OG&E 2009 Annual Report Download - page 38

standards would be expected to increase the region’s reliance on wind generation. The Company believes it can leverage its unique
geographic position to develop renewable energy resources for wind and transmission to deliver the renewable energy.
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 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.
Arkansas Rate Case Filing
In August 2008, the Company filed with the APSC an application for an annual rate increase of approximately $26.4 million
to recover, among other things, costs for investments including in the Redbud Facility and improvements in its system of power lines,
substations and related equipment to ensure that the Company can reliably meet growing customer demand for electricity. On May
20, 2009, the APSC approved a general rate increase of approximately $13.3 million, which excludes approximately $0.3 million in
storm costs discussed below. The APSC order also allows implementation of the Company’s “time-of-use” tariff which allows
participating customers to save on their electricity bills by shifting some of the electricity consumption to times when demand for
electricity is lowest. The Company implemented the new electric rates effective June 1, 2009.
OU Spirit Wind Power Project
In July 2008, the Company signed contracts 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. In November 2009, the Company received an order from the OCC authorizing 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, 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 order also assigns to the Company’s customers the proceeds from the sale of OU Spirit renewable
energy credits to the University of Oklahoma. The rider was implemented on December 4, 2009 and the net impact of the rider 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. 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 into 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.
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