OG&E 2009 Annual Report Download - page 36

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Introduction
Oklahoma Gas and Electric Company (the “Company”) generates, transmits, distributes and sells electric energy in
Oklahoma and western Arkansas. The Company is subject to rate regulation by the Oklahoma Corporation Commission (“OCC”), the
Arkansas Public Service Commission (“APSC”) and the Federal Energy Regulatory Commission (“FERC”). The Company is a
wholly-owned subsidiary of OGE Energy Corp. (“OGE Energy”) which is an energy and energy services provider offering physical
delivery and related services for both electricity and natural gas primarily in the south central United States. The Company was
incorporated in 1902 under the laws of the Oklahoma Territory. The Company is the largest electric utility in Oklahoma and its
franchised service territory includes the Fort Smith, Arkansas area. The Company sold its retail gas business in 1928 and is no longer
engaged in the gas distribution business.
Executive Overview
Strategy
OGE Energy’s vision is to fulfill its critical role in the nation’s electric utility and natural gas midstream pipeline
infrastructure and meet individual customers’ needs for energy and related services in a safe, reliable and efficient manner. OGE
Energy intends to execute its vision by focusing on its regulated electric utility business and unregulated midstream natural gas
business. OGE Energy intends to maintain the majority of its assets in the regulated utility business complemented by its natural gas
pipeline business.
The Company has been focused on increased investment to preserve system reliability and meet load growth, leverage unique
geographic position to develop renewable energy resources for wind and transmission, replace infrastructure equipment, replace aging
transmission and distribution systems, provide new products and services, provide energy management solutions to the Company’s
customers through the Smart Grid program (discussed below) and deploy newer technology that improves operational, financial and
environmental performance. As part of this plan, the Company has taken, or has committed to take, the following actions:
Ÿ in January 2007, a 120 megawatt (“MW”) wind farm in northwestern Oklahoma was placed in service;
Ÿ in September 2008, the Company purchased a 51 percent interest in the 1,230 MW natural gas-fired, combined-
cycle power generation facility in Luther, Oklahoma (“Redbud Facility”);
Ÿ in 2008, the Company announced a “Positive Energy Smart Grid” initiative that will empower customers to
proactively manage their energy consumption during periods of peak demand. As a result of the American
Recovery and Reinvestment Act of 2009 (“ARRA”) signed by the President into law in February 2009, the
Company requested a $130 million grant from the U.S. Department of Energy (“DOE”) in August 2009 to develop
its Smart Grid technology. In late October 2009, the Company received notification from the DOE that its grant had
been accepted by the DOE;
Ÿ in 2008, the Company began construction of a transmission line from Oklahoma City, Oklahoma to Woodward,
Oklahoma (“Windspeed”), which is a critical first step to increased wind development in western Oklahoma. This
transmission line is expected to be in service by April 2010;
Ÿ in June 2009, the Company received Southwest Power Pool (“SPP”) approval to build four 345 kilovolt (“kV”)
transmission lines referred to as “Balanced Portfolio 3E”, which the Company expects to begin constructing in early
2010. These transmission lines are expected to be in service between December 2012 and December 2014;
Ÿ in September 2009, the Company signed power purchase agreements with two developers who are to build two new
wind farms, totaling 280 MWs, in northwestern Oklahoma which the Company intends to add to its power-
generation portfolio by the end of 2010. The Company will continue to evaluate renewable opportunities to add to
its power-generation portfolio in the future;
Ÿ in November and December 2009, the individual turbines were placed in service related to the OU Spirit wind
project in western Oklahoma (“OU Spirit”), which added 101 MWs of wind capacity to the Company’s wind
portfolio; and
Ÿ the Company’s construction initiative from 2010 to 2015 includes approximately $2.6 billion in major projects
designed to expand capacity, enhance reliability and improve environmental performance. This construction
initiative also includes strengthening and expanding the electric transmission, distribution and substation systems
and replacing aging infrastructure.
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