OG&E 2010 Annual Report Download - page 30

At December 31, 2010, the Company’s transmission system included: (i) 49 substations with a total capacity of 10.3 million
kVA and 4,210 structure miles of lines in Oklahoma and (ii) seven substations with a total capacity of 2.5 million kVA and 282
structure miles of lines in Arkansas. The Company’s distribution system included: (i) 346 substations with a total capacity of 8.9
million kVA, 26,394 structure miles of overhead lines, 1,849 miles of underground conduit and 8,759 miles of underground
conductors in Oklahoma and (ii) 38 substations with a total capacity of 1.1 million kVA, 2,247 structure miles of overhead lines, 206
miles of underground conduit and 567 miles of underground conductors in Arkansas.
The Company owns 140,133 square feet of office space at its executive offices at 321 North Harvey, Oklahoma City,
Oklahoma 73102. In addition to its executive offices, the Company owns numerous facilities throughout its service territory that
support its operations. These facilities include, but are not limited to, district offices, fleet and equipment service facilities, operation
support and other properties.
During the three years ended December 31, 2010, the Company’s gross property, plant and equipment (excluding
construction work in progress) additions were $2.0 billion and gross retirements were $200.0 million. These additions were provided
by cash generated from operations, short-term borrowings (through a combination of bank borrowings, commercial paper and
borrowings from OGE Energy), long-term borrowings and permanent financings. The additions during this three-year period
amounted to 27.7 percent of gross property, plant and equipment (excluding construction work in progress) at December 31, 2010.
Item 3. Legal Proceedings.
In the normal course of business, the Company is confronted with issues or events that may result in a contingent
liability. These generally relate to lawsuits, claims made by third parties, environmental actions or the action of various regulatory
agencies. Management consults with legal counsel and other appropriate experts to assess the claim. If in management’s opinion, the
Company has incurred a probable loss as set forth by GAAP, an estimate is made of the loss and the appropriate accounting entries are
reflected in the Company’s Financial Statements. Except as set forth below and in Notes 12 and 13 of Notes to Financial Statements,
management, after consultation with legal counsel, does not currently anticipate that liabilities arising out of these pending or
threatened lawsuits, claims and contingencies will 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 of Stevens County, Kansas by Quinque Operating Company
and other named plaintiffs alleging the mismeasurement of natural gas on non-Federal lands. On April 10, 2003, the court entered an
order denying class certification. On May 12, 2003, the plaintiffs (now Will Price, Stixon Petroleum, Inc., Thomas F. Boles and the
Cooper Clark Foundation, on behalf of themselves and other royalty interest owners) filed a motion seeking to file an amended class
action petition, and the court granted the motion on July 28, 2003. In its amended petition, the Company and Enogex Inc. were
omitted from the case but two of OGE Energy’s other subsidiary entities remained as defendants. The plaintiffs’ amended petition
seeks class certification and alleges that 60 defendants, including two of OGE Energy’s subsidiary entities, have improperly measured
the volume of natural gas. The amended petition asserts theories of civil conspiracy, aiding and abetting, accounting and unjust
enrichment. In their briefing on class certification, the plaintiffs seek to also allege a claim for conversion. The plaintiffs seek
unspecified actual damages, attorneys’ fees, costs and pre-judgment and post-judgment interest. The plaintiffs also reserved the right
to seek punitive damages.
On September 18, 2009, the court entered its order denying class certification. On October 2, 2009, the plaintiffs filed for a
rehearing of the court’s denial of class certification. On March 31, 2010, the court denied the plaintiffs’ request for rehearing.
OGE Energy intends to vigorously defend this action. At this time, OGE Energy is unable to provide an evaluation of the
likelihood of an unfavorable outcome and an estimate of the amount or range of potential loss to OGE Energy.
2. Oxley Litigation. The Company has been sued by John C. Oxley D/B/A Oxley Petroleum et al. in the District Court
of Haskell County, Oklahoma. This case had been pending for more than 11 years. The plaintiffs alleged that the Company breached
the terms of contracts covering several wells by failing to purchase gas from the plaintiffs in amounts set forth in the contracts. The
plaintiffs’ most recent Statement of Claim described $2.7 million in take-or-pay damages (including interest) and $36 million
in contract repudiation damages (including interest), subject to the limitation described below. In 2001, the Company agreed to
provide the plaintiffs with $5.8 million of consideration and the parties agreed to arbitrate the dispute. On May 19, 2010, the
arbitration panel issued an arbitration award in an amount less than the consideration previously paid by the Company and, as a result,
the Company did not owe any additional amount. The Company now considers this case closed.
3. Franchise Fee Lawsuit. On June 19, 2006, two Company customers brought a putative class action, on behalf of
all similarly situated customers, in the District Court of Creek County, Oklahoma, challenging certain charges on the Company’s
electric bills. The plaintiffs claim that the Company improperly charged sales tax based on franchise fee charges paid by its
customers. The
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