February 2006
OKLAHOMA COMMISSION APPROVES COMPETITIVE PROCUREMENT RULES
by Robert Olson  and David J. Shulock --   Brown, Olson and Wilson, P.C.
(originally published by PMA OnLine Magazine: 2006/04/1)
 

The Oklahoma Corporation Commission recently approved emergency rules requiring electric utilities to competitively procure “long-term electric generation or longterm fuel supply for self-generation of electricity,” subject to PURPA and other applicable law, where “long-term” is defined as one year or longer. In the Matter of a Rulemaking by the Oklahoma Corporation Commission Amending OAC 165:35, Electric Utility Rules, Agency Rule Report, Cause RM No. 200500011 (January 20, 2006). According to one commissioner, the Oklahoma Corporation Commission “is one of the first [c]ommissions in the country to get these kind of rules in place,” although the emergency rules remain subject to review and approval by the governor. Commission Press Release (January 12, 2006).

Before issuing a request for proposal (“RFP”), the rules require the utility to submit a draft RFP, supporting documentation, and bid evaluation procedures to the commission, the attorney general, and an independent evaluator for review and comment. § 165:35-34-3(a). The utility must evaluate bids “to determine the lowest reasonable cost for long-term reliable power or reliable longterm fuel sought that minimizes ratepayer cost.” Id. at (d). The “variable cost of the utility producing power through self-generation [serves] as the benchmark for comparing bids,” and “[o]nly bids below the benchmark [are] eligible for acceptance.” Id.

With respect to bids from affiliates, the rules require the bidding affiliate to publicly disclose the names and titles of individuals on its “Bid Team” and require the soliciting utility to publicly disclose the names and titles of individuals on its “Evaluation Team.” Id. at (c). The rules generally prohibit individuals on the two teams from communicating directly or indirectly about the RFP or the procurement process and further require the utility and the affiliate to execute an acknowledgement that no such communications have occurred apart from submission of the bid. Id.

The rules require the utility to file its final decision on the procurement with the commission and mail copies to interested parties. Id. at (f). The independent evaluator, the attorney general, and any unsuccessful bidder may challenge the utility’s decision within fifteen days. Id. If such a challenge is filed, the commission then determines “whether the utility’s decision reveals either a clear departure from the criteria stated in [the] rules . . . , the RFP Document and bid evaluation procedures for decision or is erroneous.” Id. at (g). If so, the utility must immediately “rebid,” i.e. re-procure the affected items. Id.

The rules provide that the commission will conduct “prudence reviews on all generation and fuel procurement processes and costs,” and will evaluate all fuel and generation expenses in adjudicatory proceedings where the utility bears the burden of proof as to prudence. § 165:35-35-1. Id. Placing the burden of proof in all cases on the utility represents a departure from the rules as originally proposed, under which the utility would have enjoyed a presumption of prudence with respect to non-affiliate procurements using the competitive bidding procedures. See Cause RM No. 200500011, Proposed Rules (August 30, 2005) at §165:35-34-9(d).