Where there’s smoke, someone ought to investigate, don’t you think?

All heck is breaking loose at the Oklahoma Corporation Commission, and it’s time the candidates running to join that fray speak up and let us know where they stand.

The August 4th hearing at the OCC reminded me of a principal who smells smoke coming from the boys’ bathroom.  When he calls through the door to investigate, the boys inside answer calmly that everything’s fine, while at the same time they’re frantically trying to open the window and fan the smoke away.

The question is, is it just cigarette smoke or have they carelessly caught the trash can on fire?

Where there’s smoke, responsible public officials should investigate to make sure there isn’t a catastrophic fire in the making.  That’s what OCC Commissioner Bob Anthony was doing when he questioned representatives of Hilltop Securities and RBC Capital about the status of the $4-5 billion in ratepayer-backed bond deals – especially those of OG&E that were issued in July.

Anthony obviously looked at the results of that bond sale – costing an incredible $330 million more than was advertised – and smelled smoke.  The calm demeanors of the bond advisors and underwriters he was questioning were belied by the scattered, repetitive, evasive answers they gave.

For starters, they blamed the increased costs on changes in the market between the forecast March issuance date for the bonds and the actual July issuance date.

But they attributed only $120 million of the $330 million to that delay and failed to account at all for the other two-thirds of the excess costs.

They also repeatedly bragged that the OG&E bonds had priced better than a similar issuance by PG&E without mentioning that California utility was recently bankrupted by wildland fire liabilities and thus a pretty puny choice for comparison.

These boys also tried to deflect blame for the March-to-July delay onto the citizens who (like me) submitted protests to the Supreme Court, arguing the bonds were not only bad policy (due to all their unnecessary risks and expenses), but were also unconstitutional.

In its May ruling in the case, the Supreme Court roundly criticized Oklahoma Attorney General John O’Connor for failing to participate when it was his legal obligation to represent the ratepayers in such matters.  The Court explicitly requested his office to weigh in on some of the legal questions we raised, and even offered the AG a month to submit a brief.  But the AG refused to intervene, leaving the Court seething and we citizen protesters to argue on behalf of all the ratepayers, not just ourselves.

“The utility consumers that the Attorney General should be representing have effectively been left without representation.  Their access to counsel lies with the Attorney General.  Yet he has failed them,” wrote Justice Douglas Combs.

The fact that the AG’s contribution to the issuance delay completely escaped mention when the bond boys were trying to place $120 million of blame on the citizen protestors is just one more example of the rambling and sometimes incoherent explanations coming from the boys’ room in a frantic effort to convince Commissioner Anthony there’s nothing to see.

But this isn’t Bob Anthony’s first time around, and he clearly wasn’t buying their act.  Where there’s smoke, there could be fire – especially when, as Bob exposed, the people and firms involved apparently had no fiduciary duty to do what was in the best interests of the ratepayers.

Consequently, at the cost of a few basis points no one but Bob would notice, they could easily distribute some favorably priced tranches of OG&E bonds to their Wall Street buddies in so-called “arms length” transactions.  As Commissioner Anthony pointed out, a few extra basis points (fractions of a percentage point) in mispricing could amount to $100 million or more in a deal this size – money the ratepayers will have to cough up for the next 28 years.

It’s time to find out where the candidates for Corporation Commission stand on this.  Do they support Commissioner Anthony and the AARP’s call for an independent post-transaction analysis of the OG&E bonds to find out what really went wrong?

Should the State Auditor and Inspector be brought in to determine how Hilltop Securities could be hired by both the OCC to write the bond financing orders and also the Oklahoma Development Finance Authority (ODFA) to execute those orders?  (Looks like a pretty clear conflict of interest to me.)

Or should everyone just look the other way, suck it up and pay their inflated utility bills?

In my opinion, if these Wall Street boys have set the bathroom on fire, we need to know about it sooner rather than later.  Bob Anthony for fire chief!  But who will step up and show us they deserve to be our next Corporation Commissioner?