OG&E 2009 Annual Report Download - page 102

Review of the Company’s Fuel Adjustment Clause for Calendar Year 2007
The OCC routinely audits activity in the Company’s fuel adjustment clause for each calendar year. In September 2008, the
OCC Staff filed an application for a prudence review of the Company’s 2007 fuel adjustment clause. On August 12, 2009, all parties
to this case signed a settlement agreement in this matter, stating that the Company’s generation and fuel procurement processes and
costs during the 2007 calendar year were prudent. A hearing on the settlement agreement was held on September 10, 2009 and the
administrative law judge recommended approval of the settlement agreement. On October 15, 2009, the OCC issued an order
adopting the findings in the settlement agreement.
OU Spirit Wind Power Project
The Company signed contracts on July 31, 2008 for approximately 101 MWs of wind turbine generators and certain related
balance of plant engineering, procurement and construction services associated with OU Spirit. As discussed below, OU Spirit is part
of the Company’s goal to increase its wind power generation portfolio in the near future. On July 30, 2009, the Company filed an
application with the OCC requesting pre-approval to recover from Oklahoma customers the cost to construct OU Spirit at a cost of
approximately $265.8 million. On October 15, 2009, all parties to this case signed a settlement agreement that would provide pre-
approval of OU Spirit and authorize the Company to begin recovering the costs of OU Spirit through a rider mechanism as the 44
turbines were placed into service in November and December 2009 and began delivering electricity to the Company’s customers. The
rider will be in effect until OU Spirit is added to the Company’s regulated rate base as part of the Company’s next general rate case,
which is expected to be based on a 2010 test year and completed in 2011, at which time the rider will cease. The settlement agreement
also assigns to the Company’s customers the proceeds from the sale of OU Spirit renewable energy credits to the University of
Oklahoma. The settlement agreement permits the recovery of up to $270 million of eligible construction costs, including recovery of
the costs of the conservation project for the lesser prairie chicken as discussed below. The net impact on the average residential
customer’s 2010 electric bill is estimated to be approximately 90 cents per month, decreasing to 80 cents per month in 2011. On
November 25, 2009, the Company received an order from the OCC approving the settlement agreement in this case, with the rider
being implemented on December 4, 2009. Capital expenditures associated with this project were approximately $270 million.
In connection with OU Spirit, in January 2008, the Company filed with the SPP for a Large Generator Interconnection
Agreement (“LGIA”) for this project. Since January 2008, the SPP has been studying this requested interconnection to determine the
feasibility of the request, the impact of the interconnection on the SPP transmission system and the facilities needed to accommodate
the interconnection. Given the backlog of interconnection requests at the SPP, there has been significant delay in completing the study
process and in the Company receiving a final LGIA. On May 29, 2009, the Company executed an interim LGIA, allowing OU Spirit
to interconnect to the transmission grid, subject to certain conditions. In connection with the interim LGIA, the Company posted a
letter of credit with the SPP of approximately $10.9 million, which was later reduced to approximately $9.9 million in October 2009
and further reduced to approximately $9.2 million in February 2010, related to the costs of upgrades required for the Company to
obtain transmission service from its new OU Spirit wind farm. The SPP filed the interim LGIA with the FERC on June 29, 2009. On
August 27, 2009, the FERC issued an order accepting the interim LGIA, subject to certain conditions, which enables OU Spirit to
interconnect into the transmission grid until the final LGIA can be put in place, which is expected by mid-2010.
In connection with OU Spirit and to support the continued development of Oklahoma’s wind resources, on April 1, 2009, the
Company announced a $3.75 million project with the Oklahoma Department of Wildlife Conservation to help provide a habitat for the
lesser prairie chicken, which ranks as one of Oklahoma’s more imperiled species. Through its efforts, the Company hopes to help
offset the effect of wind farm development on the lesser prairie chicken and help ensure that the bird does not reach endangered status,
which could significantly limit the ability to develop Oklahoma’s wind potential.
Renewable Energy Filing
The Company announced in October 2007 its goal to increase its wind power generation over the following four years from
its then current 170 MWs to 770 MWs and, as part of this plan, on December 8, 2008, the Company issued an RFP to wind developers
for construction of up to 300 MWs of new capability, which the Company intends to add to its power-generation portfolio by the end
of 2010. In June 2009, the Company announced that it had selected a short list of bidders for a total of 430 MWs and that it was
considering acquiring more than the approximately 300 MWs of wind energy originally contemplated in the initial RFP. On
September 29, 2009, the Company announced that, from its short list, it had reached agreements with two developers who are to build
two new wind farms, totaling 280 MWs, in northwestern Oklahoma. Under the terms of the agreements, CPV Keenan is to build a 150
MW wind farm in Woodward County and Edison Mission Energy is to build a 130 MW facility in Dewey County near Taloga. The
agreements are both 20-year power purchase agreements, under which the developers are to build, own and operate the wind
generating facilities and the Company will purchase their electric
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