OG&E 2009 Annual Report Download - page 101

the Company to defer approximately $0.6 million in 2008 for incremental storm costs in excess of the amount included in the
Company’s rates. As discussed above, on March 18, 2009, the Company, the APSC Staff and the Arkansas Attorney General reached
a settlement agreement in the Company’s Arkansas rate case which included recovery of these storm costs. As discussed above, in its
May 20, 2009 order approving the settlement agreement, the APSC directed the Company to file an exact recovery rider for its 2008
storm costs. The Company filed this recovery rider and the rider was implemented June 1, 2009.
System Hardening Filing
In December 2007, a major ice storm affected the Company’s service territory which resulted in a large number of customer
outages. The OCC requested its Staff to review and determine if a rulemaking was warranted. The OCC Staff issued numerous data
requests to determine if other regulatory jurisdictions have policies or rules requiring that electric transmission and distribution lines
be placed underground. The OCC Staff also surveyed customers. On June 30, 2008, the OCC Staff submitted a report entitled,
“Inquiry into Undergrounding Electric Facilities in the state of Oklahoma.” The Company formed a plan to place facilities
underground (sometimes referred to as system hardening) with capital expenditures of approximately $115 million over five years for
underground facilities, as well as $10 million annually for enhanced vegetation management. On December 2, 2008, the Company
filed an application with the OCC requesting approval of its proposed system hardening plan with a recovery rider. On March 20,
2009, all parties to this case signed a settlement agreement recommending a three-year plan that includes up to $35.3 million in capital
expenditures and approximately $33.2 million in operating expenses for aggressive vegetation management and a recovery rider. On
May 13, 2009, the OCC issued an order approving the settlement agreement in this matter. The new rider, which will allow the
Company to recover costs related to system hardening incurred on or after June 15, 2009, was implemented July 1, 2009.
Security Enhancements
On January 15, 2009, the Company filed an application with the OCC to amend its security plan. The Company sought
approval of new security projects and cost recovery through the previously authorized security rider. The annual revenue requirement
is approximately $0.9 million. On May 29, 2009, the OCC issued an order approving a settlement agreement in this matter that
incorporated the Company’s requested rate relief. The new rider was implemented June 1, 2009.
FERC Formula Rate Filing
On November 30, 2007, the Company made a filing at the FERC to increase its transmission rates to wholesale customers
moving electricity on the Company’s transmission lines. Interventions and protests were due by December 21, 2007. On January 31,
2008, the FERC issued an order: (i) conditionally accepting the rates, (ii) suspending the effectiveness of such rates for five months, to
be effective July 1, 2008, subject to refund, (iii) establishing hearing and settlement judge procedures and (iv) directing the Company
to make a compliance filing. In July 2008, rates were implemented in an annual increase of approximately $2.4 million, subject to
refund. On June 25, 2009, the FERC issued an order approving an approximate $1.3 million increase in revenues from the Company’s
transmission customers compared to the approximate $2.4 million increase in revenues previously implemented in July 2008. In
accordance with the FERC formula, overcollections for the prior period are to be credited to transmission customers as part of the
calculation of the rates to be paid in 2010.
2009 Oklahoma Rate Case Filing
On February 27, 2009, the Company filed its rate case with the OCC requesting a rate increase of approximately $110
million. On July 24, 2009, the OCC issued an order authorizing: (i) an annual net increase of approximately $48.3 million in the
Company’s rates to its Oklahoma retail customers, which includes an increase in the residential customer charge from $6.50/month to
$13.00/month, (ii) creation of a new recovery rider to permit the recovery of up to $20 million of capital expenditures and operation
and maintenance expenses associated with the Company’s smart grid project in Norman, Oklahoma, which was implemented in
February 2010, (iii) continued utilization of a return on equity (“ROE”) of 10.75 percent under various recovery riders previously
approved by the OCC and (iv) recovery through the Company’s fuel adjustment clause of approximately $4.8 million annually of
certain expenses that historically had been recovered through base rates. New electric rates were implemented August 3, 2009. The
Company expects the impact of the rate increase on its customers and service territory to be minimal over the next 12 months as the
rate increase will be more than offset by lower fuel costs attributable to prior fuel over recoveries and from lower than forecasted fuel
costs in 2010.
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