Oklahoma just opened up retail choice and I'm trying to understand how OG&E handles capacity charges in the new deregulated market. Client switched to a competitive supplier 3 months ago but OG&E is still billing capacity charges on the delivery side. The supplier says they're providing capacity but OG&E shows $8,900/month in capacity costs. Is this double billing or legitimate? The client's peak demand is around 6.2 MW.
OG&E capacity charges after deregulation
Eddie - Iowa went through retail choice years ago and we saw similar confusion initially. Capacity charges can be legitimately billed by both the utility and supplier depending on how the market is structured. The utility typically bills for transmission-level capacity obligations while the supplier bills for generation capacity. You need to look at the specific tariff language to see how Oklahoma allocated these costs.
Rosa's right about needing to check the tariff structure. In some states the utility retains responsibility for certain capacity obligations even after deregulation. What specific line items are you seeing on the OG&E bill? That might help clarify whether this is legitimate or an error.
Dana - the OG&E bill shows "Transmission Capacity Charge" at $4,200/month and "Distribution Capacity Charge" at $4,700/month. The competitive supplier is billing "Generation Capacity" at $6,100/month. So total capacity costs went from $7,400/month under standard service to $15,000/month with the competitive supplier. Something doesn't add up.
Eddie - that's a huge increase in capacity costs. The generation capacity charge from your supplier seems excessive for a 6.2 MW load. In most markets, generation capacity runs $3-5 per kW-month, so you should be seeing around $18,600-31,000 annually, not $6,100 monthly. I think your supplier is overcharging significantly.
Tom's math is right. We see similar capacity pricing in other states and that supplier charge is way out of line. You should also verify that OG&E isn't double-billing for capacity that the supplier is supposed to provide. Some utilities have had billing system issues during the transition to retail choice.
Thanks everyone for the insight. I confronted the supplier about the excessive generation capacity charges and they admitted there was an "error in their pricing model." They're reducing the monthly capacity charge to $1,900 and providing a refund of $12,600 for the overcharges. Still working with OG&E to understand their capacity allocation.
Great recovery on the supplier overcharge. For the OG&E capacity charges, you might want to contact their competitive markets department. They should be able to explain exactly which capacity obligations remain with the utility versus what transfers to the supplier.
Eddie - also make sure you understand the capacity allocation for future months. Some utilities adjust capacity charges based on actual system peaks, so the monthly amounts might vary seasonally. Oklahoma summers are brutal so expect higher capacity costs during peak season.
Update from OG&E: they confirmed that transmission and distribution capacity charges remain with the utility even after switching suppliers. These are separate from generation capacity that the supplier provides. So the client is legitimately paying both sets of charges. The real problem was the supplier's excessive generation capacity pricing, which is now fixed.
That makes sense Eddie. It's similar to how Texas ERCOT works - the utility retains transmission and distribution costs while the REP handles generation. Sounds like you got a good resolution on the overpricing issue. Oklahoma deregulation is still new so expect some growing pains as the market develops.
This has been a really educational thread. Thanks for walking through the whole process Eddie. These deregulation transitions are complex and sharing experiences like this helps all of us understand how different markets work.
Happy to share the experience. The client ended up saving about $7,600 per month in total after fixing the supplier overcharge and understanding the proper cost allocation. Definitely worth the effort to dig into these deregulated market details.
Great case study Eddie. These kinds of detailed walkthroughs are exactly what this forum is for. New deregulated markets always have billing issues in the first few years as utilities and suppliers figure out their systems. Your documentation of the process will help other auditors dealing with similar situations in Oklahoma and other newly deregulated states.