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OKLAHOMA GAS & ELECTRIC CO
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 02/17/2011
Filed Period 12/31/2010

Table of contents

  • Page 1
    OKLAHOMA GAS & ELECTRIC CO 10-K Annual report pursuant to section 13 and 15(d) Filed on 02/17/2011 Filed Period 12/31/2010

  • Page 2
    ... to Section 12(g) of the Act: None OKLAHOMA GAS AND ELECTRIC COMPANY Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or...

  • Page 3
    ... of capital stock of the registrant outstanding at such date. DOCUMENTS INCORPORATED BY REFERENCE None Oklahoma Gas and Electric Company meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format permitted...

  • Page 4
    OKLAHOMA GAS AND ELECTRIC COMPANY FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2010 TABLE OF CONTENTS GLOSSARY OF TERMS FORWARD-LOOKING STATEMENTS Item 1. Business The Company Environmental Matters Finance and Construction Employees Executive Officers Access to SEC Filings Item 1A. Risk Factors Item 1B...

  • Page 5
    ... of Certain Beneficial Owners and Management and Related Stockholder Matters 95 Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services Part IV Item 15. Exhibits, Financial Statement Schedules Signatures i 95 95 96 103

  • Page 6
    ... Recovery and Reinvestment Act of 2009 Best Available Retrofit Technology Company's 120 MW wind farm in northwestern Oklahoma Critical Infrastructure Protection Internal Revenue Code of 1986 Oklahoma Gas and Electric Company, wholly-owned subsidiary of OGE Energy Company's Crossroads wind project...

  • Page 7
    ... power production producers Federal Resource Conservation and Recovery Act of 1976 Company's 1,230 MW natural gas-fired, combined-cycle generation facility in Luther, Oklahoma Request for proposal Securities and Exchange Commission Supplemental Executive Retirement Plan State implementation plan...

  • Page 8
    ...; the ability of the Company and OGE Energy to access the capital markets and obtain financing on favorable terms; prices and availability of electricity, coal and natural gas; business conditions in the energy industry; competitive factors including the extent and timing of the entry of additional...

  • Page 9
    ... the largest electric utility in Oklahoma and its franchised service territory includes the Fort Smith, Arkansas area. The Company sold its retail natural gas business in 1928 and is no longer engaged in the natural gas distribution business. The Company's principal executive offices are located at...

  • Page 10
    OKLAHOMA GAS AND ELECTRIC COMPANY CERTAIN OPERATING STATISTICS Year ended December 31 ELECTRIC ENERGY (Millions of MWH) Generation (exclusive of station use) Purchased Total generated and purchased Company use, free service and losses Electric energy sold ELECTRIC ENERGY SOLD (Millions of MWH) ...

  • Page 11
    ... its power-generation portfolio in the future. On January 19, 2011, the APSC issued an order finding that the 280 MW wind power purchase agreements are prudent and should be recovered through the Energy Cost Recovery rider. Windspeed Transmission Line Project. The OCC approved the Company's request...

  • Page 12
    ... the opportunity to receive a monthly home energy report. This report shall be made available, free of charge, to customers eligible for the Company's Low Income Home Energy Assistance Program and/or Senior Citizen program who are without internet service. The incremental costs for web portal access...

  • Page 13
    ...quarter of 2011. 2010 Arkansas Rate Case Filing. On September 28, 2010, the Company filed a rate case with the APSC requesting a rate increase of $17.7 million, to recover the cost of significant electric system expansions and upgrades, including high-voltage transmission lines and wind energy, that...

  • Page 14
    ... 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 120 miles of transmission line from the Company's Seminole substation in a northeastern direction to the Company's Muskogee substation...

  • Page 15
    ...certain types of rate-regulated activities for some or all of its operations, it could result in writing off the related regulatory assets; the financial effects of which could be significant. Rate Structures Oklahoma The Company's standard tariff rates include a cost-of-service component (including...

  • Page 16
    ... on a price signal received from the Company. The day-ahead price is based on the Company's projected next day hourly operating costs. Fuel Supply and Generation During 2010, 55 percent of the Company-generated energy was produced by coal-fired units, 42 percent by natural gas-fired units and three...

  • Page 17
    ...power purchase agreement. Additionally, on July 29, 2010, the OCC approved a settlement that would allow the Company to build, own and operate 227.5 MWs of wind turbine generators for Crossroads, which is expected to be in service by the end of 2011. On January 5, 2010, the Company received an order...

  • Page 18
    ... to Financial Statements. FINANCE AND CONSTRUCTION Future Capital Requirements Capital Requirements The Company's primary needs for capital are related to acquiring or constructing new facilities and replacing or expanding existing facilities in its electric utility business. Other working capital...

  • Page 19
    ... incremental growth opportunities in electric transmission assets, will be evaluated based upon their impact upon achieving the Company's financial objectives. Pension and Postretirement Benefit Plans During each of 2010 and 2009, OGE Energy made contributions to its Pension Plan of $50 million, of...

  • Page 20
    ... William J. Bullard Scott Forbes Max J. Myers Jerry A. Peace Age 57 55 43 52 60 50 48 52 46 46 62 53 62 54 62 53 36 48 Title Chairman of the Board and Chief Executive Officer President and Chief Operating Officer Vice President and Chief Financial Officer Vice President - Governance, Environmental...

  • Page 21
    ...President of OGE Energy and President and Chief Operating Officer of Enogex Inc. Vice President and Chief Financial Officer of OGE Energy and the Company Chief Financial Officer of Enogex Holdings Chief Financial Officer of Enogex LLC Senior Vice President - Investor Relations and Financial Planning...

  • Page 22
    ...2009 - Present: 2007 - 2009: 2006 - 2007: 2006: Business Experience Vice President - Human Resources of OGE Energy and the Company Vice President and Chief Financial Officer of Enogex LLC Vice President and Chief Financial Officer of Cayenne Drilling, LLC and Sunstone Energy Group LLC (oil and gas...

  • Page 23
    ... we operate regulate many aspects of our utility operations including siting and construction of facilities, customer service and the rates that we can charge customers. The profitability of our utility operations is dependent on our ability to fully recover costs related to providing energy and...

  • Page 24
    ...recovery, in practical terms our regulators could limit the amount or timing of increased costs that we would recover through higher rates. Any such limitation could adversely affect our results of operations and financial position. The Company may not realize the expected benefits of its Smart Grid...

  • Page 25
    ... we cannot predict the ultimate impact of any future changes in accounting regulations or practices in general with respect to public companies, the energy industry or our operations specifically. Any new accounting standards could affect the way we are required to record revenues, expenses, assets...

  • Page 26
    ... plant outages, unanticipated operation and maintenance expenses and increased power purchase costs. The Company owns and operates coal-fired, natural gas-fired and wind-powered generating facilities. Operation of electric generating facilities involves risks that can adversely affect energy...

  • Page 27
    ... purchase and sale commitments, fuel requirements and inventories of natural gas. FINANCIAL RISKS Market performance, increased retirements, changes in retirement plan regulations and increasing costs associated with our defined benefit retirement plans, health care plans and other employee-related...

  • Page 28
    .... The increasing costs and funding requirements with our defined benefit retirement plan, health care plans and other employee benefits may adversely affect our results of operations, financial position, or liquidity. We face certain human resource risks associated with the availability of trained...

  • Page 29
    ... (A) 2010 Capacity Factor = 2010 Net Actual Generation / (2010 Net Maximum Capacity (Nameplate Rating in MWs) x Period Hours (8,760 Hours)). (B) Muskogee Unit 3 was retired in December 2010. (C) Peaking units are used when additional short-term capacity is required. (D) Represents the Company's 51...

  • Page 30
    ... have a material adverse effect on the Company's financial position, results of operations or cash flows. 1. 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...

  • Page 31
    .... In its December 9, 2009 order, the OCC advised the plaintiffs that the ruling does not address the question of whether the Company's collection and remittance of such sales tax should be discontinued prospectively. On April 19, 2010, the OCC issued a final order dismissing with prejudice the...

  • Page 32
    .... In 2009, the Company declared no dividends to OGE Energy. Item 6. Selected Financial Data. HISTORICAL DATA Year ended December 31 SELECTED FINANCIAL DATA (In millions) Results of Operations Data: Operating revenues Cost of goods sold Gross margin on revenues Operating expenses Operating income...

  • Page 33
    ... increase in the Company's cost of conducting business. The Company's service territory is in central Oklahoma and borders one of the nation's best wind resource areas. Uncertainty surrounding global climate change and environmental concerns related to new coal-fired generation development...

  • Page 34
    ... Energy Cost Recovery rider. 2010 Arkansas Rate Case Filing On September 28, 2010, the Company filed a rate case with the APSC requesting a rate increase of $17.7 million, to recover the cost of significant electric system expansions and upgrades, including high-voltage transmission lines and wind...

  • Page 35
    ... the seasonal nature of air conditioning demand. Results of Operations The following discussion and analysis presents factors that affected the Company's results of operations for the years ended December 31, 2010, 2009 and 2008 and the Company's financial position at December 31, 2010 and 2009. The...

  • Page 36
    ...-system sales 1.0 1.4 0.5 Total sales 26.9 28.2 28.1 Number of customers 776,550 770,088 782,558 Average cost of energy per KWH - cents Natural gas 3.696 8.455 4.638 Coal 1.747 1.153 1.911 Total fuel 2.474 3.337 3.012 Total fuel and purchased power 2.760 3.710 3.064 Degree days (A) Heating - Actual...

  • Page 37
    ...Cost of goods sold for the Company consists of fuel used in electric generation, purchased power and transmission related charges. Fuel expense was $771.0 million in 2010 as compared to $618.5 million in 2009, an increase of $152.5 million, or 24.7 percent, primarily due to higher natural gas prices...

  • Page 38
    ... credit related to the change in the tax method of accounting for capitalization of repair expenditures. These increases in income tax expense were partially offset by an increase in Federal renewable energy credits in 2010 as compared to 2009. 2009 compared to 2008. The Company's operating income...

  • Page 39
    ... Cost of goods sold for the Company consists of fuel used in electric generation, purchased power and transmission related charges. Fuel expense was $618.5 million in 2009 as compared to $857.2 million in 2008, a decrease of $238.7 million, or 27.8 percent, primarily due to lower natural gas prices...

  • Page 40
    ... from customers related to the fuel under recovery balance in 2008 and interest income from short-term investments. Allowance for Equity Funds Used During Construction. AEFUDC was $15.1 million in 2009. There was no AEFUDC in 2008. The increase in AEFUDC was primarily due to construction costs...

  • Page 41
    ... average prices. The balance of Construction Work in Progress was $328.1 million and $259.9 million at December 31, 2010 and 2009, respectively, an increase of $68.2 million, or 26.2 percent, primarily due to increased spending on various distribution, transmission and generation projects, including...

  • Page 42
    ... being constructed by the Company. The increase of $167.8 million in net cash provided from financing activities in 2010 as compared to 2009 was primarily due to the Company using the proceeds received from the issuance of $250 million of long-term debt in June 2010 to make payments to OGE Energy...

  • Page 43
    ... Activities The Company's primary needs for capital are related to acquiring or constructing new facilities and replacing or expanding existing facilities in its electric utility business. Other working capital requirements are expected to be primarily related to maturing debt, operating lease...

  • Page 44
    ...customers, including exercising its options (if applicable) to extend these QF contracts at pre-determined rates. Variances in the actual cost of fuel used in electric generation (which includes the operating lease obligations for the Company's railcar leases shown above) and certain purchased power...

  • Page 45
    ... prices, acquisitions of other businesses and/or development of projects, actions by rating agencies, inflation, changes in environmental laws or regulations, rate increases or decreases allowed by regulatory agencies, new legislation and market entry of competing electric power generators. 2010...

  • Page 46
    ... into service from January 1, 2012 to December 31, 2012. For financial accounting purposes, the Company recorded an increase in Non-Current Deferred Income Taxes Liability at December 31, 2010 on the Company's Balance Sheet to recognize the financial statement impact of this new law. Future Sources...

  • Page 47
    ...and disclosure of the following critical accounting estimates have been discussed with OGE Energy's Audit Committee. Pension and Postretirement Benefit Plans OGE Energy has a Pension Plan that covers substantially all of the Company's employees hired before December 1, 2009. Also, effective December...

  • Page 48
    ... customers' electricity consumption that has not been billed at the end of each month. Unbilled revenue is presented in Accrued Unbilled Revenues on the Balance Sheets and in Operating Revenues on the Statements of Income based on estimates of usage and prices during the period. At December 31, 2010...

  • Page 49
    ...pollutants from various industrial sources, including electric generating units, and also impose various monitoring and reporting requirements. Such laws and regulations may require that the Company obtain preapproval for the construction or modification of certain projects or facilities expected to...

  • Page 50
    ... agreement between the Oklahoma Department of Environmental Quality and the Company that established BART for SO2 control at four coal-fired units located at the Company's Sooner and Muskogee generating stations as the continued use of low sulfur coal (along with associated emission rates and limits...

  • Page 51
    ... January 25, 2010, the EPA released a rule strengthening the NAAQS for oxides of nitrogen as measured by nitrogen dioxide which is effective March 26, 2011. The rule establishes a new one-hour standard and monitoring requirements, as well as an approach for implementing the new standard. Oklahoma is...

  • Page 52
    ... final rule that makes certain sources subject to permitting requirements for greenhouse gas emissions. The permitting requirements will become effective in 2011. Significant new sources and existing sources undergoing significant modifications may have to install and operate "best available control...

  • Page 53
    ... reduce the effects of these changes. Interest rate derivatives are used solely to modify interest rate exposure and not to modify the overall leverage of the debt portfolio. The fair value of the Company's long-term debt is based on quoted market prices and estimates of current rates available for...

  • Page 54
    ... 8. Financial Statements and Supplementary Data. OKLAHOMA GAS AND ELECTRIC COMPANY STATEMENTS OF INCOME Year ended December 31 (In millions) OPERATING REVENUES COST OF GOODS SOLD (exclusive of depreciation and amortization shown below) Gross margin on revenues OPERATING EXPENSES Other operation and...

  • Page 55
    ... for equity funds used during construction) Proceeds from sale of assets Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt Decrease in short-term debt Capital contribution from OGE Energy Retirement of long-term debt Changes in advances with...

  • Page 56
    OKLAHOMA GAS AND ELECTRIC COMPANY BALANCE SHEETS December 31 (In millions) ASSETS CURRENT ASSETS Accounts receivable, less reserve of $1.6 and $1.7, respectively Accrued unbilled revenues Advances to parent Fuel inventories Materials and supplies, at average cost Gas imbalances Deferred income taxes...

  • Page 57
    OKLAHOMA GAS AND ELECTRIC COMPANY BALANCE SHEETS (Continued) December 31 (In millions) LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable - affiliates Accounts payable - other Customer deposits Accrued taxes Accrued interest Accrued compensation Price risk management Fuel ...

  • Page 58
    OKLAHOMA GAS AND ELECTRIC COMPANY STATEMENTS OF CAPITALIZATION December 31 (In millions) STOCKHOLDER'S EQUITY Common stock, par value $2.50 per share; authorized 100.0 shares; and outstanding 40.4 and 40.4 shares, respectively Premium on common stock Retained earnings Accumulated other comprehensive...

  • Page 59
    ... of tax Comprehensive income (loss) Dividends declared on common stock Balance at December 31, 2010 $ Total 1,423.3 143.0 143.0 (35.0) 293.0 1,824.3 200.4 (0.4) 200.0 2,024.3 215.7 (1.7) 214.0 (60.2) 2,178.1 $ $ $ $ $ $ $ $ $ OKLAHOMA GAS AND ELECTRIC COMPANY STATEMENTS OF COMPREHENSIVE...

  • Page 60
    ... south central United States. The Company was incorporated in 1902 under the laws of the Oklahoma Territory. The Company is the largest electric utility in Oklahoma and its franchised service territory includes the Fort Smith, Arkansas area. The Company sold its retail natural gas business in 1928...

  • Page 61
    ... recovers pension and postretirement benefit plan expense in its electric rates and (ii) there was no negative evidence that the existing regulatory treatment will change. The Company met both criteria and, therefore, recorded the net loss, prior service cost and net transition obligation as...

  • Page 62
    ... the opportunity to receive a monthly home energy report. This report shall be made available, free of charge, to customers eligible for the Company's Low Income Home Energy Assistance Program and/or Senior Citizen program who are without internet service. The incremental costs for web portal access...

  • Page 63
    ... 2005 in its Oklahoma rate case, the Company was allowed to recover a certain amount of pension plan expenses. These deferred amounts have been recorded as a regulatory asset as the Company received an order in July 2009 allowing it to begin recovery of $16.8 million of these costs over a four-year...

  • Page 64
    ... generation of electricity consist of coal, natural gas and oil. The Company uses the weightedaverage cost method of accounting for inventory that is physically added to or withdrawn from storage or stockpiles. The amount of fuel inventory was $134.9 million and $101.0 million at December 31, 2010...

  • Page 65
    ... customers. The Company records the hourly sales to the SPP at market rates in Operating Revenues and the hourly purchases from the SPP at market rates in Cost of Goods Sold in its Financial Statements. Fuel Adjustment Clauses Variances in the actual cost of fuel used in electric generation...

  • Page 66
    ..., 2010 and 2009. Related Party Transactions OGE Energy charged operating costs to the Company of $106.9 million, $92.6 million and $87.4 million in 2010, 2009 and 2008, respectively. OGE Energy charges operating costs to its subsidiaries based on several factors. Operating costs directly related to...

  • Page 67
    ... accounting guidance in this area. The Company adopted the relevant provisions of this new standard effective January 1, 2010 and included the required disclosures beginning in the Company's Form 10-Q for the quarter ended March 31, 2010. The new standard also required additional disclosures related...

  • Page 68
    ... under the 2008 Stock Incentive Plan. The following table summarizes the Company's pre-tax compensation expense and related income tax benefit for the years ended December 31, 2010, 2009 and 2008 related to the Company's portion of OGE Energy's performance units and restricted stock. December 31 (In...

  • Page 69
    ... return are shown in the following table. Number of units granted to Company employees Expected dividend yield Expected price volatility Risk-free interest rate Expected life of units (in years) Fair value of units granted 2010 43,027 3.9% 34.0% 1.42% 2.87 39.43 2009 61,718 4.5% 31.0% 1.25% 2.88 25...

  • Page 70
    ... OGE Energy and its subsidiaries. A summary of the activity for OGE Energy's non-vested performance units applicable to the Company's employees based on total shareholder return at December 31, 2010 and changes during 2010 are shown in the following table: Weighted-Average Number Grant Date of Units...

  • Page 71
    ... cost related to non-vested performance units based on EPS which is expected to be recognized over a weighted-average period of 1.69 years. Stock Options The Company recorded no compensation expense in 2010, 2009 or 2008 as all stock options are fully vested. A summary of the activity for OGE Energy...

  • Page 72
    ... cost of generation associated with a wholesale power sales contract with the OMPA. Enogex sold physical natural gas to OER, and the Company entered into an offsetting natural gas swap with OER. These transactions are for 50,000 MMBtu's per month from August 2009 to December 2013. Normal purchases...

  • Page 73
    ...of interest capitalized, and cash paid for income taxes, net of income tax refunds. Year ended December 31 (In millions) NON-CASH INVESTING AND FINANCING ACTIVITIES Power plant long-term service agreement Future installment payments to wind farm developer SUPPLEMENTAL CASH FLOW INFORMATION Cash Paid...

  • Page 74
    ... energy credit (A) Other Effective income tax rate (A) These are credits associated with the production from the Company's wind farms. 2010 35.0 % 2.3 1.6 1.0 (1.1) (4.7) (0.1) 34.0 % 2009 35.0 % (1.2) 0.2 1.0 (1.5) (2.8) 0.3 31.0 % 2008 35.0 % (0.4) (2.1) 1.3 (2.4) (4.6) --26.8 % The Company filed...

  • Page 75
    ...resulted in a $30 million current income tax receivable related to the 2009 tax year. On November 6, 2009, the Worker, Homeownership, and Business Assistance Act of 2009 was signed into law by the President. This new law provided for a five-year carry back of net operating losses incurred in 2008 or...

  • Page 76
    ... Act. OGE Energy has been recognizing the Federal subsidy since 2005 related to certain retiree prescription drug plans that were determined to be actuarially equivalent to the benefit provided under Medicare Part D. Under the Medicare Act, the Federal subsidy does not reduce an employer's income...

  • Page 77
    ... of Retirement Income Plan In October 2009, OGE Energy's Pension Plan and OGE Energy's 401(k) Plan were amended, effective January 1, 2010 to provide eligible employees a choice to select a future retirement benefit combination from OGE Energy's Pension Plan and OGE Energy's 401(k) Plan. Employees...

  • Page 78
    ... end of year The following table summarizes the benefit payments the Company expects to pay related to its Pension Plan and Restoration of Retirement Income Plan. These expected benefits are based on the same assumptions used to measure the OGE Energy's benefit obligation at the end of the year and...

  • Page 79
    71

  • Page 80
    ...cap equity managers) after accounting for price appreciation. A minimum of 95 percent of the total assets of an equity manager's portfolio must be allocated to the equity markets. Options or financial futures may not be purchased unless prior approval of OGE Energy's Investment Committee is received...

  • Page 81
    ... bonds Preferred stocks (foreign) Interest-bearing cash Forward contracts Total Plan investments Receivable from broker for securities sold Interest and dividends receivable Payable to broker for securities purchased Plan investments attributable to affiliates Total Plan assets 73 December 31, 2010...

  • Page 82
    ... coverage from a Company-provided third-party administrator. The effect of these plan amendments will be reflected in OGE Energy's March 31, 2011 Consolidated Balance Sheet as a reduction to the postretirement benefit obligation of $91.3 million, an increase in other comprehensive income of $16...

  • Page 83
    ... at January 1 Actual return on plan assets relating to investments held at the reporting date Balance at December 31 The following table presents the status of the Company's portion of OGE Energy's postretirement benefit plans at December 31, 2010 and 2009. These amounts have been recorded in...

  • Page 84
    ... payments the Company expects to pay related to its postretirement benefit plans, including prescription drug benefits, and the Federal subsidy receipts the Company expects to receive provided by the Medicare Act. OGE Energy received $1.4 million in Federal subsidy receipts in 2010. Gross Projected...

  • Page 85
    ... Oklahoma jurisdiction which are identified as Deferred Pension Plan Expenses (see Note 1); and a reduction in pension expense in 2009 of $3.2 million in the Arkansas jurisdiction to reflect the approval of recovery Company's 2006 and 2007 pension settlement costs in the May 2009 Arkansas rate order...

  • Page 86
    ... OGE Energy's Group Long-Term Disability Plan due to death, recovery from disability, or eligibility for retiree medical benefits. The Company's post-employment benefit obligation was $1.6 million and $1.7 million at December 31, 2010 and 2009, respectively. Defined Contribution Retirement Plan OGE...

  • Page 87
    ... to the Company's coal-fired generation units. Rental payments are charged to Fuel Expense and are recovered through the Company's tariffs and fuel adjustment clauses. On December 15, 2010, the Company renewed the lease agreement effective February 1, 2011. At the end of the new lease term, which is...

  • Page 88
    ...for having the capacity available. However, if no electrical power is made available to the Company for a period of time (generally three months), the Company's obligation to pay the capacity charge is suspended. The total cost of cogeneration payments is recoverable in rates from customers. For the...

  • Page 89
    ...-2011, along with monthly and daily purchases, all of which are expected to be made at market prices. Natural Gas Measurement Case 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...

  • Page 90
    ... the Company's business activities in many ways, such as restricting the way it can handle or dispose of its wastes, requiring remedial action to mitigate pollution conditions that may be caused by its operations or that are attributable to former operators, regulating future construction activities...

  • Page 91
    ... January 25, 2010, the EPA released a rule strengthening the NAAQS for oxides of nitrogen as measured by nitrogen dioxide which is effective March 26, 2011. The rule establishes a new one-hour standard and monitoring requirements, as well as an approach for implementing the new standard. Oklahoma is...

  • Page 92
    ... the Company's Muskogee and Sooner generating plants. In recent years, the EPA has issued similar requests to numerous other electric utilities seeking to determine whether various maintenance, repair and replacement projects should have required permits under the Federal Clean Air Act's new source...

  • Page 93
    ... costs are expected to be recovered in base rates resulting from the Company's 2010 Arkansas rate case). Renewable Energy Filing In September 2009, the Company reached agreements with two developers who are to build two new wind farms, totaling 280 MWs, in northwestern Oklahoma. Under the terms...

  • Page 94
    On January 19, 2011, the APSC issued an order finding that the 280 MW wind power purchase agreements are prudent and should be recovered through the Energy Cost Recovery rider. Windspeed Transmission Line Project The OCC approved the Company's request to recover construction costs of up to $218 ...

  • Page 95
    ... the opportunity to receive a monthly home energy report. This report shall be made available, free of charge, to customers eligible for the Company's Low Income Home Energy Assistance Program and/or Senior Citizen program who are without internet service. The incremental costs for web portal access...

  • Page 96
    ... Matters 2010 Arkansas Rate Case Filing On September 28, 2010, the Company filed a rate case with the APSC requesting a rate increase of $17.7 million, to recover the cost of significant electric system expansions and upgrades, including high-voltage transmission lines and wind energy, that...

  • Page 97
    ...from the SPP to begin construction on 50 miles of a new 345 kV transmission line and substation upgrades at the Company's Sunnyside substation, among other projects. In April 2009, Western Farmers Electric Cooperative assigned to the Company the construction of 50 miles of line designated by the SPP...

  • Page 98
    ... effective in May 2010 and established an Oklahoma renewable portfolio standard with a statewide goal of renewable energy capacity (on an installed electric generation capacity basis) of 15 percent by year 2015. House Bill 3028 also designated natural gas as the preferred fuel for all new fossil...

  • Page 99
    ... PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholder Oklahoma Gas and Electric Company We have audited the accompanying balance sheets and statements of capitalization of Oklahoma Gas and Electric Company as of December 31, 2010 and 2009, and the related statements of income, changes in...

  • Page 100
    ... required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. In addition, the disclosure controls and procedures ensure that...

  • Page 101
    ... Peter B. Delaney, Chairman of the Board and Chief Executive Officer /s/ Sean Trauschke Sean Trauschke, Vice President and Chief Financial Officer /s/ Danny P. Harris Danny P. Harris, President and Chief Operating Officer /s/ Scott Forbes Scott Forbes, Controller and Chief Accounting Officer 93

  • Page 102
    ... the standards of the Public Company Accounting Oversight Board (United States), the balance sheets and statements of capitalization of Oklahoma Gas and Electric Company as of December 31, 2010 and 2009, and the related statements of income, changes in stockholder's equity, comprehensive income and...

  • Page 103
    ... the chief financial officer and chief accounting officer, which is available for public viewing on OGE Energy's web site address www.oge.com under the heading "Investor Relations", "Corporate Governance." The code of ethics will be provided, free of charge, upon request. The Company intends to...

  • Page 104
    ... other fees billed by the independent auditors to OGE Energy in 2010 and 2009 for other services. Audit Committee Pre-Approval Procedures Rules adopted by the SEC in order to implement requirements of the Sarbanes-Oxley Act of 2002 require public company audit committees to pre-approve audit and non...

  • Page 105

  • Page 106
    ... Agreement, dated as of June 17, 2004 by and between the Company and NRG McClain LLC. (Filed as Exhibit 2.03 to OGE Energy's Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12579) and incorporated by reference herein) Purchase and Sale Agreement, dated as of January 21, 2008, entered into...

  • Page 107
    ... Registration Statement No. 33-59805, and incorporated by reference herein) Copy of Amended Oklahoma Gas and Electric Company By-laws. (Filed as Exhibit 3.02 to OGE Energy's Form 8-K filed January 23, 2007 (File No. 1-12579) and incorporated by reference herein) Trust Indenture dated October 1, 1995...

  • Page 108
    98

  • Page 109
    ... rate case. (Filed as Exhibit 99.02 to OGE Energy's Form 8-K filed July 6, 2009 (File No. 1-12579) and incorporated by reference herein) Amended and Restated Facility Operating Agreement for the McClain Generating Facility dated as of July 9, 2004 between the Company and the Oklahoma Municipal Power...

  • Page 110
    ... herein) Employment Agreement between OGE Energy and Sean Trauschke, the Company's Chief Financial Officer. (Filed as Exhibit 10.01 to OGE Energy's Form 8-K filed May 8, 2009 (File No. 1-12579) and incorporated by reference herein) Copy of Settlement Agreement with Oklahoma Corporation Commission...

  • Page 111
    ...of OCC order with Oklahoma Corporation Commission Staff, the Oklahoma Attorney General and others relating to the Company's rate case. (Filed as Exhibit 99.02 to OGE Energy's Form 8-K filed July 30, 2009 (File No. 1-12579) and incorporated by reference herein) Copy of APSC order with Arkansas Public...

  • Page 112
    101.DEF XBRL Definition Linkbase Document. * Represents executive compensation plans and arrangements. 101

  • Page 113
    OKLAHOMA GAS AND ELECTRIC COMPANY SCHEDULE II - Valuation and Qualifying Accounts Additions Charged to Charged to Costs and Other Expenses Accounts (In millions) Description Year Ended December 31, 2008 Reserve for Uncollectible Accounts Year Ended December 31, 2009 Reserve for Uncollectible ...

  • Page 114
    ... Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Oklahoma City, and State of Oklahoma on the 17th day of February, 2011. OKLAHOMA GAS AND ELECTRIC COMPANY (Registrant) By...

  • Page 115
    Supplemental Information to Be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. The Registrant has not sent, and does not expect to send, an annual report or proxy statement to its security ...

  • Page 116
    OKLAHOMA GAS AND ELECTRIC COMPANY RATIO OF EARNINGS TO FIXED CHARGES Year ended December 31 (In millions) Earnings: Pre-tax income Add Fixed Charges Subtotal Subtract: Allowance for borrowed funds used during construction Total Earnings Fixed Charges: Interest on long-term debt Interest on short-...

  • Page 117
    ... Gas and Electric Company, and the effectiveness of internal control over financial reporting of Oklahoma Gas and Electric Company, included in the Annual Report (Form 10-K) for the year ended December 31, 2010. /s/ Ernst & Young LLP Ernst & Young LLP Oklahoma City, Oklahoma February 17, 2011

  • Page 118
    ... Financial Officer Scott Forbes, Principal Accounting Officer STATE OF OKLAHOMA ) ) SS COUNTY OF OKLAHOMA ) On the date indicated above, before me, Kelly D. Lang, Notary Public in and for said County and State, personally appeared the above named directors and officers of OKLAHOMA GAS AND ELECTRIC...

  • Page 119
    ... certify that: 1. I have reviewed this annual report on Form 10-K of Oklahoma Gas and Electric Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances...

  • Page 120
    ... Trauschke, certify that: 1. I have reviewed this annual report on Form 10-K of Oklahoma Gas and Electric Company; Exhibit 31.01 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in...

  • Page 121
    ...contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. February 17, 2011 /s/ Peter B. Delaney Peter B. Delaney Chairman of the Board and Chief Executive Officer /s/ Sean Trauschke Sean Trauschke Vice President and Chief...

  • Page 122
    ...transmission system operation and/or administration initiatives; recovery of investments made under traditional regulation; nature of competitors entering the industry; retail wheeling; a new pricing structure; and former customers entering the generation market; Factors affecting utility operations...

  • Page 123
    ... implement its Smart Grid program to install meters for its customers and integrate the Smart Grid meters with its customer billing and other computer information systems; and Discontinuance of accounting principles for certain types of rate-regulated activities. The Company undertakes no...