Oklahoma's biggest utility, Oklahoma Gas and Electric Company, reported an earnings increase for the past year. Journal Record editor Russell Ray discusses what caused OG&E's revenue spike, as well as the utility's plans to modernize the state's electrical grid.
Full transcript:
Drew Hutchinson: This is the Business Intelligence Report, a weekly conversation about business news in Oklahoma. I’m Drew Hutchinson. Joining me is Russell Ray, editor of The Journal Record. This week, we’re talking about Oklahoma Gas and Electric Company’s performance this past year. The utility’s parent company reported a net income of $29 million for the fourth quarter of 2019, and that’s up from $21 million for the same quarter in 2018.
Russell Ray: That’s right. OG&E, the state’s largest electric utility, and its parent company OGE Energy had a good year in 2019. Full year earnings were $350 million, that’s up from $328 million in 2018. The parent company earned $434 million in 2019 , and that’s up from $426 million in the previous year.
Hutchinson: What is this increase in OG&E’s earnings attributed to?
Ray: Well the utility pointed to earnings on the purchase of the River Valley and Frontier power plants and an increase in cooling degree days. Now what that means, that simply means the number of days in which the average temperature was above 65 degrees, and so higher temperatures, of course, translates to greater demand for electricity to cool homes and businesses.
Hutchinson: So aside from its earnings increase, OG&E also gained more customers last year and saw electricity prices for residential customers come down a bit.
Ray: Well that’s right. OG&E has long had some of the lowest rates in the country. The average price of electricity for residential customers was a little over 9 cents per kilowatt-hour in 2019. That’s well below the national average of about 13 cents. And as you said, the utility added more than 8000 customers last year to bring the count to nearly 858,000. Also, the company sold slightly more power last year thanks to increasing sales to oil and gas producers.
Hutchinson: Also in 2019, we also saw OG&E’s fuel mix shift pretty significantly. In 2018, coal made up 45 percent of the utility’s generation mix, but that percentage dropped to about 28 percent this past year. However, natural gas increased. It made up 64 percent of OG&E’s generation mix in 2019, which was up from 48 percent in 2018. And new energy sources will be part of the equation soon.
Ray: That’s right. And the drop in coal-fired generation is not a surprise, and the increase in gas-fired generation shouldn’t be surprising. Gas-fired power plants complement the increasing use of renewable energy, which as we know is intermittent and variable. And yes, OG&E is adding more solar power. The utility recently announced plans to build two 5-megawatt solar projects in southeastern Oklahoma. And both of those solar farms will be up and running in August.
Hutchinson: Speaking of solar capacity, OG&E recently submitted its $810 million grid enhancement plan to the Oklahoma Corporation Commission. This is a plan to modernize the state’s electrical grid, and one of its goals is to make the grid compatible with solar power.
Ray: Yeah, that’s right. This is a big deal. This is something every big utility is doing in one form or another across the country. The way we generate, distribute and consume power is changing rapidly thanks to huge leaps in technology. But the infrastructure utilities, including OG&E, rely on to deliver that power is old and needs to be upgraded or in some cases replaced. As you said, the price tag for OG&E’s plan is $810 million. The AG’s Office and other consumer groups, of course, will weigh in on that proposal, and the corporation commission will ultimately decide what’s fair for both consumers and the utility.
Hutchinson: Russell, I want to thank you for talking with me today.
Ray: My pleasure Drew, thank you.
Hutchinson: Russell Ray is editor of The Journal Record. KGOU and The Journal Record collaborate each week on the Business Intelligence Report. You can follow us both on social media. We're on Facebook, Instagram and Twitter: @journalrecord and @KGOUnews. The story we discussed today is available on JournalRecord.com. And this conversation, along with previous episodes of the Business Intelligence Report, are available on our website, KGOU.org. For KGOU and the Business Intelligence Report, I'm Drew Hutchinson.
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