By Commissioner Bob Anthony

On March 27, 2024, Oklahoma Corporation Commission (OCC) Chair Todd Hiett quietly sent another one-page “audit” to the governor and legislative leaders – this time, of some $700 million of PSO’s February 2021 Winter Storm ratepayer-backed bond financing. This one-pager was remarkably similar to the so-called “audit” of ONG’s $1.3 billion Winter Storm bonds Hiett sent to the same officials in September 2023. This makes a grand total of two pages of so-called “audit” documents publicly provided to account for more than $2 billion of ratepayer dollars.

Last September, in response to the one-pager for ONG, I sent a 14-page Opinion to the same officials labeling the OCC’s so-called “audit” of ONG’s bonds “ludicrous,” “pitiful,” “farcically inadequate,” and “another attempt at whitewash and cover-up.” Those same descriptors also apply to this newest bogus “audit” of PSO’s bonds, with one addition – “inconceivable.” It is inconceivable to me that, after the agency’s first pathetic excuse for an “audit” was shredded for fourteen pages over dozens of legal citations, Hiett and the OCC would attempt to get away with this kind of deceit again.

If the document’s length alone does not demonstrate its inadequacy, consider this:

- It is unsigned – by any auditor, accountant, accounting firm, attorney, law firm, officer of the utility, administrator or official of the Corporation Commission – by anyone. Apparently, no one anywhere was willing to stand behind the financial information being provided.

- Entitled “PUD Audit pursuant to 74 O.S. § 9078,” it acknowledges it is being provided by an unobjective party to the case with a vested interest in keeping hidden the disastrous results of the bond issuances that the OCC Public Utility Division (“PUD”) so publicly promoted in 2021. [See the “Estimated Bond Price Tag” table attached to the full filing.]

- It attempts to justify its biased authorship by misrepresenting the law in its very first line, falsely claiming that instead of a statutorily-defined “independent” auditor, the OCC PUD itself “is required to perform audits.” The law does not even mention the OCC PUD.

- The only identified source for the numbers provided is the utility itself – again, hardly objective or independent. Worse, the utility’s own accountants, PricewaterhouseCoopers, filed a federal report disclosing the “material noncompliance” of the PSO bond reports admittedly used by the OCC PUD as the basis for this one-page, so-called “audit” of the utility’s bonds.

- It totally fails to acknowledge or address the PSO bond issuance’s:

o $200 million cost overrun versus the estimates

o millions of dollars in apparent discrepancies among PSO’s $10.5 million in Bond Issuance Costs

o missing specifics about “Who got paid how much for what?”

o missing approval documents for more than $1 million in issuance cost charges

o apparent overpayment of Wall Street banks

o apparent overpayment/double-payment of law firms

o utility issuance costs in excess of the cap apparently charged to ratepayers anyway

o $700,000 in additional ongoing financing costs being charged annually to PSO ratepayers.

The silence of the OCC PUD’s so-called “audit” on these critical, costly topics is deafening:

- It totally fails to acknowledge that all the “audited” federal Continuing Disclosure filings for PSO’s bonds are actually “Notice[s] of Delayed Filing” by the Oklahoma Development Finance Authority (“ODFA”). In more than 18 months, not a single audited financial statement for PSO’s bonds has been filed with the Municipal Securities Rulemaking Board!

- It totally fails to acknowledge that by allowing the utility to collect both a servicer fee and reimbursement for its costs (none specifically identified by name or actual amount), the utility has been de facto allowed to profit handsomely on the recovery of its 2021 Winter Storm fuel costs.

- By its own dates and language, it has been provided four months after the OCC’s November 2023 final order that “concluded this matter,” negating any possibility it was “part of” this November 2022-November 2023 PSO rate case as the law requires.

The Oklahoma Corporation Commission continues to pretend that its internal misuse of the English language – whether bestowing inflated job titles, issuing “findings of fact” that directly contradict the evidentiary record, withholding documents related to never-ordered “settlement conferences,” or redefining for political expediency well-understood terms in law like “audit” – should somehow be acceptable to the outside world. It is not.

On November 3 and 21, 2023, Commissioners Todd Hiett and Kim David voted to approve a rate increase for PSO. I did not. Months prior to those votes, I issued a Deliberations Statement publicly revealing that neither the utility nor the OCC PUD had answered my repeated requests for specific information about “Who got paid how much for what?” or millions of dollars in apparent discrepancies among the $10.5 million in Bond Issuance Costs PSO reported were incurred to issue its bonds. Nothing changed.

As I have detailed at length, no fewer than four binding legal authorities – the Securitization Act, the OCC’s own Final Financing Order for PSO, the Oklahoma Constitution, and the State Statutes – required that the OCC “audit”/ “control”/ “investigate” the issuance cost charges for PSO’s 2021 Winter Storm bonds as “part of” its rate case “to assure that” those charges were “just and reasonable” before approving a rate increase for the utility. But neither the utility’s $10.5 million Bond Issuance Costs nor its $14 million in additional Ongoing Financing Costs were even mentioned in the two Hiett/David-approved final orders in this case.

I first requested information about bond issuance costs in September 2022 after the “securitization expenses” for PSO’s Winter Storm bonds came in $200 million higher than had been estimated. That fact alone should have prompted an immediate audit. It did not, and eighteen months later, the Corporation Commission has yet to author any explanation for that outrageous cost overrun – roughly 20% of the massive $1-billion cost overrun versus the estimates for the 2021 Winter Storm bonds overall.

More than a year ago, I also pointed out inconsistencies, omissions and outright contradictions in the reporting and “approval” documentation for each utility’s bond issuance costs. I noted millions of dollars of discrepancies between certain banks’ and law firms’ original RFP bid amounts and what they were actually paid for their services. To date, those discrepancies are unresolved, and I have been offered no documentary evidence the $41 million in bond issuance costs were ever audited by anyone.

Instead, beyond belief, subsequent disclosures seem to indicate that the issuance costs for PSO’s bonds were paid out based on estimates instead of actual vendor invoices. Since when does the State of Oklahoma pay vendors in advance based on estimates and let them determine their own refund amounts a year later?

In the interests of transparency, I have now filed the OCC’s one-page, so-called “audits” in the record of these cases so the public can judge for itself whether they are “ludicrous,” “pitiful,” and “farcically inadequate,” or satisfactory evidence that the multiple billions of dollars utility customers will be required to pay for these bonds over the next two plus decades are being properly “safeguarded,” as one of the legislation’s co-authors promised.

The legislative objective of the Securitization Act’s “audit” requirement is unquestionably a demand for accountability, transparency, compliance with state law, and detailed reporting thereof. But once again, in an act of ongoing obstruction of both justice and transparency, the Oklahoma Corporation Commission has failed to do its legal duty to contract for statutorily-required audits to determine what scale and manner of negligence or wrongdoing resulted in a billion-dollar cost overrun. As a result, ratepayers are still waiting for long-overdue relief.

By continuing to issue these one-page, so-called “audits,” the Oklahoma Corporation Commission is not fooling anyone except itself. Everyone else sees clearly that the Emperor wears no clothes!

To determine the facts and redress the tremendous financial wrong done to ratepayers as a result of the bogus “audits” thus far, a real, independent “special” audit by the State Auditor of the multi-billion-dollar 2021 Winter Storm bond issuances is long overdue. From where I sit, the facts are appalling and ever-increasing evidence that the February 2021 Winter Storm was used as cover for the worst fleecing of Oklahoma ratepayers in the history of the state.

The above is an abbreviated version of a 20-page Opinion filed at the OCC by Corporation Commissioner Bob Anthony on April 8, 2024: https://public.occ.ok.gov/WebLink/DocView.aspx?id=16541983.