OG&E 2009 Annual Report Download - page 96

Natural Gas Units
In August 2009, the Company issued a request for proposal (“RFP”) for gas supply purchases for periods from November
2009 through March 2010. The gas supply purchases from January through March 2010 account for approximately 18 percent of the
Company’s projected 2010 natural gas requirements. The RFP process was completed on September 10, 2009. The contracts
resulting from this RFP are tied to various gas price market indices that will expire in 2010. Additional gas supplies to fulfill the
Company’s remaining 2010 natural gas requirements will be acquired through additional RFPs in early to mid-2010, along with
monthly and daily purchases, all of which are expected to be made at market prices.
Coal
In August 2009, the Company issued an RFP for coal supply purchases for periods from January 2011 through December
2015. The RFP process was completed during the fourth quarter of 2009 and resulted in two new coal contracts expiring in 2015. The
coal supply purchases account for approximately 50 percent of the Company’s projected coal requirements during that timeframe.
Additional coal supplies to fulfill the Company’s remaining 2011 through 2015 coal requirements will be acquired through additional
RFPs.
Natural Gas Measurement Cases
United States of America ex rel., Jack J. Grynberg v. Enogex Inc., Enogex Services Corporation and the Company. (U.S.
District Court for the Western District of Oklahoma, Case No. CIV-97-1010-L.) United States of America ex rel., Jack J. Grynberg v.
Transok Inc. et al. (U.S. District Court for the Eastern District of Louisiana, Case No. 97-2089; U.S. District Court for the Western
District of Oklahoma, Case No. 97-1009M.). On June 15, 1999, the Company was served with the plaintiff’s complaint, which was a
qui tam action under the False Claims Act. Plaintiff Jack J. Grynberg, as individual relator on behalf of the Federal government,
alleged: (a) each of the named defendants had improperly or intentionally mismeasured gas (both volume and British thermal unit
content) purchased from Federal and Indian lands which resulted in the under reporting and underpayment of gas royalties owed to the
Federal government; (b) certain provisions generally found in gas purchase contracts were improper; (c) transactions by affiliated
companies were not arms-length; (d) excess processing cost deduction; and (e) failure to account for production separated out as a
result of gas processing. Grynberg sought the following damages: (a) additional royalties which he claimed should have been paid to
the Federal government, some percentage of which Grynberg, as relator, may be entitled to recover; (b) treble damages; (c) civil
penalties; (d) an order requiring defendants to measure the way Grynberg contends is the better way to do so; and (e) interest, costs
and attorneys’ fees. Various appeals and hearings were held in this matter from 2006 to late 2009. In October 2009, this matter
concluded with the dismissal of all complaints against the Company. The Company now considers this case closed.
Will Price, et al. v. El Paso Natural Gas Co., et al. (Price I). On September 24, 1999, various subsidiaries of OGE Energy
were served with a class action petition filed in the District Court of Stevens County, Kansas by Quinque Operating Company and
other named plaintiffs alleging the mismeasurement of natural gas on non-Federal lands. On April 10, 2003, the court entered an
order denying class certification. On May 12, 2003, the plaintiffs (now Will Price, Stixon Petroleum, Inc., Thomas F. Boles and the
Cooper Clark Foundation, on behalf of themselves and other royalty interest owners) filed a motion seeking to file an amended class
action petition, and the court granted the motion on July 28, 2003. In its amended petition (the “Fourth Amended Petition”), the
Company and Enogex Inc. were omitted from the case but two of OGE Energy’s other subsidiary entities remained as
defendants. The plaintiffs’ Fourth Amended Petition seeks class certification and alleges that approximately 60 defendants, including
two of OGE Energy’s subsidiary entities, have improperly measured the volume of natural gas. The Fourth Amended Petition asserts
theories of civil conspiracy, aiding and abetting, accounting and unjust enrichment. In their briefing on class certification, the
plaintiffs seek to also allege a claim for conversion. The plaintiffs seek unspecified actual damages, attorneys’ fees, costs and pre-
judgment and post-judgment interest. The plaintiffs also reserved the right to seek punitive damages.
Discovery was conducted on the class certification issues, and the parties fully briefed these same issues. A hearing on class
certification issues was held April 1, 2005. In May 2006, the court heard oral argument on a motion to intervene filed by Colorado
Consumers Legal Foundation, which is claiming entitlement to participate in the putative class action. The court has not yet ruled on
the motion to intervene.
The class certification issues were briefed and argued by the parties in 2005 and proposed findings of facts and conclusions
of law on class certification were filed in 2007. On September 18, 2009, the court entered its order denying class certification. On
October 2, 2009, the plaintiffs filed for a rehearing of the court’s denial of class certification. On February 10, 2010 the court heard
arguments on the rehearing. No ruling on this motion has been made.
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