OG&E 2010 Annual Report Download - page 14

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 a 20-year plan to address issues of regional and
interregional importance. The 20-year plan suggests overlaying the SPP footprint with a 345 kV 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 44 miles of a new 345 kV transmission line which will originate at the
Company’s existing 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. Construction of the line is expected to begin in mid-2011 and the line is estimated to be in
service by June 2012.
In January 2009, the Company received notification 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 to be built by
Western Farmers Electric Cooperative. The new line will extend from the Company’s Sunnyside substation near Ardmore,
Oklahoma, 123.5 miles to the Hugo substation owned by Western Farmers Electric Cooperative near Hugo, Oklahoma. The Company
began preliminary line routing and acquisition of rights-of-way in June 2009. Construction began in January 2011. 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 regional cost allocation mechanism as provided in the SPP tariff for application to such improvements.
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 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 $180 million for the Company, which is expected to be in
service by December 2013, (ii) construction of 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 $120 million for the Company, which is expected to be in service by April 2014, (iii)
construction of 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 $65 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 of the Cimarron-Lawton East Side 345 kV line at an estimated cost of $15 million
for the Company, which is expected to be in service by December 2011. On June 19, 2009, the Company received a notice to
construct the Balanced Portfolio 3E projects from the SPP. On July 23, 2009, the Company responded to the SPP that the Company
will construct the Balanced Portfolio 3E projects discussed above beginning in early 2011.
On April 27, 2010, the SPP approved, contingent upon approval by the FERC of a regional cost allocation methodology
filed with the FERC by the SPP, a set of transmission projects titled “Priority Projects.” The Priority Projects consist of several
transmission projects, two of which have been assigned to the Company. The 345 kV projects include: (i) construction of 92 miles of
transmission line from the Company’s Woodward District EHV substation to a companion transmission line to be built by
Southwestern Public Service to its Hitchland substation in the Texas Panhandle at a cost of $180 million for the Company, which is
expected to be in service by June 2014 and (ii) construction of 80 miles of transmission line from the Company’s Woodward District
EHV substation to a companion transmission line at the Kansas border to be built by either Mid-Kansas Electric Company or another
company assigned by Mid-Kansas Electric Company at a cost of $135 million to the Company, which is expected to be in service by
December 2014. On June 17, 2010, the FERC approved the cost allocation filed by the SPP and notices to construct these Priority
Projects were issued by the SPP on June 30, 2010. On September 27, 2010, the Company responded to the SPP that the Company will
construct the Priority Projects discussed above beginning in June 2012. The scope of the Woodward District EHV substation/Kansas
border Priority Project was subsequently revised and the SPP Board of Directors approved this revision in October 2010. The SPP
issued a revised notice to construct for this Priority Project on November 22, 2010. On February 4, 2011, the Company responded to
the SPP that the Company will construct the revised Priority Project.
The capital expenditures related to the Sooner-Rose Hill, Sunnyside-Hugo, Balanced Portfolio 3E and Priority Projects 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 – Liquidity and Capital Resources – Future Capital Requirements and
Financing Activities.”
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