OG&E 2011 Annual Report Download - page 38

36 OGE Energy Corp.
Electric Utility Segment
Regulatory Assets and Liabilities
OG&E, as a regulated utility, is subject to accounting principles for certain
types of rate-regulated activities, which provide that certain actual or
anticipated costs that would otherwise be charged to expense can be
deferred as regulatory assets, based on the expected recovery from
customers in future rates. Likewise, certain actual or anticipated credits
that would otherwise reduce expense can be deferred as regulatory
liabilities, based on the expected flowback to customers in future rates.
Management’s expected recovery of deferred costs and flowback of
deferred credits generally results from specific decisions by regulators
granting such ratemaking treatment.
OG&E records certain actual or anticipated costs and obligations as
regulatory assets or liabilities if it is probable, based on regulatory orders
or other available evidence, that the cost or obligation will be included in
amounts allowable for recovery or refund in future rates. The benefit
obligations regulatory asset is comprised of expenses recorded which
are probable of future recovery and that have not yet been recognized
as components of net periodic benefit cost, including net loss, prior
service cost and net transition obligation.
Unbilled Revenues
OG&E reads its customers’ meters and sends bills to its customers
throughout each month. As a result, there is a significant amount of
customers’ electricity consumption that has not been billed at the end of
each month. Unbilled revenue is presented in Accrued Unbilled Revenues
on the Consolidated Balance Sheets and in Operating Revenues on the
Consolidated Statements of Income based on estimates of usage and
prices during the period. At December 31, 2011, if the estimated usage
or price used in the unbilled revenue calculation were to increase or
decrease by one percent, this would cause a change in the unbilled
revenues recognized of $0.3 million. At December 31, 2011 and 2010,
Accrued Unbilled Revenues were $59.3 million and $56.8 million, respec-
tively. The estimates that management uses in this calculation could
vary from the actual amounts to be paid by customers.
Allowance for Uncollectible Accounts Receivable
Customer balances are generally written off if not collected within six
months after the final billing date. The allowance for uncollectible accounts
receivable for OG&E is calculated by multiplying the last six months of
electric revenue by the provision rate. The provision rate is based on a
12-month historical average of actual balances written off. To the extent
the historical collection rates are not representative of future collections,
there could be an effect on the amount of uncollectible expense recog-
nized. Beginning in August 2009 and going forward, there was a change
in the provision calculation as a result of the Oklahoma rate case whereby
the portion of the uncollectible provision related to fuel is being recovered
through the fuel adjustment clause. Due to the extremely hot weather in
OG&E’s service territory in 2011, OG&E recorded an additional amount
of uncollectible expense anticipating higher customer defaults. At
December 31, 2011, if the provision rate were to increase or decrease
by 10 percent, this would cause a change in the uncollectible expense
recognized of $0.2 million. The allowance for uncollectible accounts
receivable is a reduction to Accounts Receivable on the Consolidated
Balance Sheets and is included in Other Operation and Maintenance
Expense on the Consolidated Statements of Income. The allowance for
uncollectible accounts receivable was $3.7 million and $1.6 million at
December 31, 2011 and 2010, respectively.
Natural Gas Transportation and Storage,
Gathering and Processing and Marketing Segments
Operating Revenues
Operating revenues for gathering, processing, transportation, storage
and marketing services for Enogex are recorded each month based on
the current month’s estimated volumes, contracted prices (considering
current commodity prices), historical seasonal fluctuations and any
known adjustments. The estimates are reversed in the following month
and customers are billed on actual volumes and contracted prices.
Gas sales are calculated on current-month nominations and contracted
prices. Operating revenues associated with the production of NGLs
are estimated based on current-month estimated production and con-
tracted prices. These amounts are reversed in the following month and
the customers are billed on actual production and contracted prices.
Estimated operating revenues are reflected in Accounts Receivable on
the Consolidated Balance Sheets and in Operating Revenues on the
Consolidated Statements of Income.
Enogex recognizes revenue from natural gas gathering, processing,
transportation, storage and marketing services to third parties as serv-
ices are provided. Revenue associated with NGLs is recognized when
the production is sold.
Enogex records deferred revenue when it receives consideration
from a third party before achieving certain criteria that must be met for
revenue to be recognized in accordance with GAAP. In August 2010,
Enogex completed construction of transportation and compression
facilities necessary to provide gas delivery service to a new natural
gas-fired electric generation facility near Pryor, Oklahoma. Aid in
Construction payments of $36.4 million received in excess of construc-
tion costs were recognized as Deferred Revenues on the Company’s
Consolidated Balance Sheet and are being amortized on a straight-line
basis of $1.2 million per year over the life of the related firm transporta-
tion service agreement under which service commenced in June 2011.
Also, in August 2011, Enogex and one of its five largest customers entered
into new agreements, effective July 1, 2011, relating to the customer’s
gathering and processing volumes on the Oklahoma portion of Enogex’s
system. As a result of this transaction and as part of the new agreements,
Enogex recorded $6.4 million in Deferred Revenues on the Company’s
Consolidated Balance Sheet at December 31, 2011. Processing revenues
under the agreements are recognized based on the estimated average
fee per MMBtu processed over the life of the agreements. Enogex expects
to record additional deferred revenues during 2012.