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PART I
Item 1. Business.
THE COMPANY
Introduction
The Company generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas. The Company’s
operations are subject to regulation by the OCC, the APSC and the FERC. The Company is a wholly-owned subsidiary of OGE
Energy which is an energy and energy services provider offering physical delivery and related services for both electricity and natural
gas primarily in the south central United States. The Company was incorporated in 1902 under the laws of the Oklahoma
Territory. The Company is the largest electric utility in Oklahoma and its franchised service territory includes the Fort Smith,
Arkansas area. The Company sold its retail natural gas business in 1928 and is no longer engaged in the natural gas distribution
business. The Company’s principal executive offices are located at 321 North Harvey, P.O. Box 321, Oklahoma City, Oklahoma
73101-0321; telephone (405) 553-3000.
Company Strategy
OGE Energy’s mission is to fulfill its critical role in the nation’s electric utility and natural gas midstream pipeline
infrastructure and meet individual customers’ needs for energy and related services in a safe, reliable and efficient manner. OGE
Energy intends to execute its vision by focusing on its regulated electric utility business and unregulated natural gas midstream
business. OGE Energy intends to maintain the majority of its assets in the regulated utility business, however, OGE Energy
anticipates significant growth opportunities for its natural gas midstream business.
The Company is focused on increased investment to preserve system reliability and meet load growth, leverage its
advantageous geographic position to develop renewable energy resources for wind generation and transmission, replace infrastructure
equipment, replace aging transmission and distribution systems, provide new products and services, provide energy management
solutions to the Company’s customers through the Smart Grid program and deploy newer technology that improves operational,
financial and environmental performance. The Company also is promoting demand-side management programs to encourage more
efficient use of electricity. If these initiatives are successful, the Company believes it may be able to defer the construction or
acquisition of any incremental fossil fuel generation capacity until 2020.
OGE Energy’s corporate strategy is to continue to maintain the diversified asset position of the Company and Enogex
focused on providing competitive energy products and services to customers primarily in the south central United States. OGE
Energy will continue to focus on growing products and services with limited or manageable commodity price exposure.
General
The Company furnishes retail electric service in 268 communities and their contiguous rural and suburban areas. At
December 31, 2010, three other communities and two rural electric cooperatives in Oklahoma and western Arkansas purchased
electricity from the Company for resale. The service area covers 30,000 square miles in Oklahoma and western Arkansas, including
Oklahoma City, the largest city in Oklahoma, and Fort Smith, Arkansas, the second largest city in that state. Of the 268 communities
that the Company serves, 242 are located in Oklahoma and 26 in Arkansas. The Company derived 89 percent of its total electric
operating revenues for the year ended December 31, 2010 from sales in Oklahoma and the remainder from sales in Arkansas.
The Company’s system control area peak demand during 2010 was 6,626 MWs on August 4, 2010. The Company’s load
responsibility peak demand was 6,171 MWs on August 4, 2010. As reflected in the table below and in the operating statistics that
follow, there were 27.6 million MWH system sales in 2010, 25.9 million MWH system sales in 2009 and 26.8 million MWH system
sales in 2008. Variations in system sales for the three years are reflected in the following table:
2010 vs. 2009 2009 vs. 2008
Year ended December 31 2010 Increase 2009 Decrease 2008
System sales – millions of MWHs 27.6 6.6% 25.9 (3.4)% 26.8
The Company is subject to competition in various degrees from government-owned electric systems, municipally-owned
electric systems, rural electric cooperatives and, in certain respects, from other private utilities, power marketers and
cogenerators. Oklahoma law forbids the granting of an exclusive franchise to a utility for providing electricity.
Besides competition from other suppliers or marketers of electricity, the Company competes with suppliers of other forms of
energy. The degree of competition between suppliers may vary depending on relative costs and supplies of other forms of energy.
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