OG&E 2010 Annual Report Download - page 11

Regulation and Rates
The Company’s retail electric tariffs are regulated by the OCC in Oklahoma and by the APSC in Arkansas. The issuance of
certain securities by the Company is also regulated by the OCC and the APSC. The Company’s wholesale electric tariffs,
transmission activities, short-term borrowing authorization and accounting practices are subject to the jurisdiction of the FERC. The
Secretary of the DOE has jurisdiction over some of the Company’s facilities and operations. For the year ended December 31, 2010,
88 percent of the Company’s electric revenue was subject to the jurisdiction of the OCC, eight percent to the APSC and four percent
to the FERC.
The OCC issued an order in 1996 authorizing the Company to reorganize into a subsidiary of OGE Energy. The order
required that, among other things, (i) OGE Energy permit the OCC access to the books and records of OGE Energy and its affiliates
relating to transactions with the Company, (ii) OGE Energy employ accounting and other procedures and controls to protect against
subsidization of non-utility activities by the Company’s customers and (iii) OGE Energy refrain from pledging Company assets or
income for affiliate transactions. In addition, the Energy Policy Act of 2005 enacted the Public Utility Holding Company Act of 2005,
which in turn granted to the FERC access to the books and records of OGE Energy and its affiliates as the FERC deems relevant to
costs incurred by the Company or necessary or appropriate for the protection of utility customers with respect to the FERC
jurisdictional rates.
Recent and Pending Regulatory Matters
OU Spirit Wind Power Project. As previously disclosed, on November 25, 2009, the Company received an order from the
OCC authorizing the Company to recover from Oklahoma customers the cost to construct OU Spirit, with the rider being implemented
on December 4, 2009. In January 2008, the Company filed with the SPP for an interconnection agreement for the OU Spirit project.
On May 29, 2009, the Company executed an interim interconnection agreement, allowing OU Spirit to interconnect to the
transmission grid, subject to certain conditions. On August 27, 2009, the FERC issued an order accepting the interim interconnection
agreement, subject to certain conditions, which enables OU Spirit to interconnect into the transmission grid. On February 8, 2011, the
final interconnection agreement was put in place.
On January 19, 2011, the APSC issued an order finding that (i) OU Spirit is prudent and is in the public’s interest and (ii) the
$2.1 million of costs associated with OU Spirit from September 1, 2010 through June 30, 2011 should be recovered through the
Energy Cost Recovery rider, which is expected to be filed with the APSC by March 15, 2011 (beginning July 1, 2011, OU Spirit 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 of the agreements, CPV Keenan built a 150 MW
wind farm in Woodward County, which was placed in service in December 2010, and Edison Mission Energy is to build a 130 MW
facility in Dewey County near Taloga, which is expected to be in service during the second quarter of 2011. The agreements are both
20-year power purchase agreements, under which the developers are to build, own and operate the wind generating facilities and the
Company will purchase their electric output. On January 5, 2010, the Company received an order from the OCC approving the power
purchase agreements and authorizing the Company to recover the costs of the power purchase agreements through the Company’s fuel
adjustment clause. The Company will continue to evaluate renewable opportunities to add to 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 to recover construction costs of up to
$218 million, including AFUDC, for Windspeed. Construction costs and AFUDC incurred for Windspeed were $212.3
million. Windspeed was placed into service on March 31, 2010, with the recovery rider being implemented with the first billing cycle
in April 2010.
Long-Term Gas Supply Agreements. In May 2010, the OCC approved the Company’s request for a waiver of the
competitive bid rules to allow the Company to negotiate desired long-term gas purchase agreements. On June 29, 2010, the Company
filed a separate application with the OCC seeking approval of four long-term gas purchase agreements, which would provide a 12-year
supply of natural gas to the Company and account for 25 percent of its currently projected natural gas fuel supply needs over the same
time period. On September 26, 2010, the Company filed a motion with the OCC to dismiss this case. A hearing in this matter was held
on October 7, 2010 and the administrative law judge recommended that the case be dismissed without prejudice. The Company and
the other parties to this matter continue ongoing discussions with the OCC Staff.
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