Eddie E. from Tulsa here. Is anyone else tracking OG&E's fuel adjustment clause? I've got commercial clients seeing swings of $0.02-0.04 per kWh month to month. Last winter it hit $0.0387/kWh in February, now it's down to $0.0156/kWh. How do you guys budget for this volatility with your clients?
Oklahoma Gas & Electric fuel adjustment clause - monthly swings are crazy
Ramona L. here in OKC. Tell me about it! The natural gas price correlation is brutal when we get those cold snaps. I've started building in a 15% buffer on energy costs for budget forecasts. The Corporation Commission publishes the calculation methodology but it's still hard to predict month to month.
Donna L. also in OKC. Eddie, are you looking at the actual fuel factor or the total adjustment including the environmental compliance rider? Sometimes clients don't realize there are multiple riders stacked on top of the base energy charge. Schedule RECP adds another layer of variability.
Steve B. from Tulsa. I track this stuff religiously. The fuel factor hit a peak of $0.0421/kWh in January 2022 during that brutal cold snap. What kills me is the two-month lag in the true-up mechanism. We're always chasing actual costs with estimates. I use a rolling 12-month average for budget planning now.
Randy Dawson here. Steve's approach with the rolling average is solid. The key thing to remember about OG&E's fuel clause is that it's designed to be revenue neutral over time - they're recovering actual fuel costs, not profiting from the adjustment. The volatility comes from natural gas price spikes and generation mix changes. Winter of 2021 was a perfect storm with gas prices hitting $200+/MMBtu during the freeze. For budgeting, I recommend tracking Henry Hub natural gas futures and heat rate assumptions. OG&E typically runs at about 7,500 Btu/kWh heat rate for their gas units. When Henry Hub jumps, you can roughly estimate the fuel cost impact before it shows up in the tariff.
Randy, that's incredibly helpful. I never thought to track Henry Hub directly. Do you have a good source for those futures prices? And is there a way to estimate when OG&E will file their monthly fuel factor updates?
Eddie, I use EIA data and CME futures for Henry Hub pricing. OG&E typically files their fuel factor by the 20th of each month for the following month's billing. You can set up alerts on the Oklahoma Corporation Commission's website for new filings in their electric dockets.
Susan W. in OKC here. This thread is gold! I've been manually checking the OCC website every month. Had no idea about the Henry Hub correlation. My biggest client just got hit with a $3,200 surprise on their January bill from the fuel adjustment spike.
Susan, ouch on that bill! One thing that helped my clients was switching to budget billing for the larger accounts. OG&E will smooth out those fuel cost spikes over 12 months. Not perfect, but it helps with cash flow planning.
Budget billing is great until you get that annual true-up bill. Had a client get whacked with a $8,000 reconciliation last March. Better to understand the volatility and plan for it than get surprised by the true-up.
Steve makes a good point. I prefer quarterly check-ins on budget billing accounts to avoid those big true-up shocks. OG&E will adjust the monthly amount if you call and the variance gets too large.