OG&E 2009 Annual Report Download - page 39

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 a request for proposal
(“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 output. On October 30, 2009, the Company filed
separate applications with the OCC seeking pre-approval for the recovery of the costs associated with purchasing power from these
projects. On December 9, 2009, all parties to these cases signed settlement agreements whereby the stipulating parties requested that
the OCC issue orders: (i) finding that the execution of the power purchase agreements complied with the OCC competitive bidding
rules, are prudent and are in the public’s interest, (ii) approving the power purchase agreements and (iii) authorizing the Company to
recover the costs of the power purchase agreements through the Company’s fuel adjustment clause. On January 5, 2010, the Company
received an order from the OCC approving the power purchase agreements and authorizing the Company to recover the costs of the
power purchase agreements through the Company’s fuel adjustment clause. The two wind farms are expected to be in service by the
end of 2010. Negotiations with the third bidder on the Company’s short list announced in June, for an additional 150 MWs of wind
energy from Texas County were terminated in early October. The Company will continue to evaluate renewable opportunities to add
to its power-generation portfolio in the future.
Smart Grid Application
In February 2009, the President signed into law the ARRA. Several provisions of this law relate to issues of direct interest to
the Company including, in particular, financial incentives to develop smart grid technology, transmission infrastructure and renewable
energy. After review of the ARRA, the Company filed a grant request on August 4, 2009 for $130 million with the DOE to be used
for the Smart Grid application in the Company’s service territory. On October 27, 2009, the Company received notification from the
DOE that its grant had been accepted by the DOE for the full requested amount of $130 million. Receipt of the grant monies is
contingent upon successful negotiations with the DOE on final details of the award. The Company expects to file an application with
the OCC requesting pre-approval for system-wide deployment of smart grid technology and a recovery rider, including a credit for the
Smart Grid grant during the first quarter of 2010. Separately, on November 30, 2009, the Company requested a grant with a 50
percent match of up to $5 million for a variety of types of smart grid training for the Company’s workforce. Recipients of the grant
are expected to be announced in the first quarter of 2010.
2010 Outlook
OGE Energy projects the Company to earn approximately $207 million to $217 million in 2010. The key factors and
assumptions include:
Ÿ Normal weather patterns are experienced for the year;
Ÿ Gross margin on revenues of approximately $1.05 billion to $1.06 billion. The key assumptions for gross margin
are listed below:
Ÿ Sales growth of approximately 0.9 percent on a weather adjusted basis; and
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