In the Sermon on the Mount, Jesus tells his disciples that “no one can serve two masters”, or “he will be devoted to one and despise the other”. In other words, divided loyalties end in one party’s ignorance and neglect.
This truth is equally applicable in the business world, where companies must clearly understand who they serve, or risk becoming hopelessly entangled in conflicts of interest. This type of conflict is happening today in Oklahoma’s electricity market, which is dominated by Oklahoma Gas and Electric Co. (OG&E) and Public Service Corp. of Oklahoma (PSO), two government-backed monopolies with competing priorities.
For one thing, their parent companies (OGE Energy Corp. and American Electric Power) are publicly traded companies that exist to maximize profits for their investors. From that side, they are doing quite well. OGE reported annual net income of $360 million in 2021, while American Electric Power (PSO’s parent company) reported well over $2 billion. They are undeniably profitable companies with happy shareholders.
Beyond their fiduciary duty to investors, OG&E and PSO fulfill an entirely different role: to provide the public with access to reliable and affordable electricity. In exchange for obtaining a government-backed monopoly in their respective service areas, the two utilities agree to allow the Corporation Commission to dictate the price of the electricity they sell to the public. Consumers, meaning Oklahoma families and businesses, can’t afford better prices.
It is by examining the performance of OG&E and PSO as public utilities, however, that we can see that shareholders and profits are the real masters of these two companies, while the public good and taxpayers of the ‘Oklahoma have been largely pushed aside and ignored. In 2021, during a historic cold winter, OG&E and PSO grossly overpaid for the natural gas they use to generate their electricity. They did so without fear or hesitation, knowing that the system is designed to allow them to pass those costs on to consumers. And indeed, as expected, the Corporation Commission approved a historic rate increase of more than $1.5 billion between the two utilities. Less than a year later, OG&E raised its rates again by another $30 million.
That Oklahomans are seeing skyrocketing energy costs is unfortunate, but it’s a predictable outcome of the “two masters” that OG&E and PSO have been asked to serve. They cannot simultaneously exist to maximize their profits and enrich their shareholders, while acting as quasi-public monopolistic sellers of energy in service of the public good.
In much of the rest of the country, policy makers have understood this conflict of interest and how it hurts consumers and businesses. In 14 states, state legislatures have decoupled utility work — such as power line maintenance — from electricity sales, allowing businesses, individuals, or both to enter into contracts with power generators. independent. In these states, electricity costs have been reduced by 7% since 2008. In other monopoly states, costs have increased by 20%, according to a study published by the Retail Energy Supply Association.
During the next legislative session, the Alliance for Electrical Restructuring in Oklahoma (AERO) will lead a coalition of businesses and voters to call on lawmakers to end our monopoly system and embrace choice and competition. on the market. Oklahomans deserve to be able to buy the best plans at the best prices and to pursue their own individual preferences, which can include fixed rate offerings that protect them from weather events or renewable plans that protect the environment.
OG&E and PSO, meanwhile, can continue to generate value for their shareholders by winning contracts in an open and competitive market, rather than using the power of government to coerce taxpayers into buying their products.
Mike Boyd is the executive director of the Alliance for Electrical Restructuring in Oklahoma.