OG&E 2009 Annual Report Download - page 105

to the base-plan funding mechanism as provided in the SPP tariff for application to such improvements. The capital expenditures
related to this project are presented in the summary of capital expenditures for known and committed projects in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Future Capital Requirements.”
On April 28, 2009, the SPP approved a set of 345 kV projects referred to as “Balanced Portfolio 3E”. Balanced Portfolio 3E
includes four projects to be built by the Company and includes: (i) construction of approximately 120 miles of transmission line from
the Company’s Seminole substation in a northeastern direction to the Company’s Muskogee substation at a cost of approximately
$131 million for the Company, which is expected to be in service by December 2014, (ii) construction of approximately 72 miles of
transmission line from the Company’s Woodward District EHV substation in a southwestern direction to the Oklahoma/Texas
Stateline to a companion transmission line to be built by Southwestern Public Service to its Tuco substation at a cost of approximately
$120 million for the Company, which is expected to be in service by April 2014, (iii) construction of approximately 38 miles of
transmission line from the Company’s Sooner substation in an eastern direction to the Grand River Dam Authority Cleveland
substation at an estimated cost of approximately $41 million for the Company, which is expected to be in service by December 2012
and (iv) construction of a new substation near Anadarko which is expected to consist of a 345/138 kV transformer and substation
breakers and will be built in the Company’s portion of the Cimarron-Lawton East Side 345 kV line at an estimated cost of
approximately $8 million for the Company, which is expected to be in service by December 2012. On June 19, 2009, the Company
received a notice to construct the Balanced Portfolio 3E projects from the SPP. On July 23, 2009, the Company responded to the SPP
that the Company will construct the Balanced Portfolio 3E projects discussed above beginning in early 2010. The capital expenditures
related to the Balanced Portfolio 3E projects are presented in the summary of capital expenditures for known and committed projects
in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Future Capital Requirements.”
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 for 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.
Review of the Company’s Fuel Adjustment Clause for Calendar Year 2008
On July 20, 2009, the OCC Staff filed an application for a public hearing to review and monitor the Company’s application
of the 2008 fuel adjustment clause. On September 18, 2009, the Company responded by filing the necessary information and
documents to satisfy the OCC’s minimum filing requirement rules. On February 2, 2010, a procedural schedule was established in
this matter with a hearing scheduled for May 26, 2010.
North American Electric Reliability Corporation
The Energy Policy Act of 2005 gave the FERC authority to establish mandatory electric reliability rules enforceable with
monetary penalties. The FERC approved the North American Electric Reliability Corporation (“NERC”) as the Electric Reliability
Organization for North America and delegated to it the development and enforcement of electric transmission reliability rules. In
September 2009, the Company completed a NERC Critical Infrastructure Protection (“CIP”) spot check audit. Resolution of any audit
findings is expected in 2010; however, the Company does not expect the resolution of any audit findings to have a material impact on
its operations. The Company is subject to a NERC compliance audit every three years as well as periodic spot check audits. The next
compliance audit is scheduled for 2011, which will incorporate both NERC CIP and non-CIP standards.
Summary
The Energy Policy Act of 2005, the actions of the FERC and other factors are intended to increase competition in the electric
industry. The Company has taken steps in the past and intends to take appropriate steps in the future to remain a
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