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80 OGE Energy Corp.
Public Utility Regulatory Policy Act of 1978
At December 31, 2011, OG&E has QF contracts having terms of 15
to 32 years. These contracts were entered into pursuant to the Public
Utility Regulatory Policy Act of 1978. Stated generally, the Public Utility
Regulatory Policy Act of 1978 and the regulations thereunder promul-
gated by the FERC require OG&E to purchase power generated in a
manufacturing process from a QF. The rate for such power to be paid
by OG&E was approved by the OCC. The rate generally consists of two
components: one is a rate for actual electricity purchased from the QF
by OG&E; the other is a capacity charge, which OG&E must pay the QF
for having the capacity available. However, if no electrical power is
made available to OG&E for a period of time (generally three months),
OG&E’s obligation to pay the capacity charge is suspended. The total
cost of cogeneration payments is recoverable in rates from customers.
For the 320 MW AES-Shady Point, Inc. QF contract and the 120 MW
PowerSmith Cogeneration Project, L.P. QF contract, OG&E purchases
100 percent of the electricity generated by the QFs.
For the years ended December 31, 2011, 2010 and 2009, OG&E
made total payments to cogenerators of $140.7 million, $147.3 million
and $139.8 million, respectively, of which $78.0 million, $80.7 million
and $83.1 million, respectively, represented capacity payments. All
payments for purchased power, including cogeneration, are included
in the Consolidated Statements of Income as Cost of Goods Sold.
OG&E Minimum Fuel Purchase Commitments
OG&E purchased necessary fuel supplies of coal and natural gas for
its generating units of $647.6 million, $721.4 million and $588.3 million
for the years ended December 31, 2011, 2010 and 2009, respectively.
OG&E has coal contracts for purchases from January 2012 through
OG&E Railcar Lease Agreement
OG&E has a noncancellable operating lease with purchase options,
covering 1,392 coal hopper railcars to transport coal from Wyoming
to OG&E’s coal-fired generation units. Rental payments are charged to
Fuel Expense and are recovered through OG&E’s tariffs and fuel adjustment
clauses. On December 15, 2010, OG&E renewed the lease agreement
effective February 1, 2011. At the end of the new lease term, which is
February 1, 2016, OG&E has the option to either purchase the railcars
at a stipulated fair market value or renew the lease. If OG&E chooses
not to purchase the railcars or renew the lease agreement and the
actual fair value of the railcars is less than the stipulated fair market
value, OG&E would be responsible for the difference in those values
up to a maximum of $22.8 million.
OG&E is also required to maintain all of the railcars it has under
lease to transport coal from Wyoming and has entered into agreements
with Progress Rail Services and WATCO, both of which are non-affili-
ated companies, to furnish this maintenance.
Enogex Noncancellable Operating Leases
Enogex currently occupies 116,184 square feet of office space at its
executive offices under a lease that expires March 31, 2012. On June 30,
2011, Enogex executed a five-year lease agreement that expires March
31, 2017 for 134,219 square feet of office space at its new executive
offices. The lease payments are $11.3 million over the lease term which
begins April 1, 2012. Enogex also has compression service and gas
treating service agreements which are either on a month-to-month
basis or expire during 2012 and 2013.
Other Purchase Obligations and Commitments
The Company’s other future purchase obligations and commitments
estimated for the next five years are as follows:
(In millions) 2012 2013 2014 2015 2016 Total
Other purchase obligations and commitments
OG&E cogeneration capacity and fixed operation
and maintenance payments $÷90.3 $÷89.4 $÷87.3 $÷85.2 $÷83.3 $÷«435.5
OG&E expected cogeneration energy payments 59.3 68.9 81.3 74.2 86.8 370.5
OG&E minimum fuel purchase commitments 380.2 192.4 87.9 90.4 – 750.9
OG&E expected wind purchase commitments 32.4 32.8 33.3 34.0 34.7 167.2
OG&E long-term service agreement commitments 4.5 6.6 33.7 5.1 5.0 54.9
OER Cheyenne Plains commitments 5.3 6.5 6.5 1.6 – 19.9
OER MEP commitments 2.1 2.1 1.2 – – 5.4
OER other commitments 4.9 3.1 3.1 3.1 0.7 14.9
Total other purchase obligations and commitments $579.0 $401.8 $334.3 $293.6 $210.5 $1,819.2