OG&E 2010 Annual Report Download - page 26

permits, approvals and certificates have been obtained for our existing operations and that our business is conducted in accordance
with applicable laws; however, we are unable to predict the impact on our operating results from future regulatory activities of these
agencies.
The Energy Policy Act of 2005 gave the FERC authority to establish mandatory electric reliability rules enforceable with
significant monetary penalties. The FERC has approved the NERC as the Electric Reliability Organization for North America and
delegated to it the development and enforcement of electric transmission reliability rules. It is our intent to comply with all applicable
reliability rules and expediently correct a violation should it occur. We are subject to a NERC compliance audit every three years as
well as periodic spot check audits and cannot predict the outcome of those audits.
OPERATIONAL RISKS
Our results of operations may be impacted by disruptions beyond our control.
We are exposed to risks related to performance of contractual obligations by our suppliers. We are dependent on coal for
much of our electric generating capacity. We rely on suppliers to deliver coal in accordance with short and long- term contracts. We
have certain coal supply contracts in place; however, there can be no assurance that the counterparties to these agreements will fulfill
their obligations to supply coal to us. The suppliers under these agreements may experience financial or technical problems that
inhibit their ability to fulfill their obligations to us. In addition, the suppliers under these agreements may not be required to supply
coal to us under certain circumstances, such as in the event of a natural disaster. Coal delivery may be subject to short-term
interruptions or reductions due to various factors, including transportation problems, weather and availability of equipment. Failure or
delay by our suppliers of coal deliveries could disrupt our ability to deliver electricity and require us to incur additional expenses to
meet the needs of our customers.
Also, because our generation and transmission systems are part of an interconnected regional grid, we face the risk of
possible loss of business due to a disruption or black-out caused by an event (severe storm, generator or transmission facility outage)
on a neighboring system or the actions of a neighboring utility. Any such disruption could result in a significant decrease in revenues
and significant additional costs to repair assets, which could have a material adverse impact on our financial position and results of
operations.
The Company’s electric generating facilities are subject to operational risks that could result in unscheduled 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 output and efficiency levels. Included among these risks are:
Ÿ Increased prices for fuel and fuel transportation as existing contracts expire;
Ÿ Facility shutdowns due to a breakdown or failure of equipment or processes or interruptions in fuel supply;
Ÿ Operator error or safety related stoppages;
Ÿ Disruptions in the delivery of electricity; and
Ÿ Catastrophic events such as fires, explosions, floods or other similar occurrences.
Economic conditions could negatively impact our business and our results of operations.
Our operations are affected by local, national and worldwide economic conditions. The consequences of a prolonged
recession could include a lower level of economic activity and uncertainty regarding energy prices and the capital and commodity
markets. A lower level of economic activity could result in a decline in energy consumption, which could adversely affect our
revenues and future growth. Instability in the financial markets, as a result of recession or otherwise, also could affect the cost of
capital and our ability to raise capital.
Current economic conditions may be exacerbated by insufficient financial sector liquidity leading to potential increased
unemployment, which could impact the ability of our customers to pay timely, increase customer bankruptcies, and could lead to
increased bad debt. If such circumstances occur, we expect that commercial and industrial customers would be impacted first, with
residential customers following.
In addition, economic conditions, particularly budget shortfalls, could lead to increased pressure on Federal, state and local
governments to raise additional funds, including through increased corporate taxes and/or through delaying, reducing or eliminating
tax credits, grants or other incentives, which could have a material adverse impact on our results of operations.
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