OG&E 2009 Annual Report Download - page 11

is completed and in service until new rates are implemented in an expected 2011 rate case and (iii) to the extent the construction costs
and AFUDC for the transmission line exceed $218 million, the Company be permitted to show that such additional costs are prudent
and allowed to be recovered. On September 11, 2008, the OCC issued an order approving the settlement agreement. At December 31,
2009, the construction costs and AFUDC incurred were approximately $184.9 million. Separately, on July 29, 2008, the SPP Board of
Directors approved the proposed transmission line discussed above. On February 2, 2009, the Company received SPP approval to
begin construction of the transmission line and the associated Woodward District EHV substation. In 2009, the Company received a
favorable outcome in five local court cases challenging the Company’s use of eminent domain to obtain rights-of-way. 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.”
SPP Transmission/Substation Projects. The SPP is a regional transmission organization (“RTO”) under the jurisdiction of
the FERC, which was created to ensure reliable supplies of power, adequate transmission infrastructure and competitive wholesale
prices of electricity. The SPP does not build transmission though the SPP’s tariff contains rules that govern the transmission
construction process. Transmission owners complete the construction and then own, operate and maintain transmission assets within
the SPP region. When the SPP Board of Directors approves a project, the transmission provider in the area where the project is needed
has the first obligation to build.
There are several studies currently under review at the SPP including the Extra High Voltage (“EHV”) study that focuses on
year 2026 and beyond to address issues of regional and interregional importance. The EHV study suggests overlaying the SPP
footprint with a 345 kV, 500kV and 765kV transmission system and integrating it with neighboring regional entities. In 2009, the SPP
Board of Directors approved a new report that recommended restructuring the SPP’s regional planning processes to focus on the
construction of a robust transmission system, large enough in both scale and geography, to provide flexibility to meet the SPP’s future
needs. The Company expects to actively participate in the ongoing study, development and transmission growth that may result from
the SPP’s plans.
In 2007, the SPP notified the Company to construct approximately 44 miles of new 345 kV transmission line which will
originate at the existing Company Sooner 345 kV substation and proceed generally in a northerly direction to the Oklahoma/Kansas
Stateline (referred to as the Sooner-Rose Hill project). At the Oklahoma/Kansas Stateline, the line will connect to the companion line
being constructed in Kansas by Westar Energy. The line is estimated to be in service by June 2012. 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.”
In January 2009, the Company received notification from the SPP to begin construction on approximately 50 miles of new
345 kV transmission line and substation upgrades at the Company’s Sunnyside substation, among other projects. In April 2009,
Western Farmers Electric Cooperative (“WFEC”) assigned to the Company the construction of 50 miles of line designated by the SPP
to be built by the WFEC. The new line will extend from the Company’s Sunnyside substation near Ardmore, Oklahoma,
approximately 100 miles to the Hugo substation owned by the WFEC near Hugo, Oklahoma. The Company began preliminary line
routing and acquisition of rights-of-way in June 2009. When construction is completed, which is expected in April 2012, the SPP will
allocate a portion of the annual revenue requirement to Company customers according 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 the Balanced Portfolio 3E projects. 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
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