Now that the Oklahoma Corporation Commission has formally voted in support of a controversial financing method for $1.255 billion in expanded energy projects for Public Service Company of Oklahoma, could a legal challenge be in the making?
It’s what Corporation Commissioner Todd Hiett suggested after the Commission voted 2-1 this week in support of the PSO projects. He expects a constitutional challenge to the Construction Work in Progress financing method approved for PSO which will allow the utility to begin charging ratepayers for some of the 8 energy projects even while they are under construction. However, PSO defends its use of the new law.
CWIP, as it’s known, became law last year and PSO sought its approval for its use of new natural gas generators at its Northeast power plant in Oologah. The estimated total project capital cost for the NE 5&6 Project is approximately $539,800,000, which includes direct costs, indirect costs, and owner’s costs for the projects.
The new financing method was approved for the generators and did not include the Battery Energy Storage Systems as OK Energy Today initially reported. The BESS projects will be financed through a standard procedure because they did not involve the use of natural gas. The CWIP law applies only to energy projects that rely on natural gas for power.
Commissioner Hiett told OK Energy Today he believes a constitutional challenge to the new law will possibly come from the Attorney General, AARP or Oklahoma Industrial Energy Consumers.
“I’d be shocked if they didn’t,” he added, while explaining any challenges to the OCC decision face a 30-day deadline.
When asked about the possibility of such a challenge, PSO gave this response to OK Energy Today.
“Construction Work in Progress (CWIP) helps accelerate investment in new natural gas generation, giving customers faster access to reliable energy at a lower overall cost. By making progress payments during construction, this approach helps avoid larger rate increases later and keeps bills more stable over time. In the end, customers benefit from a more affordable, dependable energy supply that’s ready when they need it.”
Testimony on CWIP
John Givens, a Senior Regulatory Analyst for the Corporation Commission had offered testimony against the CWIP request, testifying, “it unfairly recovers all financing costs form customers before the plant is even providing service. This means that future customers who use the plant will experience savings, but the customers who financed it will see much higher costs in early years, and may not see any savings unless they stay on the system for decades.”
He further cited a Manhattan Institute report that claimed CWIP incentivizes lengthy construction timelines and results in cost escalations and overexpansion.
PSO’s Matthew Horeled, vice president of Regulatory & Finance, offered the initial testimony when PSO applied for the Commission’s approval for its 8 expanded energy projects, but his only reference to CWIP was stating the company intended to request its approval. In all the other hours of testimony, Rebecca A. Schwarz Director, Regulatory Pricing and Analysis, in the Regulatory Services Department for American Electric Power Service Corporation defended CWIP after it was opposed by the Attorney General and the Commission’s Public Utilities Division. Hers were the only CWIP reference in which any details of the financing method were discussed.
“I also explain why the Commission should reject the AG’s and PUD’s proposal to track CWIP return by customer class and later true up those amounts. CWIP recovery is a temporary financing mechanism, and riders and true-ups are designed to reconcile system-level costs rather than establish or revisit customer class responsibility. I further note that the Company has proposed a system contribution charge in its recent base rate case to address large-load growth during the pre-service period, making the additional CWIP tracking consideration unnecessary in this proceeding.”
PSO favored annual updating of the ESR or Electric Storage Resource costs to make sure CWIP ratepayers were being correctly billed for the cost of the project.
“I disagree for multiple reasons. The proposal to track CWIP return by customer class and later true up those amounts is inconsistent with how riders and true-up mechanisms are applied in practice. Riders are designed to recover costs at the system level, using allocation factors approved in the most recent cost-of-service study. When a true-up occurs, it reconciles total dollars collected versus actual costs incurred, not class-specific balances. Class-level responsibility is determined in a base rate case or through dynamic updates to class allocators in rider updates.”
The use of CWIP has already been challenged before the state Supreme Court by Oklahoma Gas & Electric, but Hiett explained the challenge is based on what commissioners considered a “procedural” denial of the utility’s request of CWIP. OG&E initially filed a request May 2025 for a rate hike request while the CWIP bill was still in the legislature. When the bill won approval, OG&E withdrew its request. As soon as the bill was allowed to become law without the signature of Gov. Kevin Stitt, OG&E refiled its request and included the CWIP financing method.
Commissioner Hiett said the commission denied CWIP for OG&E because the utility “retroactively filed the case” and the denial involved a “procedural issue.” OG&E contended in its Supreme Court that the mandate under the law should apply to its request for the Construction Work in Progress financing procedure. A ruling could come down based on whether the utility properly followed the timing and rules and regulations for filing a request, not for the constitutionality of the new law.
As for the PSO approval, it came on a request filed well after CWIP became law and as the commissioners stated numerous times in their 31-page order, they were under a “mandate” to approve the financing method.
Commissioners used their order to make it clear they had to follow the law in dealing with PSO’s CWIP request and approval, pointing out, “such recovery is now mandatory under recent amendments to 17 O.S. § 286(C)(6).”
The order stated that the Commission might have preferred another financial treatment applied in the past but, “the Legislature has removed that discretion and mandated CWIP recovery under specified conditions. Nothing in the Oklahoma Constitution or the Commission’s enabling statutes authorizes the Commission to deny relief expressly required by statute unless deemed unconstitutional by the Oklahoma or United States Supreme Court.”
More than once, the commission pointed to the actions of the legislature in approval of the CWIP law.
“The Commission likewise emphasizes that it has constitutional duty to ensure that rates remain fair, just, and reasonable; however, through SB 998, the Legislature has significantly constrained the Commission’s ability to fulfill that duty in this context. By mandating CWIP recovery, the Legislature has effectively inserted itself into the Commission’s constitutionally established ratemaking authority and limited the Commission’s ability to reject cost recovery mechanisms, even where the evidentiary record may demonstrate that such mechanisms are not in the best interest of ratepayers.”