OG&E 2011 Annual Report Download - page 89

OGE Energy Corp. 87
On November 13, 2007, one of the protesting intervenors filed to
consolidate the Enogex 2007 rate case with a separate Enogex applica-
tion pending before the FERC allowing Enogex to lease firm capacity to
MEP and with separate applications filed by MEP with the FERC for a
certificate to construct and operate the MEP pipeline and to lease firm
capacity from Enogex. Enogex and MEP separately opposed this inter-
venor’s protests and assertions in its initial and subsequent pleadings.
On July 25, 2008, the FERC issued an order (i) approving the MEP proj-
ect including the approval of a limited jurisdiction certificate and (ii)
authorizing the Enogex lease agreement with MEP. Accordingly, Enogex
proceeded with the construction of facilities necessary to implement
this service. On August 25, 2008, a protestor sought rehearing which
the FERC denied. Enogex commenced service to MEP under the lease
agreement on June 1, 2009. On July 16, 2009, the protestor filed, with
the United States Court of Appeals for the District of Columbia Circuit,
a petition for review of the FERC’s orders approving the MEP construc-
tion and the MEP lease of capacity from Enogex requesting that such
orders be modified or set aside on the grounds that they are arbitrary,
capricious and contrary to law. On December 28, 2010, the Court of
Appeals issued an opinion generally upholding the FERC’s orders, but
remanding the case for further explanation of one aspect of the FERC’s
reasoning. The Court of Appeals emphasized that it was not vacating
the FERC’s orders and that its approval of the Enogex lease agreement
with MEP remains in effect and legally binding. On remand, the FERC
was to clarify that its decision was based on a finding that the lease
does not adversely affect existing customers on Enogex’s system. On
January 21, 2011, Apache Corporation filed a motion asking the FERC
to establish procedures on remand and to either condition the lease on
Enogex’s willingness to provide firm Section 311 transportation service
to existing customers on all portions of its system or to establish an
expedited briefing schedule. On February 7, 2011, Enogex, MEP and
Chesapeake Energy Corporation filed a joint answer asking the FERC
to find, among other things, that the reduction in the amount of
interruptible transportation capacity available due to the MEP lease did
not have an adverse affect on Apache Corporation and to acknowledge
that Apache Corporation’s request to condition the lease on the provi-
sion of West Zone 311 firm transportation service has been addressed
as Enogex filed a rate case on January 28, 2011 proposing to imple-
ment such service effective March 1, 2011. On March 1, 2011, Apache
Corporation filed an answer seeking to refute some of the arguments
presented in the joint answer filed by Enogex, MEP and Chesapeake
Energy Corporation. On March 3, 2011, the FERC issued an order on
remand affirming the authorizations previously granted to Enogex and
MEP and clarifying the applicable legal standard in response to the
court’s directive. On April 4, 2011, Apache Corporation filed a request
for rehearing of the FERC’s order on remand. On September 29, 2011,
the FERC issued an order denying Apache Corporation’s motion for
rehearing. Apache Corporation did not appeal the FERC’s March 3,
2011 order on remand and/or the September 29, 2011 order denying
rehearing. This matter is now closed.
Pending Regulatory Matters
OG&E 2011 Oklahoma Rate Case Filing
As part of the Joint Stipulation and Settlement Agreement reached in
OG&E’s 2009 Oklahoma rate case filing, the parties agreed that OG&E
would file a rate case on or before June 30, 2011. On May 27, 2011,
OG&E requested an extension until the end of July 2011 for filing the
Oklahoma rate case. On July 28, 2011, OG&E filed its application with
the OCC requesting an annual rate increase of $73.3 million, or a 4.3 per-
cent increase in its rates. OG&E is requesting a return on equity of
11.00 percent based on a common equity percentage of 53 percent.
Each 0.10 percent change in the requested return on equity affects the
requested rate increase by $3.0 million. In its application, OG&E seeks
to recover increases in its operating costs and to begin earning on
approximately $500 million of new capital investments made on behalf
of its Oklahoma customers during the previous two and one-half years.
On November 9, 2011, the OCC Staff recommended a $6.2 million
annual rate decrease based on a return on equity of 9.81 percent and
a common equity percentage of 53 percent. The staff of the Oklahoma
Attorney General recommended a return on equity of 9.818 percent
and a common equity percentage of 49.5 percent. The staff of the
Oklahoma Attorney General did not recommend a specific revenue
requirement, but OG&E believes that adoption of the staff of the
Oklahoma Attorney General’s recommendations would result in a rate
decrease. The Oklahoma Industrial Electric Consumers recommended a
$56 million annual rate decrease based on a return on equity of 9.5 per-
cent and a common equity percentage of 48 percent. OG&E filed
rebuttal testimony on November 29, 2011 on the revenue requirement
testimony filed by the parties on November 9, 2011. On November 16,
2011, the parties filed cost-of-service and rate design testimony and
OG&E filed rebuttal testimony in those areas on December 2, 2011. The
hearing in this matter began on December 13, 2011. OG&E expects to
receive an order from the OCC in the first quarter of 2012.
OG&E Fuel Adjustment Clause Review for Calendar Year 2010
On August 19, 2011, the OCC Staff filed an application for a public
hearing to review and monitor OG&E’s application of the 2010 fuel
adjustment clause. On October 18, 2011, OG&E responded by filing
the necessary information and documents to satisfy the OCC’s mini-
mum filing requirement rules. A procedural schedule has not yet been
established in this matter.
OG&E Contract and Wind Energy Purchase Agreement Filing
On December 1, 2011, OG&E filed an application with the OCC
requesting approval of a 20-year agreement that is intended to provide
wind power to help meet the current and future power generation needs
of Oklahoma State University. The project calls for OG&E to contract with
NextEra Energy to build a 60 MW wind farm near Blackwell, Oklahoma,
to support the Oklahoma State University project in which NextEra will
build, own and operate the wind farm and OG&E will purchase the elec-
tric output. A procedural schedule has not yet been established in this
matter. OG&E expects to receive a decision from the OCC in the first
quarter of 2012.