OG&E 2011 Annual Report Download - page 54

1. Summary of Significant Accounting Policies
Organization
The Company 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 conducts these activities
through four business segments: (i) electric utility, (ii) natural gas trans-
portation and storage, (iii) natural gas gathering and processing and
(iv) natural gas marketing. All significant intercompany transactions
have been eliminated in consolidation.
The electric utility segment generates, transmits, distributes and
sells electric energy in Oklahoma and western Arkansas. Its operations
are conducted through OG&E and are subject to regulation by the OCC,
the APSC and the FERC. OG&E was incorporated in 1902 under the
laws of the Oklahoma Territory. OG&E is the largest electric utility in
Oklahoma and its franchised service territory includes the Fort Smith,
Arkansas area. OG&E sold its retail natural gas business in 1928 and
is no longer engaged in the natural gas distribution business.
Enogex is a provider of integrated natural gas midstream services.
Enogex is engaged in the business of gathering, processing, transport-
ing, storing and marketing natural gas. Most of Enogex’s natural gas
gathering, processing, transportation and storage assets are strategi-
cally located in the Arkoma and Anadarko basins of Oklahoma and the
Texas Panhandle. Enogex’s operations are organized into three business
segments: (i) natural gas transportation and storage, (ii) natural gas
gathering and processing and (iii) natural gas marketing. At December 31,
2011, the Company indirectly owns an 81.3 percent membership interest
in Enogex Holdings, which in turn owns all of the membership interests
in Enogex LLC, a Delaware single-member limited liability company (see
Note 4). The Company continues to consolidate Enogex Holdings in
its Consolidated Financial Statements as OGE Energy has a controlling
financial interest over the operations of Enogex Holdings. Also, Enogex
LLC holds a 50 percent ownership interest in Atoka. The Company
consolidates Atoka in its Consolidated Financial Statements as Enogex
acts as the managing member of Atoka and has control over the
operations of Atoka.
OGE Energy charges operating costs to its subsidiaries based on
several factors. Operating costs directly related to specific subsidiaries
are assigned to those subsidiaries. Where more than one subsidiary
benefits from certain expenditures, the costs are shared between those
subsidiaries receiving the benefits. Operating costs incurred for the
benefit of all subsidiaries are allocated among the subsidiaries, either
as overhead based primarily on labor costs or using the "Distrigas"
method. The Distrigas method is a three-factor formula that uses an
equal weighting of payroll, net operating revenues and gross property,
plant and equipment. OGE Energy adopted the Distrigas method in
January 1996 as a result of a recommendation by the OCC Staff. OGE
Energy believes this method provides a reasonable basis for allocating
common expenses.
Basis of Presentation
In the opinion of management, all adjustments necessary to fairly present
the consolidated financial position of the Company at December 31,
2011 and 2010 and the results of its operations and cash flows for the
years ended December 31, 2011, 2010 and 2009, have been included
and are of a normal recurring nature except as otherwise disclosed.
Accounting Records
The accounting records of OG&E are maintained in accordance with
the Uniform System of Accounts prescribed by the FERC and adopted
by the OCC and the APSC. Additionally, OG&E, as a regulated utility,
is subject to accounting principles for certain types of rate-regulated
activities, which provide that certain actual or anticipated costs that
would otherwise be charged to expense can be deferred as regulatory
assets, based on the expected recovery from customers in future rates.
Likewise, certain actual or anticipated credits that would otherwise reduce
expense can be deferred as regulatory liabilities, based on the expected
flowback to customers in future rates. Management’s expected recovery
of deferred costs and flowback of deferred credits generally results from
specific decisions by regulators granting such ratemaking treatment.
OG&E records certain actual or anticipated costs and obligations
as regulatory assets or liabilities if it is probable, based on regulatory
orders or other available evidence, that the cost or obligation will be
included in amounts allowable for recovery or refund in future rates.
The following table is a summary of OG&E’s regulatory assets and
liabilities at:
(In millions, December 31) 2011 2010
Regulatory assets
Current
Fuel clause under recoveries $÷÷1.8 $÷÷1.0
Other(A) 14.2 4.9
Total current regulatory assets $÷16.0 $÷÷5.9
Non-current
Benefit obligations regulatory asset $359.2 $365.5
Income taxes recoverable from customers, net 54.0 43.3
Smart Grid 37.2 14.2
Deferred storm expenses 23.8 28.6
Unamortized loss on reacquired debt 14.2 15.3
Deferred pension expenses 9.1 13.5
Other 10.4 9.0
Total non-current regulatory assets $507.9 $489.4
Regulatory Liabilities
Current
Smart Grid rider over collections(B) $÷24.3 $÷10.4
Fuel clause over recoveries 7.7 29.9
Other(B) 13.7 10.5
Total current regulatory liabilities $÷45.7 $÷50.8
Non-Current
Accrued removal obligations, net $208.2 $184.9
Pension tracker 22.5 8.2
Total non-current regulatory liabilities $230.7 $193.1
(A) Included in Other Current Assets on the Consolidated Balance Sheets.
(B) Included in Other Current Liabilities on the Consolidated Balance Sheets.
52 OGE Energy Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS