Commissioner asks “where’s the beef?” about audits of ratepayer-backed utility bond issues

Nearly six months after a one-page audit of ONG’s $1.3 billion February 2021 Winter Storm ratepayer-backed bond financing was sent to the Governor, Oklahoma legislative leaders and the Oklahoma Development Finance Authority, Corporation Commissioner Bob Anthony still can’t believe no one wants a more in-depth audit.

In a filing this week, the commissioner expressed his surprise and outrage that state leaders don’t want a thorough examination of how ratepayers are footing the bill for the winter storm natural gas costs of ONG? And for all of the utilities that used the ratepayer-backed bonds to cover their storms during the storm.

That’s why Anthony called it his “Where’s the Beef?” question.

An Opinion by Corporation Commissioner Bob Anthony 

In 1984, Wendy’s ran a tv commercial featuring three elderly women examining a competitor’s hamburger.  After commenting on the generous size of the bun, the women removed the top to reveal a pitifully small patty.  This prompted one of the women to ask – repeatedly, and now famously – “Where’s the beef?” 

In 2022, the Oklahoma Development Finance Authority (ODFA) issued almost $3 billion of Winter Storm “Uri” ratepayer-backed bonds on behalf of monopoly public utility companies OG&E, ONG, PSO and Summit.  The authorizing statute specified audits of “all costs requested for recovery,” and of “amounts actually collected from customers,” in addition to requiring, “An audit … shall be part of any general rate case filed by a regulated utility … with outstanding ratepayerbacked bonds.” 

Almost 18 months after the bonds were issued, Oklahoma ratepayers should remove the top from this enormous bun their elected officials baked (allegedly for their benefit) and ask, “WHERE’S THE AUDIT?” 

I recently did just that on behalf of the customers of OG&E, ONG, PSO and Summit.  I asked the ODFA, the State Treasurer’s Office and the Corporation Commission to provide me with copies of any audits related to the 2021 Winter Storm fuel costs and/or bonds. 

I was informed, “The Oklahoma Development Finance Authority does not have any copies of any audit related to the 2021 Winter Storm bonds.”  The State Treasurer similarly reported to me that his office does “not have any audits related to the securitization transactions.” 

The Corporation Commission’s inability to supply anything in response to my repeated requests to see its so-called “audits” is just as telling as the others’ written denials. 

The customers of OG&E, ONG, PSO and Summit who are now paying some $5 billion for two-weeks-worth of energy usage in February 2021 should be as disturbed and dismayed by these responses as I am.  It appears that, despite the legal requirements, NO statutorily-compliant audit of either the $2.8 billion of 2021 Winter Storm fuel costs or the $2+ billion of bonds issued to finance them was ever produced by or for any agency of state government. 

The ODFA and State Treasurer’s Office never claimed to have conducted any audits.  But how they could possibly fulfill their legal responsibilities to “control … ODFA-related [bond] issuance costs” or “approve or disapprove the fees and expenses” for the ratepayer-backed bonds without auditing those ~$41 million of issuance costs, fees and expenses has yet to be explained.  

Also unexplained are millions of dollars in discrepancies – including the apparent overpayment of Wall Street banks and recategorization of utility expenses as “non-utility expenses” seemingly to circumvent the utilities’ expense cap – that I have been questioning for more than a year. 

The Oklahoma Corporation Commission (OCC), on the other hand, has insisted repeatedly for years that it was auditing both the utilities’ February 2021 Winter Storm fuel costs and the “securitization bonds” it authorized to finance them over decades.  These statements are well documented in the record; the audits they purport to avow are not. 

On February 1, 2023, I asked for any audits of the bond issuance costs, or even reports containing actual payee names and amounts.  In response, Commissioner Todd Hiett insisted the OCC’s Public Utility Division (PUD) “performed audits in every one of those cases.” 

But a closer examination of the testimony in the securitization cases reveals a conspicuous scarcity of evidence that the OCC PUD actually audited the utilities’ $2.8 billion of February 2021 Winter Storm fuel costs before Commissioners Hiett and Dana Murphy voted to declare them “fair, just, and reasonable expenses, and prudently incurred,” thereby authorizing OG&E, ONG, PSO and Summit to recover those costs from their customers using ratepayer-backed bonds. 

In just one example from the OG&E securitization case, an OCC PUD witness testified that the utility company did an internal audit of its own gas purchasing (including some of the highest prices ever paid for natural gas in the history of the country) and drew admirable conclusions about itself with which PUD’s witness agreed.  

I know very well what utility customers will think about state regulators allowing monopoly public utilities to audit themselves.  But someone should ask the elected officials who voted for the Securitization Act if, when the law specified “a timely audit of all costs requested for recovery prior to the utility being authorized to recover costs,” that lawmakers intended for the utility companies to audit themselves.  Somehow, I don’t think so. 

In an April 2023 dissenting opinion, I detailed the same disconnect between the (unsupportive) testimony and the “Findings of Fact” approved by Commissioners Hiett and Kim David that “PUD conducted a complete and thorough audit” in the $6+ billion 2021 Fuel Cost and Prudence Review cases for OG&E, ONG and PSO.  They still voted to declare every dollar of that $6+ billion “prudent.”  But to this day, none of the “audits” the OCC PUD claims to have conducted have ever been provided to me. 

On September 15, 2023, Commissioner Hiett sent a one-page so-called “audit” of more than $1.3 billion of ONG’s February 2021 Winter Storm ratepayer-backed bond financing to the governor, legislative leaders and the ODFA.  (Apparently even the ODFA doesn’t consider that one-pager an actual “audit,” since six months later when I asked the agency if it had copies of any Winter Storm audits, it said “no.”) 

I issued a 14-page Opinion labeling the OCC’s so-called “audit” for ONG “ludicrous,” “pitiful,” “farcically inadequate,” and “another attempt at whitewash and cover-up,” pointing out the one-pager did not remotely meet the criteria for an “audit” as defined by State Statute. 

Hiett then told OETA’s Oklahoma News Report, “I certainly would welcome an audit to assure that the Corporation Commission has done everything correctly.”  Talk is cheap.  The multi-billion-dollar debt burden under which Oklahoma ratepayers are suffering is not.  Six months later, I am still waiting to cast a vote for Commissioner Hiett’s suggested independent audit of the 2021 Winter Storm costs and bonds – but I am not holding my breath.  So the public charade about audits continues, including more one-pagers for the other utilities posted on the OCC website. 

In the Wendy’s commercial, after repeatedly asking, “Where’s the beef?” without response, the elderly customer finally concluded, “I don’t think there’s anybody back there.”  But the viewing audience knew the responsible parties were “back there;” they just didn’t want to step up and take responsibility for their disgraceful so-called “beef” offering to the public.  The same can be said of the public officials responsible for the all-but-invisible “audits” put forth for these billions of dollars of Winter Storm costs and bonds.  

Oklahoma ratepayers should demand an explanation for this failure and a true accounting by the State Auditor of the charges appearing on their plate every month.  The law indicates independent “audits” are required – with good reason! – and utility customers have a right to know how much they will be paying for those 2021 Winter Storm bonds over the next 2+ decades and why.  

The current state of affairs – widespread obstruction, whitewash and coverup of apparent discrepancies, manipulations and overcharges, as well as possible bid-rigging, wrongdoing and public corruption – is the result of officials required by their oath to support, obey and defend the Constitution and to enforce the laws of our State who are instead shirking their duty.  

Of even greater concern than “Where’s the audit?” is perhaps, “Where’s the integrity?” 

The above is an abbreviated version of an Opinion filed at the OCC by Corporation Commissioner Bob Anthony on March 25, 2024: https://public.occ.ok.gov/WebLink/DocView.aspx?id=16486747.

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