In re Okla. Dev. Fin. Auth.

511 P.3d 1052

In the MATTER OF the Application of the OKLAHOMA DEVELOPMENT FINANCE AUTHORITY for Approval of Not to Exceed $1,450,000,000 Ratepayer-Backed Bonds (Oklahoma Natural Gas Company), Series 2022 (Federally Taxable)

No. 120,274

Supreme Court of Oklahoma.

FILED MAY 24, 2022

Jered T. Davidson, The Public Finance Law Group, PLLC, Oklahoma City Oklahoma, for The Oklahoma Development Finance Authority.

Porter Davis, Oklahoma City, Oklahoma, Pro Se Opponent.

Mike Reynolds, Oklahoma City, Oklahoma, Pro Se Opponent.

Dr. James Michael Ritze, Oklahoma City, Oklahoma, Pro Se Opponent.

PER CURIAM:

¶1 The matter before us is an original proceeding brought pursuant to the February 2021 Regulated Utility Consumer Protection Act (Act), specifically 74 O.S.2021, ch. 110A-1, § 9079, https://govt.westlaw.com/okjc (in ch. 110A-1, follow hyperlink titled, "February 2021 Regulated Utility Consumer Protection Act"), which authorized the Oklahoma Development Finance Authority (ODFA) to file an application with this Court seeking approval of ratepayer-backed bonds to finance the recovery of the fuel costs incurred by Oklahoma Natural Gas Company (ONG) during the February 2021 weather event. We assume original jurisdiction and approve the bonds.

BACKGROUND AND PROCEDURAL HISTORY

¶2 In February 2021, the State of Oklahoma endured record cold temperatures. The severe cold weather resulted in a shortage of the natural gas supply due to incredibly high demand and the cold weather preventing the gas's extraction and transportation, which, in turn, caused extraordinary natural gas costs for regulated utilities operating in Oklahoma. The cost of natural gas for the Oklahoma utilities during the two weeks of extreme cold exceeded their entire fuel acquisition cost in 2020. Specifically as to ONG, the companies that ONG had contracts with to provide natural gas invoked their force majeure clauses as those companies could not extract or provide natural gas to ONG. This resulted in ONG having to use about 50% of its natural gas held in storage. ONG was also forced to buy natural gas at market cost, with gas prices rising from $2.00 to almost $1,200.¹

¶3 As a result, the Oklahoma Legislature enacted the Act, 74 O.S.2021, ch. 110A-1, §§ 9070 - 9081, to provide financing options to lower the economic impact on the utility customers. Most Oklahomans could not afford a one-time, cost recovery payment imposed by the utilities or a monthly payment under the utilities' traditional financing method. The Legislature provided a new mechanism to spread the fuel cost recovery over a longer period at a lower interest rate to minimize the financial impact on utility customers. The Act authorized the Oklahoma Corporation Commission (Commission) to approve the utilities' recovery of prudently incurred costs through securitization, which is a financial tool creating a property right to revenues collected by regulated utilities from customers under an irrevocable and non-bypassable mechanism. 74 O.S.2021, ch. 110A-1, § 9072(10), https://govt.westlaw.com/okjc. The property right is then sold and used as security for the repayment of the ratepayer-backed bonds. Id .²

¶4 On April 29, 2021, ONG applied with the Commission to determine that the $1,284,101,405 in fuel costs ONG incurred during the February 2021 winter storm were prudent. ONG, the Commission's Public Utility Division, the Oklahoma Attorney General's office, and Walmart entered into settlement negotiations regarding ONG's application. All the parties, except for Walmart and the Attorney General, entered into a Settlement Agreement that found ONG prudently incurred costs during the winter storm amounting to $1,284,101,405.³ With securitization and financing costs, the agreement approved ONG to recover $1,357,300,000.

¶5 On November 22, 2021, after taking public comment, an Administrative Law Judge (ALJ) for the Commission held a hearing on the Settlement Agreement. The hearing consisted of the parties presenting evidence in support of the Agreement. No party objected to the Settlement Agreement, and all the parties acknowledged or agreed that utilizing the securitization method provided the most favorable savings to the ratepayers. The ALJ then issued a report approving the Settlement Agreement.

¶6 On January 20, 2022 (and continued to January 25, 2022), the Commission held a regular meeting regarding the ALJ's report and issued the Final Financing Order. The Order approved $1,284,101,405 in fuel costs and approximately $73,000,000 in financing costs and interest, totaling $1,357,300,000 to be collected through securitization of that debt.⁴ The Order specified that ODFA would purchase the debt through issuing bonds backed by a monthly charge (WESCR charge) assessed to each ONG ratepayer. The securities were to be amortized for a longer period of time (25 years) to lower the ratepayer collection cost. The monthly WESCR charge was estimated to be $7.82 per month for an average residential customer under the securitization method, compared to $15.32 per month under the traditional method. Any low-income ratepayer enrolled in the Low-Income Heating Energy Assistance Program would be exempted from the monthly charge.⁵ ONG presented testimony that utilizing the securitization method instead of using its traditional financing method would save approximately $700 million. No party appealed the Final Financing Order.

¶7 ODFA filed an application with this Court to assume original jurisdiction for approval of the ratepayer-backed bonds, per the provisions of 74 O.S.2021, ch. 110A-1, § 9079, https://govt.westlaw.com/okjc. Three Protestants filed in response to the application challenging the bonds on several grounds, but focusing primarily on the constitutionality of the bonds. One Protestant also contends that the Final Financing Order violates the Open Meetings Act, and the Court should not validate bonds from an invalid financing order. The questions before this Court are (1) whether the ratepayer-backed bonds were properly authorized under the Act and (2) whether the bonds are constitutional.

STANDARD OF REVIEW

¶8 The Court has long recognized that its obligation in reviewing bonds is to determine whether the bonds facially violate the law and to examine the legal authority presented by protestants. In re Application of Okla. Turnpike Auth. , 2018 OK 88, ¶ 5, 431 P.3d 59, 60-61. Protestants' legal arguments center mainly on the constitutionality of the bonds. A heavy burden is placed on those challenging a legislative enactment, and every presumption is to be indulged in favor of the constitutionality of a statute. In re Application of Okla. Capitol Improvement Auth. , 1998 OK 25, ¶ 8, 958 P.2d 759, 763. If two possible interpretations of a statute are possible, only one of which would render it unconstitutional, a court is bound to give the statute an interpretation that will render it constitutional unless constitutional infirmity is shown beyond a reasonable doubt. Fent v. Okla. Capitol Improvement Auth. , 1999 OK 64, ¶ 3, 984 P.2d 200, 204.

DISCUSSION

¶9 The Legislature conferred upon the Court "exclusive original jurisdiction" to hear and determine ODFA's application. 74 O.S.2021, ch. 110A-1, § 9079, https://govt.westlaw.com/okjc. We recently answered similar legal questions in In the Matter of the Application of the Oklahoma Development Finance Authority for Approval of Not to Exceed $800,000,000 Ratepayer-Backed Bonds (Oklahoma Gas and Electric Company), Series 2022 (Federally Taxable) , which involved the use of securitization of bonds to recoup Oklahoma Gas and Electric Company's costs for the 2021 February weather event. We held that the ratepayer-backed bonds for Oklahoma Gas and Electric Company were properly authorized and constitutional. 2022 OK 41, ¶¶ 13, 16, 510 P.3d 165. In any case in which it appears that a prior controlling appellate decision is dispositive of the appeal, the court may summarily affirm or reverse. See Okla. Sup. Ct. Rule 1.201.

¶10 For the reasons stated in our prior decision, the ratepayer-backed bonds for ONG conform to the Act as ONG's Final Financing Order also sets out the parameters of the bonds' issuance, terms, conditions, requirements, and interest. 74 O.S.2021, ch. 110A-1, § 9074(A), https://govt.westlaw.com/okjc. The process set out in the Act was followed, and the bonds appear facially valid. Protestants in this matter provide no authority to the contrary.

¶11 These ratepayer-backed bonds are also constitutional. In re Application of Okla. Dev. Fin. Auth. for Approval of Not to Exceed $800,000,000 Ratepayer-Backed Bonds (Okla. Gas and Elec. Co.), Series 2022 (Federally Taxable) , 2022 OK 41, ¶¶ 14-16, 510 P.3d 165. The proposed bonds involve traditional, self-liquidating bonds historically upheld by this Court's jurisprudence as constitutional; stare decisis demands their approval. In re Application of Okla. Capitol Improvement Auth. , 1998 OK 25, ¶¶ 45-46, 958 P.2d at 773.

¶12 We emphasize that the use of securitization of bonds to recoup the costs for the 2021 February weather event was a legislative fiscal policy decision. This Court is not to question whether the Act is "wise or unwise, whether it is based on sound economic theory or whether it is the best means to achieve the desired result." In re Application of Okla. Capitol Improvement , 1998 OK 25, ¶ 9, 958 P.2d at 763. As noted in our prior opinion, "this Court may not—based on its perception of how the State should conduct its business dealings—direct legislative decision-making."

In re Application of Okla. Dev. Fin. Auth. for Approval of Not to Exceed $800,000,000 Ratepayer-Backed Bonds (Okla. Gas & Elec. Co.), Series 2022 (Federally Taxable) , 2022 OK 41, ¶ 13, 510 P.3d 165.

¶13 Protestants raise issues regarding the filed-rate doctrine⁶ and whether ONG's fuel costs were prudently incurred, which involve examining the Commission's Final Financing Order. The Act provided that the Commission's...