to show that by the time adjusted fuel costs for the February 2021 event would normally be calculated in the fall of 2021 and franchise fees applied thereto, these fuel costs were considered by the Commission to be no longer fuel costs associated with a tariff calculation, but fuel costs converted into a bond obligation subject to a then contemporaneous bond approval process. A municipal gross receipts tax pursuant to 66 O.S.2021, §2601, is levied for a term "of not less than one (1) year," and "shall be payable monthly."
68 O.S.2021, §2603: "The tax authorized to be levied under Section 2601 of this title, shall be levied for a term of not less than one (1) year; shall be payable monthly."
¶17 On August 18, 2022, the Commission issued its Final Order and concluded the utilities could not collect from customers any franchise fees or gross receipts taxes if such fees and taxes were based on securitization property or securitized revenue for the ratepayer-backed bonds. The only relief or command actually ordered in Final Order states as follows.
THE COMMISSION THEREFORE ORDERS that Respondents are not authorized to bill customers for any franchise fees, municipal fees or taxes, and/or 68 O.S. § 2601 taxes (including gross receipt taxes) based on securitization property or securitized revenue, unless or until otherwise ordered by the Commission.
Final Order, O.R. at 333. However, the portion of the Final Order characterized as "Findings of Fact and Conclusions of Law" contains the following.
Respondents expressed concerns that they may be precluded from seeking recovery from the Commission for any past or future Franchise-Related Payments on securitization charges upon a finding by a court of competent jurisdiction or subsequent legislation that Franchise-Related Payments should be assessed on securitization charges. However, this order does not prohibit the future filing of applications and proceedings seeking such recovery in subsequent Commission cases.
Final Order, O.R. at 332. The Final Order also contains the following statement.
To the extent there is a disagreement or a dispute between utilities and those entities claiming they are owed Franchise-Related Payments, the Commission would not be the proper forum for such dispute(s). Further, counsel for OML acknowledged that due to the hundreds, if not thousands, of agreements, he could not speak to the particulars of each.Id. The Final Order of the Commission states it should be construed as possessing no legal effect upon municipal franchise fees owed, or claimed to be owed, from the extraordinary fuel costs that were not billed to the customers but incorporated into bonds issued pursuant to the February 2021 Regulated Utility Consumer Protection Act.
¶18 The dissenting Commissioner's opinion references arguments by counsel. The Commissioner's dissenting opinion does highlight certain "facts" stated in the arguments by counsel to address the nature of the controversy. The Commissioner concludes that approximately 60-100 million dollars is owed to cities and towns due to unpaid franchise fees and municipal taxes. This Commissioner noted during the hearing: "[I]t was mentioned it might be 10 cents per month per customer... Do you have any idea what kind of money we're talking about?" Hearing Transcript, O.R. at 24. PUD responded with the following
Commissioner, we are talking about the franchise fees and gross sales tax receipts that would otherwise be collected from customers on this over three billion dollars worth of fuel. So I'm sure it would be substantial.
I don't know the individual contracts that are entered into between the utilities and municipalities, but we're talking about a great deal of money.Id. at 24. OML responded with an estimated amount sought by the Commissioner.
Commissioner, I met with our finance folks about it and they are anticipating on the franchise fee side, it would be about 10 cents, like you indicated, per month, per account.
Hearing Transcript, O.R. at 24-25. When the Commissioner pressed on a total amount at issue, OML stated the hundreds of individual municipal/utility contracts would need to be reviewed to provide an accurate number. Id. O.R. at 25. Upon being pressed again for an accurate number of dollars in dispute, OML stated "I think to get the estimate we would just take the total number of houses per month and times it by that 10 cents." Id. O.R. at 25. ¶19 OG&E initially planned to bill a customer for franchise fees, apparently based upon a customer's securitization payment or a portion thereof, and then OG&E decided to not seek to bill this amount upon learning of the PUD's application to prevent such billing. Dissenting Opinion, O.R. at 333B. This Commissioner also pointed out ONG stating if the Commission did not grant the PUD's application, then ONG "would have to determine whether or not, based on our individual franchise agreements, is assessing it [a franchise fee] on a securitization charge is appropriate." Id. The dissenting Commissioner also argued that any disagreements on whether franchise fees could be assessed against the securitization charge was an issue to be litigated in Oklahoma's District Courts. This Commissioner argued for denying the PUDs application.
II. Preliminary Issues
¶20 Oklahoma City filed a petition in error challenging the Commission's Final Order. The Corporation Commission filed a motion to dismiss this petition in error. The motion to dismiss was denied by an order the Court on March 6, 2023.
¶22 The OML filed a timely response to the petition in error. The OML's response did not indicate an interest against reversing the Commission's Order, but aligned itself with appellant in challenging the Order. The Court requested the OML to clarify its request for appellate relief due to its statement in its response. OML filed a "cross-petition in error" in July 2023.
¶23 The OML's filing is not a usual cross-appeal or counter-appeal. Any party challenging a judgment, final order, or some other immediately appealable order, may commence an appeal by timely filing a petition in error with a cost deposit or its substitute. Okla. Sup. Ct. R. 1.23(a). Two or more parties may join as co-appellants in a single petition in error for the principal appeal, and if more than one party files a petition in error on the same day, then the Court determines which petition in error "is to be regarded as bringing the principal appeal and which constitutes a counter-appeal, a cross-appeal or some other form of appeal." Okla. Sup. Ct. R. 1.27(a). The OML did not join the principal appeal as a co-appellant. The principal appeal by Oklahoma City was timely commenced and the substance of OML's challenge to the Commission's Order is before the Court as a permissible appeal to assign error and brief.
A cross-appeal is usually considered as one brought by an appellee in the original appeal and seeking relief against another appellee. Pub. Serv. Co. of Okla. v. State ex rel. Okla. Corp. Comm'n, 2005 OK 47, n.10, 115 P.3d 861, 869. A counter-appeal is usually considered as brought by an appellee who invokes the court's appellate jurisdiction for relief against the original appellant. Id.
Okla. Sup. Ct. R. 1.27(f); 1.36(k). The OML and Oklahoma City did not file a petition in error as co-appellants, and we need not discuss issues relating to assignment of errors by co-appellants in a petition in error.
¶24 The issue of the OML's standing was raised and a decision on this deferred until disposition on the merits of the appeal. Generally, an association's standing is based upon members of that association possessing standing to sue in their own right. Also generally, associational standing is usually based upon its members possessing a "'direct, immediate and substantial'" interest in the controversy and a "personal stake in the outcome." Our State Constitutional provision for Corporation Commission appeals includes the following.
Okla. Pub. Employees Ass'n. v. Okla. Dept. of Cent. Serv., 2002 OK 71, ¶ 9, 55 P.3d 1072, 1077.
Okla. Educ. Ass'n v. State ex rel. Okla. Legislature, 2007 OK 30, ¶11, n.17, 158 P.3d 1058, 1063, citing Hendrick v. Walters, 1993 OK 162, ¶ 5, 865 P.2d 1232, 1237.
From any action of the Corporation Commission prescribing rates, charges, services, practices, rules or regulations of any public utility or public service corporation, or any individual, person, firm, corporation, receiver or trustee engaged in the public utility business, an appeal may be taken by any party affected, or by any person deeming himself aggrieved by any such action, or by the State, directly to the Supreme Court....Okla. Const. Art. IX, § 20. In Henry v. Southwestern Bell Telephone Co., 1991 OK 134, 825 P.2d 1305, we quoted part of this language and explained the American Association of Retired Persons (AARP) possessed standing for itself and on behalf of its members whose pecuniary interests were affected by the Corporation Commission's order affecting rates. In Henry, the Commission concluded a statutory change caused a utility to possess less tax liability, and the AARP unsuccessfully argued its members should receive refunds due to this statutory change. Id. 1991 OK 134, ¶8. We explained: "AARP qualifies as a 'party affected' by the order now before us... AARP doubtless has standing to press for relief in this appeal." 1991 OK 134, ¶¶8-9, 825 P.2d at 1310 (material omitted).
¶25 The OML was allowed to intervene by a vote of the Commission. The OML argued newly created statutes could not change utility tariff "charges" in the nature of franchise fees and gross receipts taxes because the fees and taxes were legal obligations of the utilities created prior to the newly enacted statutes, i.e., the obligations were vested property rights not subject to retroactive extinguishment. The Commission restricted its ruling by including a finding that franchise fees could be imposed in the future if a court of record required such result. However, the Commission's Order ruled that municipal franchise fees based upon winter storm fuel costs would not be made part of tariff charges upon securitization property. OML possessed standing to participate in the Commission proceeding brought to prevent utilities from collecting franchise fees and gross receipts taxes based upon the winter storm fuel costs. Henry v. Southwestern Bell Telephone Co., supra.
¶26 The City argues on appeal: (1) The Order is an unlawful cancellation of municipal sales taxes on parts of utility billings; (2) The Order creates an indirect cancellation of municipal franchise fees; (3) The Commission's Order is an exercise of jurisdiction not possessed by the Commission; (4) The Order does not address liability of utilities for franchise fees and municipal taxes while preventing their collection; (5)The bond revenue collected is ultimately for a taxable sale of fuel costs; and (6) The Commission has no authority to interfere with municipal franchise agreements and municipal tax liability of utilities. The OML argues similar issues and adds additional arguments stating the Commission was required to provide notice to the cities and towns affected by the Commission's Order when attempting to act in a judicial capacity.
III. Appellate Review
¶27 OML and the City of Oklahoma City (Oklahoma City) state this controversy concerns franchise fees, municipal taxes, utility tariffs, the jurisdiction of the Commission, application of the February 2021 Regulated Utility Consumer Protection Act, and the constitutional authority of our Legislature. Oklahoma City and OML argue the Commission did not possess jurisdiction to award the relief in the Final Order, no deference should be given to any portion of the Commission's order, de novo appellate review is proper due to appellant's constitutional claims, and the Commission should have clarified when exercising judicial or legislative functions with proper notice and procedure for one or both of these functions.
¶28 One Commissioner raised the issue whether PUD was requesting the Commission to act judicially or legislatively.
Sometimes around here we get asked, is the case legislative or judicial... So I'm somewhat curious as to whether deciding this matter that's before us today is a policy question. And if it is a policy determination, it might involve considerations like the Legislature gives all the time.
You have trade-offs. You have balancing, and this time we have cities and towns that are parties to the case.
... How many think this is a legislative case? Would you hold up your hand.... All right. How many think its judicial?
Hearing Transcript, O.R at 26-7 (material omitted). One counsel appearing for the Attorney General stated the proceeding was a mixture of judicial and legislative authority. Id. at 27.
Due to both a standard of review provided by Okla. Const. Art. IX, § 20, and the nature of legislative facts before us, we need not address the extent to which modern public utility ratemaking may occur as a mixture of legislative and judicial authority, or whether classifying a particular attribute of the Commission's exercise of authority as judicial or legislative has a potential for different outcomes upon application of Okla. Const. Art. IX, § 20. But see, e.g., Southwestern Bell Tel. Co. v. Okla. Corp. Comm'n, 1994 OK 38, 873 P.2d 1001, cert. den., 513 U.S. 869, 115 S.Ct. 191, 130 L.Ed.2d 123 (1994); (legislative nature of the Commission proceeding is sufficient to deny a party's requested extraordinary writ relief, and the dissent by Opala, J., stating judicial relief is available in some circumstances when an exercise of individual ratemaking by Commission also possesses an adjudicatory nature or attributes).
¶29 The Commission has authority to act in "legislative," "judicial," (quasi-judicial), "executive," and "administrative" roles based upon the legal nature of the controversy upon which the Commission's authority is applied, and relief granted by the Commission pursuant to authority granted by the Oklahoma Constitution and statutes. A proceeding is "judicial" (quasi-judicial) if it "investigates, declares, and enforces liabilities as they stand on present and past facts and under laws already existing." In St. Louis & S.F. Railroad Co. v. State of Oklahoma, 1925 OK 541, 244 P. 440, the Court noted that when a claim for a refund of an illegal transportation charge is based on an application of a wrong rate, the determination of whether a different rate from that charge is a legal rate is judicial not legislative. A proceeding is "legislative" if it "looks to the future and changes existing conditions by making a new rule to be applied thereafter." A ratemaking hearing is legislative because it establishes a future rule. Similarly, a utility tariff is created by the exercise of a legislative power possessed by the Commission.
Southwestern Bell Tel. Co. v. Okla. Corp. Comm'n, supra note 12 at 1994 OK 38, ¶5, 873 P.2d at 1004 ("Among the many powers and duties given the Commission, it is required to exercise the authority of the state to supervise, regulate and control public service corporations, and to that end it has been clothed with legislative, executive and judicial powers."); Okla. Cotton Ginners' Ass'n v. State, 1935 OK 1004, 51 P.2d 327, 333 (The framers of the Oklahoma Constitution designed the Corporation Commission with "legislative, executive, quasi judicial, and administrative powers" and "subject to many restrictions and conditions.").
In re Application of Okla. Gas & Elec. Co., 2018 OK 31, n.24, 417 P.3d 1196, 1201("This Court has adopted the United States Supreme Court's definition of 'legislative' and 'judicial' proceedings.'") (citing Cox Okla. Telecom, LLC, 2007 OK 55, ¶ 11, 164 P.3d 150; Southwestern Bell Tel. Co. v. Okla. Corp. Comm'n, 1994 OK 38, ¶9, 873 P.2d 1001; Prentis v. Atlantic Coast Line Co., 211 U.S. 210, 226, 29 S.Ct. 67, 53 L.Ed. 150 (1908)); Okla. State Med. Ass'n v. Corbett, 2021 OK 30, n.2, 489 P.3d 1005, 1006 (Quasi-judicial power usually describes a non-judicial officer empowered to investigate facts, weigh evidence, draw conclusions as a basis for official actions, and exercise discretion of a judicial nature.).
In re Application of Okla. Gas & Elec. Co., 2018 OK 31, ¶14, n.25, 417 P.3d 1196, 1201 (citing Prentis, supra note 14, at 211 U.S. at 226; Cox Okla.Telecom, LLC, supra note 14, at 2007 OK 55, ¶11, 164 P.3d at 157).
In re Application of Okla. Gas & Elec. Co., supra note 15 at 2018 OK 31, ¶14, n.26, 417 P.3d at 1201 ("A ratemaking hearing, for example, is always a legislative proceeding because it establishes a rule for the future.") (citing Wiley v. Okla. Natural Gas Co., 1967 OK 152, ¶ 3, 429 P.2d 957; Turpen v. Okla. Corp. Comm'n, 1988 OK 126, ¶ 76, 769 P.2d 1309).
See, e.g., Satellite Sys., Inc. v. Birch Telecom of Okla., Inc., 2002 OK 61, ¶10, 51 P.3d 585, 589 ("Commission rules, including tariffs, adopted pursuant to this grant of authority are legislative rules limited by the grant of authority.").
¶30 The appellee defends the Commission's Order as a conditional legislative determination that excludes a certain type of franchise fees and taxes, i.e., if a utility requests a tariff where franchise fees and municipal gross receipts taxes are based upon a customer's securitization payment, or a portion thereof, then such will necessarily be denied by the Commission unless an Oklahoma District Court issues an order requiring payment of such franchise fees and municipal taxes from the utilities. OML and Oklahoma City read the Final Order as declaring liability on present and past facts, determining a legal charge, and exercising a judicial (quasi-judicial) authority.
¶31 The Commission's Order was the result of arguments of counsel at a hearing before the Commissioners. The Commission's Final Order references several statements of law in its Order, and the Order is based upon the Commission construing certain statutes. The Final Order does reference facts such as filing dates and notices provided to the parties in this Commission proceeding.
¶32 The Final Order makes statements of fact with reference to facts purportedly present in previous Commission proceedings that resulted in the financing orders issued pursuant to the February 2021 Regulated Utility Consumer Protection Act. The Commission did not address principles of res judicata or judicial notice when it exercises a judicial or quasi-judicial authority. The Final Order makes statements of fact with references to "as represented by counsel," and "concerns" of the parties made in the hearing and by briefs. Arguments by counsel are not used to make a record of facts for adjudication in a judicial or quasi-judicial proceeding. Generally, rules of evidence are applied before the Commission and its administrative law judges when exercising a judicial (quasi-judicial) function, except when such application is contrary to a public interest and when the exception is also consistent with Due Process.
Judicial principles such as res judicata are applicable when the Commission is exercising a judicial (quasi-judicial) authority, but "[w]hen it exercises legislative power...res judicata is not applicable." In re Application of Okla. Gas & Elec. Co., supra note 15 at 2018 OK 31, ¶11, 417 P.3d at 1201 (material omitted)..
When Commission exercises judicial (quasi-judicial) authority and uses judicial notice of its orders in prior proceedings such use must comply with due process principles. C.F. Braun & Co. v. Corp. Comm'n, 1987 OK 52, ¶2, 739 P.2d 510, 511, explaining, C.F. Braun & Co. v. Corp. Comm'n, 1980 OK 42, 609 P.2d 1268, 1272-73 (discussing due process is violated when in the exercise of quasi-judicial power judicial notice of extra-record facts is used without opportunity for rebuttal, and the Commission was required to base its findings upon evidence before it.); Wilson v. Okla. Horse Racing Comm'n, 1996 OK 3, ¶8, 910 P.2d 1020, 1022 (an exercise of administrative authority that involves both investigative and adjudicatory stages must comply with Due Process).
Argument by counsel is not evidence. Berkson v. State ex rel. Askins, 2023 OK 70, ¶38, 532 P.3d 36, 51.
The Commission and Administrative Law Judges "shall follow the rules of evidence applied in the district courts of Oklahoma, except that such rules may be relaxed where the Commission or the Administrative Law Judge deems it in the public interest to do so." O.A.C. 165:5-13-3(f) (as amended 40 OK Reg 1730, eff. 10-1-2023); cf. Okla. Nat. Gas v. Corp. Comm'n, 1923 OK 400, 216 P. 917 (on appeal from an order fixing gas rates, Court concluded the Commission had disregarded evidence, failed to base its findings upon evidence before it, adopted an unreasonable construction of a state statute, and reversed the Commission's order); C.F. Braun & Co. v. Corp. Comm'n note 19 s upra.
¶33 The Commission's procedure herein and reliance upon facts used by arguments of counsel appears to be an exercise of a legislative function. A legislative power does not include fact-finding in the form of predetermining an adjudicative fact for a judicial proceeding. However, legislative authority does include a type of fact-finding "similar to that of a legislative committee engaged in fact-finding for the purpose of legislation." Various classifications of "facts" are possible, such as "adjudicative facts," facts in controversy decided by a judge or jury, "legislative facts," facts used by the legislative body as a basis for creating legislation, and "premise facts" for "an entire field of fact disputes." As we explain herein, facts before the Commission in a judicial or legislative capacity, or a mixture of the two, receives an appellate review that is "judicial" by this Court, and if a fact is necessary as a matter of law to support the Commission's decision, then sufficiency of the evidence is reviewed based upon standards in the Oklahoma Constitution.
Hill v. American Med. Response, 2008 OK 57, ¶28, 423 P.3d 1119, 1130.
Cox Okla. Telecom, LLC, 2007 OK 55, ¶14, 164 P.3d 150, 157; 12 O.S.2021 § 2202 (Evidence Subcommittee Note) (legislative facts are ordinarily general and do not concern the immediate parties) (quoting Davis, K., Administrative Law, p. 296 (1972)); see, e.g., Haley N. Proctor, Rethinking Legislative Facts, 99 Notre Dame L. Rev. 955, 970 (2024) (quoting Kenneth Culp Davis, An Approach to Problems of Evidence in the Administrative Process, 55 Harv. L. Rev. 364, 402 (1942) (Generally, when an administrative agency finds facts concerning parties before the agency to determine rights and duties with regard to the parties, then the agency performs an adjudicative function and makes findings of "adjudicative facts." But when an agency "wrestles with a question of law or policy, it is acting legislatively" and the facts which inform the legislative judgment are "legislative facts."); Peggy C. Davis, "There Is a Book Out...": An Analysis of Judicial Absorption of Legislative Facts, 100 Harv. L. Rev. 1539, n.1, & 1539-40 (1987) (quoting Davis, An Approach to Problems of Evidence, supra, and E. Cleary, McCormick on Evidence, § 331, at 928 (3d ed. 1984)).
Robert E. Keeton, Legislative Facts and Similar Things: Deciding Disputed Premise Facts, 73 Minn. L. Rev. 1, 8-9, nn.19-21 (1988) (premise facts "are facts that explicitly or implicitly serve as premises used to decide issues of law" including "legislative facts which legislatures use as premises to enact statutes"); Todd S. Aagaard, Factual Premises of Statutory Interpretation in Agency Review Cases,77 Geo. Wash.L.Rev. 366, 382-383 (2009) (relying on Keeton, Legislative Facts, supra); Yocum v. Greenbriar Nursing Home, 2005 OK 27, n.32, 130 P.3d 213, 220 (because legislative facts are used when enacting a statute, such facts "are helpful to a court in determining the meaning, effect, content or validity of enactments").
MCI Commc'ns Corp. v. State, 1991 OK 86, ¶22, 823 P.2d 351, 358 (in absence of adjudicating an assignment of error based upon federal or state constitutions, appellate review determines whether the Commission has regularly pursued its authority, and whether the findings and conclusions are sustained by the law and substantial evidence); Pub. Serv. Co. of Okla. v. State ex rel. Okla. Corp. Comm'n, supra note 8 at 2005 OK 47, ¶ 8, 115 P.3d at 869-70 (discussing review required by Okla. Const. Art. IX, §20); Samson Res. Co. v. Okla. Corp. Comm'n, 1987 OK 73, ¶11, 742 P.2d 1114, 1116 (Court follows Okla. Const. Art. IX, §20 standard when reviewing sufficiency of the evidence challenge); Okla. Const. Art. IX, § 20, infra, at note 28.
¶34 The Final Order contains a segment titled "Findings of Fact and Conclusions of Law," composed of an introductory paragraph and twenty-four unnumbered paragraphs for findings of fact and conclusions of law. Statements of fact or those of combined of fact and law in this segment are as follows.
Second paragraph: States date when PUD filed its Application, notices provided, and Commission's legal conclusion notice was proper.
Third paragraph: "PUD requested the Commission issue an order prohibiting Respondents from billing customers for any franchise fees, municipal fees of taxes, and.or 68 O.S. §2601 taxes based upon securitized revenue, and any other relief the Commission deems appropriate."
Fifth paragraph: States respondents are utilities.
Sixth paragraph: States established rates are billed to customers by Commission-approved tariffs.
Seventh paragraph: States respondents bill customers for franchise fees by Commission-approved tariffs.
Eighth paragraph: States Commission previously entered orders authorizing respondents "to deviate from their respective fuel adjustment/purchase clause tariffs and defer collecting fuel and purchased power costs incurred during the Weather Event until... approval in a subsequent Commission proceeding." (Material omitted).
Ninth paragraph: States The February 2021 Regulated Utility Consumer Protection Act was enacted in response to the February 2021 Weather Event.
Eleventh paragraph: States each of the respondents previously sought relief pursuant to the February 2021 Regulated Utility Consumer Protection Act, and the deferred collection of purchased fuel and power costs were made part of the securitization property under previous financing orders of the Commission. The Commission footnotes several previous proceedings concerning this Act.
Nineteenth paragraph: Identifies the "concerns" raised by OML as a finding of fact, and states two conclusions, "The Commission agrees that it does not have jurisdiction related to contractual terms of such [franchise] agreements. However, the Commission is vested with the exclusive authority with respect to the ratemaking of utilities and the charges they seek to collect from their ratepayers concerning Franchise-Related payments."
Twentieth paragraph: "As represented by counsel, each respondent reportedly charged, collected, and paid its respective Franchise-Related Payment pertaining to the Weather Event--on a normalized basis.... Any excess fuel, purchased power and/or natural gas commodity costs became part of the securitization property under the financing orders." (Material omitted).
Twenty-first paragraph: "The Act as well as the financing orders specify the amounts received from customers through the applicable securitization mechanisms authorized in the financing orders...."
Twenty-second paragraph: "In each of the financing orders, the Commission set forth an authorized amount and how it is to be recovered through the securitization mechanism."
Final Order, O.R. at 329-332. Findings of fact related to "franchise fees" are limited to the following, (1) A request by PUD to prevent collection of franchise fees if "based upon" securitized revenue payments; (2) Customers are billed for franchise fees through Commission approved tariffs; (3) The Commission does not possess jurisdiction related to "contractual terms" in franchise agreements; and (4) The Commission's Order does not prevent a utility from seeking permission from the Commission if a District Court rules that additional franchise fees are owed by the utilities.
¶35 No finding of fact or conclusion of law is made concerning the date when a utility possesses a legal obligation to pay an agreed franchise fee pursuant to a franchise agreement (or mandated by law and incorporated into the agreement), or the relationship between any agreement-provided date and the date of sale of gas/electricity to a customer. However, the Commission concluded franchise fees do not apply to certain fuel costs. The OML argued: "[T]he point I was trying to make... is that the whole concept of this body here determining when a franchise applies and when it doesn't is a new and novel approach." Hearing Transcript, O.R. at 60. Additional paragraphs in this section of the Final Order quote or reference the February 2021 Regulated Utility Consumer Protection Act, 74 O.S. §9070-§9081," 17 O.S. §§ 151 et seq.,"" 68 O.S. §2601," and Okla. Const. Art. IX, §§18-19. The Final Order's language appears to be primarily legislative and not judicial when combined with the PUD's stated reason for filing its application.
In re Vose, 2017 OK 3, ¶28, 390 P.3d 238, 249 ("extant applicable law is a part of every contract in this state as if it were expressly cited or its terms incorporated in the contract").
¶36 When provided with an opportunity to explain why the PUD filed its application, a representative for the Public Utilities Division argued: "[N]o one should receive a windfall from this winter weather emergency, and that's what would occur if these franchise fees, gross sales taxes were paid to municipalities." Hearing Transcript, O.R. at 40. The representative was asked if this opinion was "just the opinion of the Public Utility Division," or "in the statute," and he responded with the following.
That's just the opinion of the Public Utility Division, Commissioner. Again, the cost of fuel during this period of time was astronomical. And so, franchise fees paid on this would be astronomical.Id. at 40. PUD's stated reason for filing its application, an opinion concerning "astronomical" franchise fees, was not made one of the findings by the Commission. PUD's application stated it was filed pursuant to Okla. Const. Art. IX, §§ 18-19, and" 17 O.S. §§151 et seq.," which includes the Commission's authority of "general supervision over all public utilities to, with power to fix and establish rates and to prescribe and promulgate rules, requirements and regulations, affecting their services, operation, and the management of the business thereof, and the method in which it is conducted." 17 O.S.2021 §152 (A). Viewing PUD's application, the Final Order, and when these two are combined with the procedure used by the Commission, the record before us clearly shows the Commission was exercising a primarily legislative authority. The Final Order's language is primarily legislative and not judicial when combined with the PUD's request for the Commission to legislate a result consistent with the PUD's perception of fairness for customers by alleviating them from the PUD's perceived "windfall" for municipalities.
¶37 Reviewing decisions by the Commission is divided between: (1) Appeals adjudicating assignments of error raising a violation of any right of the parties under the Constitution of the United States of the Constitution of the State of Oklahoma when the Court exercises its own independent judgment as to both the law and the facts of record; and (2) All other appeals when the Court determines whether the Commission has regularly pursued its authority, and whether the findings and conclusions of the Commission are sustained by the law and substantial evidence. This dual-nature review is required by Okla. Const. Art. IX, § 20.
MCI Commc'ns Corp. v. State, supra note 25, Pub. Serv. Co. of Okla. v. State ex rel. Okla. Corp. Comm'n, supra note 8, Samson Res. Co. v. Okla. Corp. Comm'n, supra note 25; and Okla. Const. Art. IX, § 20, infra, note 28.
Okla. Const. Art. IX, § 20 states in part: "The Supreme Court's review of appealable orders of the Corporation Commission shall be judicial only, and in all appeals involving an asserted violation of any right of the parties under the Constitution of the United States of the Constitution of the State of Oklahoma, the Court shall exercise its own independent judgment as to both the law and the facts. In all other appeals from orders of the Corporation Commission the review by the Supreme Court shall not extend further than to determine whether the Commission has regularly pursued its authority, and whether the findings and conclusions of the Commission are sustained by the law and substantial evidence."
¶38 A single appeal may involve applying both standards of review in Art. IX, §20. These constitutional standards apply regardless whether the Commission exercises a legislative or judicial (quasi-judicial) authority. When the Commission's order fails to follow applicable law the order, or a portion thereof, will be reversed as not "sustained by law." We have explained the "sustained by the law" portion of the Art. IX, §20 standard "is not limited solely to review of the evidentiary basis of the order as distinguished from presentation of legal basis for relief," but we examine whether a party's "entitlement to relief can be demonstrated by legal argument."
Cox Okla. Telecom, LLC v. State ex rel. Okla. Corp. Comm'n, supra note 23, at 2007 OK 55, ¶9, 164 P.3d at 156 (Court noted the two standards in Okla. Const. Art. IX, §20, and stated: "Today's pronouncement employs both standards.").
Cox Okla. Telecom, LLC v. State ex rel. Okla. Corp. Comm'n, supra note 23, at 2007 OK 55, ¶¶1,10-16, 31, 36, 164 P.3d at 150, 153, 156-58, 162, 164 (When the Commission exercises legislative authority: (1) The Court uses an independent judgment when reviewing assigned errors of fact and law asserting violations of federal or state constitutional rights; and (2) The Court adjudicates whether the Commission's order is sustained by "substantial evidence" on non-constitutional assignments of error challenging sufficiency of evidence before the Commission.); Carter Oil v. State, 1951 OK 272, ¶27, 240 P.2d 787, 796 ("Boards of quasi judicial powers must base their findings and orders on substantial evidence... [and the Court possesses] the power to examine into the record on appeal from the Corporation Commission whether in fact the findings and conclusions of the Commission are sustained by law and substantial evidence.") (explanatory phrase added); H & L Operating Co. v. Marlin Oil Corp., 1987 OK 39, ¶1, 737 P.2d 565, 566 (When the nature of relief granted by the Commission's exercise of quasi-judicial authority did not require an adjudication of fact by evidentiary proof, e.g., granting a stay, then appellate review was based upon whether an error of law occurred, i.e., "an absence of legal foundation for the order.").
Henry v. Corp. Comm'n, 1990 OK 104, ¶¶13-14, 825 P.2d 1262, 1266-67 (failure to follow a procedural rule and due process discussed).
H & L Operating Co. v. Marlin Oil Corp., 1987 OK 39, ¶1, 737 P.2d 565, 566.
¶39 Apart from the claims based upon our State Constitution, our review is non-deferential and de novo for the Commission's Order to the extent the appellate adjudication reviews assignments of error challenging the Commission's statutory construction on non-constitutional grounds. Appellants also assign error based upon provisions in the Oklahoma Constitution, but we need not reach those issues due to reversal of the Order based upon an erroneous statutory construction.
Dobson Tel. Co. v. State ex rel. Okla. Corp. Comm'n, 2019 OK 25, ¶17, 441 P.3d 156, 160-61 ("The issue in this appeal concerns the Commission's legal interpretation of the OUSF statute...[and] [c]onstitutional implications as well as statutory interpretation dictate our de novo review.") (emphasis added and material omitted); Okla. Gas & Elec. Co. v. State ex rel. Corp. Comm'n, 2023 OK 33, ¶¶ 7-8, 535 P.3d 1218, 1222 (non-deferential de novo review of assigned error of law was proper when reviewing Commission's construction of state statute).
Pub. Serv. Co. of Okla. v. State ex rel. Corp. Comm'n ex rel. Loving, 1996 OK 43, ¶16, 918 P.2d 733, 738 (Reversal of Commission order on specified grounds did not require analysis whether additional assigned errors required reversal: "Because we find the first argument persuasive we do not address the remaining constitutional attacks."); Ranola Oil Co. v. Corp. Comm'n of Okla., 1988 OK 28, ¶7, 752 P.2d 1116, 1118 (This Court determines constitutional questions only if necessary to adjudicate the rights of the parties in an appeal from the Corporation Commission.).
IV. Appeal
¶40 The Commission essentially concluded a municipal franchise fee (and gross receipts tax) are contrary to statutory law when the fee and tax are "based upon" securitization revenue customer payments. The Commission's unstated approach to this controversy is: A utility's collection for this "unlawful" (or contrary to statutory law) franchise fee/gross receipts tax is similar to a utility's collection for unreasonable cost or expense of a utility that the Commission routinely examines when determining the reasonableness of a utility's tariffs/rates.
See, e.g., In re Medicine Park Tel. Co., 2019 OK 21, 441 P.3d 113 (administrator properly examined a utility's expenses and infrastructure costs for reasonableness when determining utility's right to funds from a statutory fund); Pioneer Tel. & Tel. Co. v. Westenhaver, 1911 OK 47, 118 P. 354 (telephone company's "operating expenses, fixed charges, and some profits" were proper for Commission consideration of rates charged) (Syllabus by Court).
¶41 However, for the purpose of this controversy distinctions must be made when: (1) A utility requests to seek Commission approval for the utility's business expenses; (2) A utility's request for approval of a business expense including an unreasonable business expense; (3) A utility's business expenses outside of Commission oversight; (4) A utility requesting a tariff to include franchise fees and tax obligations; and (5) Legal tax or franchise fee liability of a utility is determined upon a judicial request by a utility or sua sponte by the Commission.
¶42 In Turpen v. Oklahoma Corporation Commission, 1988 OK 126, 769 P.2d 1309, we noted the following concerning the reasonableness of costs and expenses between affiliates.
Throughout the United States it is recognized that a public utility's dealings with affiliates require thorough investigation and close scrutiny by a public utility commission. It is generally held that, while the regulatory agency bears the burden of proving that expenses incurred in transactions with nonaffiliates are unreasonable, the utility bears the burden of proving that expenses incurred in transactions with affiliates are reasonable.Id. 1988 OK 126, ¶25, 769 P.2d 1309, 1320-1321 (notes omitted). We stated in State v. Oklahoma Gas & Electric Company, 1975 OK 40, 536 P.2d 887, a Commission inquiry concerning unreasonableness of expenses and costs was "limited to an investigation of these acts to determine whether or not they have a reasonable and fair effect upon the rights of the public, and to take steps to avoid an unreasonable or prejudicial effect upon public rights." Id. at ¶22, 536 P.2d at 891 (quoting Lone Star Gas Co. v. Corporation Commission, 1934 OK 396, 39 P.2d 547). Generally, a utility's usual process includes calculating its reasonable business expenses and costs and then making the calculation as part of a request to the Commission for approval of the utility's charges to its customers.
¶43 In a general sense, a utility may request whether a business expense or costs may be included in a tariff subject to approval. For example, we have explained a utility "could not exhibit improvident expenditures to justify a rate increase," and we explained "charitable contributions" could not be reasonable operating business expenses for the purpose of an increase in a rate/tariff. State v. Oklahoma Gas & Electric Company, 1975 OK 40, ¶¶27-38, 536 P.2d at 892-893. We affirmed the Commission's determination: "All gifts, donations and contributions made by a regulated utility shall be treated as 'below the line' expenses, and excluded from operating expenses allowable for rate making purposes; including, but not limited to the following: (1) contributions to charitable, religious or educational institutions or associations." The Commission determined a certain "business expense," was not a proper expense for inclusion when calculating a utility's rates. Id.
State v. Okla. Gas & Elec. Co., 1975 OK 40, ¶¶26-38, 536 P.2d at 891-893 (affirmed a Commission "Rule 5" but noted exceptions, at ¶¶37-38, concerning a rule-based limitation on contributions that was invalid since charitable contributions were excluded, and payments to cities in towns in excess of franchise fees or charges required by enforceable contract).
¶44 This general legal authority to examine utility expenses and costs in utility rate proceedings is limited in some circumstances, and two of these limitations are present in the Commission's Order concerning legal liability for franchise fees and gross receipts taxes. First, the Commission may not review a utility's "business discretion." Second, the Commission may not by quasi-judicial adjudication or legislative determination decide the existence of a utility's legal liability when the specific liability is an issue determined by a different governmental entity by our Constitution or statutes.
¶45 An example of the Commission's infringement upon a utility's business discretion was explained in Lone Star Gas Co. v. Corporation Commission, supra, where we stated the following.
The powers of the Commission are to regulate, supervise, and control the public service companies in their services and rates, but these powers do not extend to an invasion of the discretion vested in the corporate management. It does not include the power to approve or disapprove contracts about to be entered into, nor to the approval or veto of expenditures proposed. The powers of the Commission, as respects the acts of public service companies, are limited to an investigation of these acts to determine whether or not they have a reasonable and fair effect upon the rights of the public, and to take steps to avoid an unreasonable or unfair or prejudicial effect upon the public rights, if such be found.'1934 OK 396, ¶23, 39 P.2d at 553. In Oklahoma Gas & Electric v. Corporation Commission, 1975 OK 15, 543 P.2d 546, we relied upon Lone Star Gas Co., supra, and discussed the Commission's lack of a general power to substitute its own judgment "for that of the utilities concerning their internal management and control." Id. 1975 OK 15, ¶¶30-31, 543 P.2d at 551. The Commission may not adjudicate the presence of legal liability or legal right when the determination of this liability/right is committed to a District Court or a different administrative agency by state statutes or Oklahoma Constitution.
Okla. Gas & Elec. v. Corp. Comm'n, 1975 OK 15, ¶¶27-33, 543 P.2d at 551-52 (Commission's reliance upon its general supervision over all public utilities, with power to fix and establish rates, did not grant it authority prevent a utility from constructing a new electric generating station when the Legislature had not utilized Okla. Const. Art. IX, § 35 for vesting additional authority and duties in the Commission.).
Tucker v. Special Energy Corp., 2008 OK 55, ¶10, 187 P.3d 730, 733 (Commission does not possess authority to determine the legal effect of one its orders upon legal title to real property).
Okla. Cnty. Util. Services Auth. v. Corp. Comm'n, 1970 OK 28, 478 P.2d 352 (writ of prohibition granted and Commission directed to undertake no further proceedings against County Authority providing utility services); cf. Southeastern Okla. Develop. and Gas Auth. v. Okla. Corp. Comm'n, 1980 OK 16, ¶5, 606 P.2d 574 (Legislature constitutionally conferred jurisdiction in the Corporation Commission over a public trust engaged in furnishing utility services); State ex rel. Corp. Comm'n v. Texas Cnty. Irr. and Water Res. Ass'n, Inc., 1991 OK 63, ¶¶10-11, 818 P.2d 449, 452 (Oklahoma Water Resources Board had exclusive authority to authorize the appropriation of fresh water and Commission did not have such jurisdiction) (discussing Merritt v. Corp. Comm'n, 1968 OK 19, 438 P.2d 495, 498).
¶46 The Commission's approach to this controversy is that it did not infringe upon the internal management and control of a utility when the Commission determined on a sua sponte application that a utility had no gross receipts tax liability and no contractual municipal franchise fee liability in a particular factual circumstance by the Commission applying a particular statute to that circumstance. We disagree with this assessment by the Commission. While we agree the Commission may consider a utility's tax liability when fashioning the utility's reasonable rate of return, the Commission is not empowered to determine whether a utility has a legal tax liability (obligation) or contractual municipal franchise fee liability (obligation) in a particular circumstance.
Okla. Nat Gas v. Corp. Comm'n, 1923 OK 400, ¶23, 216 P. 917, 922 (operating expense of gas company's federal income tax paid by the corporation could be used as an operating expense when Commission determined a reasonable rate of return).
¶47 In one sense, the Commission did not claim for itself a power to make a universally legal and binding decision on tax liability and contract liability, since it left legal liability for potential future litigation in a District Court. But the effect of the Commission's ruling is that a particular and potential utility tax and contract liability, even if recognized by the utility with their own accounting/business practices, would not be recognized as such by the Commission until a court of law gave its approval to the tax and contract liability.
¶48 The Legislature may create an exception and grant Commission authority involving internal management decisions. But no such exception was created by the Legislature for this controversy. The February 2021 Regulated Utility Consumer Protection Act contains the following provision.
See, e.g., In re Application of Okla. Gas & Elec. Co., 2018 OK 31, ¶¶24-30, 417 P.3d 1196, 1204-05 (Commission does not approve or veto proposed contractual capital business expenditures of a utility unless the Commission has been given statutory authority, and Court noted statutory exception with associated requirement the Commission's consideration must include fairness to ratepayers).
If this act, or any provision hereof is, or may be deemed to be, in conflict or inconsistent with any of the provisions of Section 18 through Section 34, inclusive, of Article IX of the Constitution of the State of Oklahoma, then, to the extent of any conflicts or inconsistencies, it is hereby expressly declared this entire act and this section are amendments to and alterations of such sections of the Constitution of the State of Oklahoma, as authorized by Section 35 of Article IX of the Constitution of the State of Oklahoma.74 O.S.2021 § 9081. This section requires a preliminary analysis whether any provision of this Act exercised by the Commission's Okla. Const. Art. IX authority may be reasonably applied to give the Commission internal management control of a utility concerning the particular potential tax or franchise fee liabilities raised in this controversy.
¶49 The appellate record contains ONG's Final Finance Order referencing ONG's Extreme Purchase Costs, as well as "Extraordinary Costs and other associated costs... [and] [t]hese costs include ONG financing costs, ONG carrying costs until bond issuance, ONG legal and consulting costs, as well as ODFA upfront costs for the issuance of Bonds after an order in this Cause." O.R. at 258. The terms "franchise," "franchise fees," and gross receipts taxes" do not appear in the Final Finance Order as expressly listed costs incurred by ONG in association with the sale or delivery of increased amount of gas during the extreme weather event. Id.
¶50 The Order references "extreme purchase costs and the extraordinary costs authorized pursuant to 74 Okla.Stat. §9073(F)," which references therein extreme purchase costs and extraordinary costs." O.R. at 264. The February 2021 Regulated Utility Consumer Protection Act defines the terms "extraordinary costs," "extreme purchase costs" and "qualified costs," by 74 O.S.2021, §9072 (3),(6),(7). Section 9072(F)(3) states extraordinary costs "shall mean costs incurred by a regulated utility related to the extreme weather... included but not limited to...." costs specified therein. Section 9072(6) states extreme purchase costs refers to the purchase of fuel by the utility. This section does not expressly reference either a municipal franchise right or gross receipts taxes. Section 9072(7) states "qualified costs" is a calculation by the Commission of a utility's extreme purchase costs and extraordinary costs less certain specified costs. None of these three costs identified in the Act expressly state in their definitions whether a franchise fee or gross receipts tax are either excluded or included as a cost or expense of a public utility providing fuel during the extreme weather event. In summary, the statutes referencing costs for calculating the amount of a bond do not expressly mention franchise fees or gross receipts taxes. No additional financing order is in the appellate record before the Court.
74 O.S.2021, §9073 (F): "F. Extreme purchase costs and extraordinary costs determined by the Commission to be subject to this act and to be mitigated by issuing ratepayer-backed bonds shall include carrying costs at an appropriate rate determined by the Commission as set forth in a financing order. The carrying costs shall begin accruing at a time determined by the Commission in the financing order and continue until the date that ratepayer-backed bonds are issued, or the costs are otherwise recovered."
74 O.S.2021 §9072 (3) (quoted in part with emphasis added). Section 9072(3): "3. 'Extraordinary costs' shall mean costs incurred by a regulated utility related to the extreme weather that occurred beginning February 7, 2021, and ending February 21, 2021, including but not limited to fuel-related storage and associated costs, emergency compressed or liquified natural gas supplies, contracts for services providing additional pressurization on lines and transportation pipeline penalties. Extraordinary costs shall not include extreme purchase costs, as defined in this section;"
74 O.S.2021 §9072 (6): "'Extreme purchase costs' shall mean expenses incurred for the purchase of fuel, purchased power, natural gas commodity or any combination thereof, whether at spot pricing, index pricing or otherwise with delivery beginning February 7, 2021, and ending February 21, 2021;"
74 O.S.2021 §9072 (7): "7. 'Qualified costs' shall mean the extreme purchase costs and extraordinary costs, as calculated and set out in a financing order of the Oklahoma Corporation Commission, less any insurance proceeds, governmental grants or other funding sources, as well as any costs of managing ratepayer-backed bonds;"
¶51 An examination of language in 74 O.S. §9070 - §9082, inclusive, reveals that none of these statutes expressly mention franchise fees or gross receipts taxes. The Commission's Findings of Fact and Conclusions of Law makes one, and only one, reference to "taxation" in the Act.
Title 74 O.S. § 9077 (B) provides in pertinent part that, "[t]he bonds shall have all of the qualities and incidents of negotiable paper, and the bonds and the interest earned on the bonds shall not be subject to taxation by the state, or by any county, municipality or political subdivision therein."
Final Order, O.R. 328-333, at 331. The Court looks at the plain and ordinary meaning of language in a statute unless the language clearly shows the Legislature intended a different meaning. The plain and ordinary meaning of the "taxation" in 74 O.S. §9077 (B) refers to "bonds" authorized by the Act, and "interest earned on the bonds" as authorized by the Act. Neither of these terms, "bonds" and "interest," corresponds to any express prohibition using "securitization revenue" as a basis for calculating and paying municipal franchise fees or municipal gross receipts taxes.
Fanning v. Brown, 2004 OK 7, ¶10, 85 P.3d 841, 845-46 (words in a statute are to be construed according to their plain and ordinary meaning unless it is clear the legislature intended a different meaning).
¶52 Generally, a municipality may create a franchise contract with a utility and grant the utility the right to sell its services in the municipality to the exclusion of other utilities, and a quid pro quo for granting this right is payment of franchise fees by the utility to the municipality. In some circumstances, a franchise is construed as a type of property with a franchise fee as a purchase price or rent for this property, and the fee is usually not construed as a "tax."
See, e.g., King County v. King County Water Dist. No. 20, 194 Wn.2d 830, ¶17, 453 P.3d 681, 687 (2019) ("The utilities argue that franchise compensation is an unauthorized and therefore unlawful tax. But courts have consistently rejected similar arguments, instead characterizing charges like the franchise compensation at issue here as charges in the nature of rent."), citing City of St. Louis v. W. Union Tel. Co., 148 U.S. 92, 97, 13 S.Ct. 485, 37 L.Ed. 380 (1893); Jacks v. City of Santa Barbara, 3 Cal. 5th 248, 262, 267, 397 P.3d 210, 219 Cal.Rptr.3d 859 (2017); Jacks v. City of Santa Barbara (2017) 3 Cal.5th 248, 219 Cal.Rptr.3d 859, 397 P.3d 210, 218 ("A franchise to use public streets or rights-of-way is a form of property...and a franchise fee is the purchase price of the franchise...Historically, franchise fees have not been considered taxes.") (citations omitted).
¶53 Nothing in the February 2021 Regulated Utility Consumer Protection Act references a franchise fee property right, or states, or implies, that such right is one diminished by a derived police power exercised pursuant to the Act. The parties agreed at the Commission hearing that a "proper" franchise fee is included in the Commission's tariffs for utilities. The February 2021 Regulated Utility Consumer Protection Act does not give the Commission the authority to determine the legality of a municipal franchise fee or whether a franchise fee liability is legally unenforceable via a utility rate or tariff because of that Act.
While the State's "police powers" may result in altering a contractual right in some circumstances, Shepard v. Okla. Dept. of Corrections, 2015 OK 8, ¶ 19, 345 P.3d 377, 384-5, the Commission's power, which is "derived from the police power of the state, is only such as expressly or by necessary implication granted by statute." Marathon Oil Co. v. Corp. Comm'n, 1994 OK 28, ¶12, 910 P.2d 966, 969.
¶54 Nothing in the February 2021 Regulated Utility Consumer Protection Act references municipal gross receipts taxes. Our Constitution does reference "taxation" with the Commission's authority.
In all matters pertaining to the public visitation, regulation, or control of corporations, and within the jurisdiction of the Commission, it shall have the powers and authority of a court of record, to administer oaths, to compel the attendance of witnesses, and the production of papers, to punish for contempt any person guilty of disrespectful or disorderly conduct in the presence of the Commission while in session, and to enforce compliance with any of its lawful orders or requirements by adjudging, and by enforcing its own appropriate process, against the delinquent or offending party or company (after it shall have been first duly cited, proceeded against by due process of law before the Commission sitting as a court, and afforded opportunity to introduce evidence and to be heard, as well against the validity, justness, or reasonableness of the order or requirement alleged to have been violated, as against the liability of the company for the alleged violation), such fines or other penalties as may be prescribed or authorized by this Constitution or by law. The Commission may be vested with such additional powers, and charged with such other duties (not inconsistent with this Constitution) as may be prescribed by law, in connection with the visitation, regulation, or control of corporations, or with the prescribing and enforcing of rates and charges to be observed in the conduct of any business where the State has the right to prescribe the rates and charges in connection therewith, or with the assessment of the property of corporations, or the appraisement of their franchises, for taxation, or with the investigation of the subject of taxation generally. Any corporation failing or refusing to obey any valid order or requirement of the Commission, within reasonable time, not less than ten days, as shall be fixed in the order, may be fined by the Commission (proceeding by due process of law as aforesaid) such sum, not exceeding five hundred dollars, as the Commission may deem proper, or such sum, in excess of five hundred dollars, as may be prescribed or authorized by law; and each day's continuance of such failure or refusal, after due service upon such corporation of the order or requirement of the Commission, shall be a separate offense: Provided, That should the operation of such order or requirement be suspended, pending any appeal therefrom, the period of such suspension shall not be computed against the company in the matter of its liability to fines or penalties.Okla. Const. Art. IX, § 19 (emphasis added). A grant of power to the Commission pursuant to this section must necessarily be based upon "public duties and obligations" of a utility with respect to "where the State has a right to prescribe the rates and charges" of a utility. We have stated an indefinite expression of legislative intent in a statute concerning a property right is an insufficient expression of legislative intent to show the Commission's possession of a derived police power to alter the property right. This insufficiency is shown by a statutory intent that is not "express or necessarily implied" as it relates to the right in controversy.
Okla. Gas & Elec. v. Corp. Comm'n, 1975 OK 15, 543 P.2d 546, 550 (discussing Southern Oil Corp. v. Yale Nat. Gas Co., 1923 OK 129, 214 P. 131 and Wagoner Gas Co. v. State, 1933 OK 407, 23 P.2d 645); see also St. Louis-San Francisco Ry. Co. v. State, 1953 OK 335, ¶31, ¶36, 268 P.2d 845 (Okla. Const. Art. IX, § 19 powers "must be construed to mean obligations of the corporations with reference to their public duties, for the section expressly states that the Commission may be vested with such additional powers and charged with such other duties (not inconsistent with the Constitution.)"
Marathon Oil Co. v. Corp. Comm'n, 1994 OK 28, ¶12, 910 P.2d 966, 969-70.
Id.
¶55 The Commission's Order states utilities may not bill customers for franchise fees, municipal fees or taxes, and/or 68 O.S. §2601 gross receipts taxes when such fees and taxes are "based upon" specific "securitized revenue," unless a District Court concludes otherwise. First, a District Court judgment is not necessary to create a legal liability for a utility. A legal obligation may be created or arise by various sources, e.g., common law, municipal ordinances, Federal or State administrative rules, Federal or State statutes, and Federal or State Constitutions. These sources of law apply to a person's conduct without an expression of judicial recognition applying law to the person's conduct, and the Commission does not need a judicial expression of a utility's tax liability to consider such liability when determining a utility's rates. Nothing in the February 2021 Regulated Utility Consumer Protection Act shows an intent for the Commission to determine a particular utility's legal liability for a particular tax authorized by an Oklahoma statute, and then authorizing the Commission to apply that conclusion when determining a utility's rates and tariffs.
Okla. Nat Gas v. Corp. Comm'n, supra at note 40.
¶56 The February 2021 Regulated Utility Consumer Protection Act does not give the Commission the authority to determine a utility's gross receipts tax liability or determine such liability is legally unenforceable via a utility rate or tariff because of that Act.
V. Conclusion
¶57 The Oklahoma Municipal League possessed standing to appear in the controversy. The Commission's determination that the February 2021 Regulated Utility Consumer Protection Act changed, amended, or altered a utility's legal obligations concerning municipal franchise fees and gross receipts taxes is a determination not sustained by law and must be reversed.
¶58 Corporation Commission Order No.727704, in Case No. PUD2022-000073, is REVERSED. Okla. Const. Art. IX, §20. The matter is remanded to the Corporation Commission.
¶59 CONCUR: KANE, C. J.; KAUGER, WINCHESTER, EDMONDSON, COMBS, GURICH, and DARBY, JJ.
¶60 CONCUR BY SEPARATE OPINION: ROWE, V.C.J.
¶61 NOT PARTICIPATING: KUEHN, J.
ROWE, V.C.J., CONCURRING:
¶1 I concur with the Court's judgment insofar as it reverses the order of the Corporation Commission. I write separately to highlight the question that is unspoken: How much more money will ratepayers be required to pay for the 14-day winter storm that occurred in 2021?
¶2 In February 2021, record-setting cold temperatures plagued the State of Oklahoma for fourteen (14) days, revealing a shortage of natural gas. Oklahoma utility companies continued to purchase natural gas at incredibly high prices, which exceeded their entire fuel acquisition cost for all of 2020. In the Matter of Application of the Okla. Dev. Fin. Auth., 2022 OK 41, ¶ 2, 510 P.3d 165, 166. By the time Oklahoma thawed, Oklahoma's largest utility companies incurred roughly three billion dollars in fuel and purchased power costs. Roughly three weeks later, to address the financial impact of the costs related to the winter storm, the Legislature passed the February 2021 Regulated Utility Consumer Protection Act ("the Act") which provided for the issuance of ratepayer backed bonds to securitize approximately $3,070,000,000 in bonded indebtedness to be borne by the ratepayer. By passing the Act, the Legislature "allow[ed] customers to pay their utility bills at a lower amount and over a longer period." In essence, Oklahomans consumed 3 billion dollars of fuel in just 14 days--which the Act authorized to be repaid over 28 years by bonded indebtedness.
74 O.S.2021, §§ 9070-9081.
¶3 The pertinent utility companies each filed for relief under the Act and financing orders were subsequently issued by the Corporation Commission. This Court reviewed and approved utility company bonds pursuant to the Act in In re Application of Oklahoma Development Finance Authority For Approval of Not to Exceed $800,000,000 Ratepayer-Backed Bonds, 2022 OK 41, 510 P.3d 165; In re Application of Oklahoma Finance Authority for Approval of $1,450,000,000 Ratepayer-Backed Bonds, 2022 OK 47, 511 P.3d 1052; In re Application of Oklahoma Finance Authority for Approval of $725,000,000 Ratepayer-Backed Bonds, 2022 OK 48, 511 P.3d 1048; and In re Application of the Oklahoma Development Finance Authority for Approval Not to Exceed $95,000,000 Ratepayer-Backed Bonds, 2022 OK 49, 511 P.3d 1044. In each, I concurred in the Court's judgment, but wrote separately to address the nature of the proceedings and highlight the debt that would fall onto the shoulders of the people of Oklahoma over the next 28 years.
¶4 Shortly after we approved the bonds, the Public Utility Division filed an Application with the Corporation Commission arguing the Act, as well as the Corporation Commission's financing orders, "clearly limit any collection and billing by the regulated utility to only those items set forth in each utility's respective irrevocable and nonbypassable mechanism, which do not include franchise fees, municipal fees or taxes, and/or 68 O.S. § 2601 taxes."
PUD Application, ¶ 15.
¶5 With its Application, PUD requested the Corporation Commission issue an order prohibiting utility companies from billing customers for any franchise fees, municipal fees or taxes, and/or 68 O.S. § 2601 taxes based upon securitized revenue. The Corporation Commission was faced with interpretating the Act as it pertains to what monies may be collected by utility companies. The Corporation Commission's order prohibited utility companies from billing customers for any franchise fees, municipal fees or taxes, and/or 68 O.S. § 2601 taxes based on securitization property or securitized revenue, unless or until otherwise ordered by the Corporation Commission in any future proceeding(s). The Corporation Commission's order effectively held franchise fees, municipal fees or taxes, and/or 68 O.S. § 2601 taxes related to the winter storm were not owed--a determination beyond the Corporation Commission's authority.
Corporation Commission Order, Case No. PUD 2022-000073
¶6 When utility companies incurred substantial costs from the winter storm, the February 2021 Regulated Utility Protection Act provided that "unprecedented utility costs will be passed through to the Oklahoma customers of utilities from regulated utility entities." 74 O.S. § 9071. The Act, however, is silent on whether franchise fees and related taxes are excluded or included as costs or expenses of a utility company providing fuel during the winter storm.
¶7 Are the franchise fees and related taxes based upon the winter storm owed to municipalities under the February 2021 Regulated Utility Consumer Protection Act? Are franchise fees and related taxes based upon the winter storm owed under a utility company's respective Franchise Agreement? If so, who is paying the franchise fees associated with the winter storm? Will payment be made from the securitized revenue or from the utility companies' balance sheets? I suppose the answer to these questions will be litigated in the district court. From there, the district court can determine whether the burden of an additional $60-100 million will fall onto the people of Oklahoma.
¶8 I previously expressed my misgivings in prior concurrences relating to substantive questions that stood unanswered. Hereto, there remain too many questions with too few answers. Namely, in its original Exceptions to the Report and Recommendations of the ALJ filed before the Corporation Commission on November 18, 2021, AARP noted the ALJ's Report did not analyze OG&E's claim that "it did not need to engage in hedging activities due to its portfolio approach to keeping multiple supply sources available... all while 53% of its gas units, one third of its wind turbines, and certain coal units were not operating during the Winter Weather Event." Moreover, AARP highlighted the ALJ Report failed to analyze the impact of "OG&E's failure to re-evaluate scheduled maintenance when OG&E had notice as early as February 2, 2021, of the impending extreme weather." These questions were not addressed before the Corporation Commission because a Joint Stipulation and Settlement Agreement was reached. Accordingly, these issues were not addressed in the application for bond approval that we ultimately approved in 2022. Because of the Joint Stipulation and Settlement Agreement, many questions that were not addressed and remain unanswered.
AARP Exceptions to the Report and Recommendation of the Administrative Law Judge, ¶ 1. Cause No. PUD 202100072.
Id. at ¶ 2.
¶9 Today, nearly four years after the 14-day winter storm, it remains to be seen whether municipalities will receive their franchise fees and taxes. And, if municipalities are entitled to be paid--and if not from the securitized revenue--it remains to be seen whether the ratepayer will have to cough up more money to pay for this colossal financial event. Although beyond our purview, I cannot help but wonder how many of these catastrophic weather events Oklahoma ratepayers can afford--and what, if anything--has been done to prevent this from happening again.