OG&E 2010 Annual Report Download - page 13

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Ÿ If the three-year rolling average of Crossroads MWHs of production (including a credit for energy not produced due to
curtailments or other events caused by system emergencies, force majeure events, or transmission system issues) falls
below 712,844 MWHs, the Company shall file testimony demonstrating the appropriate operation of Crossroads as part
of its fuel cost recovery filing.
Pursuant to the terms of the settlement, the Company chose to expand Crossroads by an additional 29.7 MWs. As a result of
the expansion, the amount of capital costs which the Company is entitled to recover and the three-year rolling average of MWH
production were adjusted to $469.7 million and 819,879 MWHs, respectively. The total projected cost of the 227.5 MW expanded
project, including AFUDC, is $450 million, which is below the adjusted recovery amount of $469.7 million. The Company entered
into a turbine supply agreement with Siemens whereby the Company is to acquire 227.5 MWs of wind turbine generation at a cost in
excess of $300 million. The Company expects Crossroads to be in service by the end of 2011.
The Company is in the process of entering into an interconnection agreement with the SPP for Crossroads. As part of the
multi-study interconnection process, the SPP conducted an interim operational study to determine the impact Crossroads will have on
the existing transmission system. The SPP verbally indicated that limited interconnection would be necessary to address system
stability limitations. In order to enable full interconnection of Crossroads, the Company put forth a mitigation proposal, consisting of
a system protection relay system, which has recently received all the necessary SPP working group and committee approvals to be
implemented. This will allow Crossroads to interconnect at the anticipated 227.5 MWs. On December 30, 2010, the SPP posted the
results of its interim operational study to reflect the SPP approval of the mitigation strategy. The Company expects a final
interconnection agreement to be put in place by the second 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 have been completed since the last rate filing in August 2008, as well as rising operating
costs. If approved, the targeted implementation date for new electric rates is expected to be during the third quarter of 2011. A hearing
in this matter is scheduled for May 24, 2011.
SPP Cost Tracker. On October 7, 2010, the Company filed an application with the OCC seeking recovery of the Oklahoma
jurisdictional portion of (i) costs associated with transmission upgrades and facilities that have been approved by the SPP in its
regional planning processes and constructed by other transmission owners throughout the SPP that have been allocated to the
Company through the FERC-approved transmission rates and (ii) SPP administrative fees. The Company requested authorization to
implement a cost tracker in order to recover from its retail customers the third-party project costs discussed above and to collect its
administrative SPP cost assessment levied under Schedule 1A of the SPP open access transmission tariff, which is currently recovered
in base rates. The Company also requested authorization to establish a regulatory asset effective January 1, 2011 in order to give the
Company the opportunity to recover such costs that will be paid but not recovered until the cost tracker is made effective. On February
8, 2011, all parties signed a settlement agreement in this matter which would allow the Company to begin recovering the incremental
transmission costs allocated to the Company by the SPP for base plan transmission projects built by other transmission owners in the
SPP through a recovery rider effective January 1, 2011. The Company anticipates recovering $1.8 million of incremental revenues in
2011 through the rider. The Company had requested the inclusion of the incremental SPP administrative fee assessment in the
recovery rider. Rather than including these costs in the recovery rider, the stipulating parties agreed to allow the Company to include
the projected 2012 level of the SPP administrative fee assessment in its anticipated Oklahoma rate case to be filed in the summer of
2011. A hearing on the settlement is scheduled for February 17, 2011. The Company expects to receive an order from the OCC in this
matter during the second quarter of 2011.
FERC Transmission Rate Incentive Filing. On October 12, 2010, the Company submitted to the FERC revised tariff
sheets to its open access transmission tariff and to the SPP open access transmission tariff to implement two limited transmission rate
incentives. If approved by the FERC, the revised tariff sheets will authorize recovery of 100 percent of all prudently incurred
construction work in progress in rate base for specific 345 kV EHV transmission projects to be constructed and owned by the
Company within the SPP’s region. In addition, if approved by the FERC, the revised tariff sheets will authorize the Company to
recover 100 percent of all prudently incurred development and construction costs if the transmission projects are abandoned or
cancelled, in whole or in part, for reasons beyond the Company’s control. On December 30, 2010, the FERC granted these two
incentives for the Priority Projects discussed below. Also, the Company plans to make a filing with the FERC in February 2011 to
seek incentives for at least five other projects.
SPP Transmission/Substation Projects. The SPP is a regional transmission organization under the jurisdiction of the
FERC that 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.
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