OG&E 2010 Annual Report Download - page 95

expires, including a true-up for project costs, if any, in excess of $357.4 million but less than the Smart Grid project
cost. Any over/under recovery remaining will be passed or credited through the Company’s fuel adjustment clause;
Ÿ The Company guarantees that customers will receive the benefit of certain operations and maintenance cost
reductions resulting from the smart grid deployment as a credit to the recovery rider;
Ÿ Beginning January 1, 2011, the Company shall make available the smart grid web portal to all customers having a
smart meter. The Company shall expend funds to educate customers regarding the best use of the information
available on the portal. In addition, the Company shall make available to all customers who do not have internet
access the opportunity to receive a monthly home energy report. This report shall be made available, free of charge,
to customers eligible for the Company’s Low Income Home Energy Assistance Program and/or Senior Citizen
program who are without internet service. The incremental costs for web portal access, education and the providing
of home energy reports free of charge are to be accumulated as a regulatory asset in an amount up to $6.9 million
and recovered in base rates beginning in 2014;
Ÿ The stranded costs associated with the Company’s existing meters which are being replaced by smart meters will be
accumulated in a regulatory asset and recovered in base rates beginning in 2014; and
Ÿ The Company will file an application with the APSC related to the deployment of smart grid technology by the end
of 2010.
On December 17, 2010, the Company filed an application with the APSC requesting pre-approval for system-wide
deployment of smart grid technology and a recovery rider, including a credit for the Smart Grid grant. A procedural schedule has not
been established in this matter.
Crossroads Wind Project
In February 2010, the Company signed memoranda of understanding for 197.8 MWs of wind turbine generators and certain
related balance of plant engineering, procurement and construction services associated with Crossroads. On July 29, 2010, the OCC
approved a settlement that would allow the Company to build, own and operate the wind farm. The key settlement terms approved by
the OCC were:
Ÿ Authorization for the Company to begin recovering the costs of Crossroads through a rider mechanism that will be
effective until new rates are implemented after the Company’s 2013 general rate case;
Ÿ Continued utilization of a return on equity previously approved by the OCC for other various recovery riders,
subject to adjustment in the future to reflect the return on equity authorized in subsequent general rate cases;
Ÿ The Company’s capital costs for which it is entitled recovery for a 197.8 MW wind farm are $407.7 million;
Ÿ To the extent the Company’s total investment in Crossroads exceeds the amount for which it is entitled recovery, the
Company shall be entitled to offer evidence and seek to establish that the excess amount was prudently incurred and
should be included in the Company’s rate base; and
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 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.
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