OG&E 2012 Annual Report Download - page 34

32 OGE Energy Corp.
Electric Utility Segment
Regulatory Assets and Liabilities
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
benefit obligations regulatory asset is comprised of expenses recorded
which are probable of future recovery and that have not yet been recog-
nized as components of net periodic benefit cost, including net loss,
prior service cost and net transition obligation.
Unbilled Revenues
OG&E reads its customers’ meters and sends bills to its customers
throughout each month. As a result, there is a significant amount of
customers’ electricity consumption that has not been billed at the end of
each month. Unbilled revenue is presented in Accrued Unbilled Revenues
on the Consolidated Balance Sheets and in Operating Revenues on the
Consolidated Statements of Income based on estimates of usage and
prices during the period. At December 31, 2012, if the estimated usage
or price used in the unbilled revenue calculation were to increase or
decrease by one percent, this would cause a change in the unbilled
revenues recognized of $0.3 million. At December 31, 2012 and 2011,
Accrued Unbilled Revenues were $57.4 million and $59.3 million, respec-
tively. The estimates that management uses in this calculation could
vary from the actual amounts to be paid by customers.
Allowance for Uncollectible Accounts Receivable
Customer balances are generally written off if not collected within six
months after the final billing date. The allowance for uncollectible accounts
receivable for OG&E is calculated by multiplying the last six months of
electric revenue by the provision rate. The provision rate is based on a
12-month historical average of actual balances written off. To the extent
the historical collection rates are not representative of future collections,
there could be an effect on the amount of uncollectible expense recog-
nized. Also, a portion of the uncollectible provision related to fuel is
being recovered through the fuel adjustment clause. At December 31,
2012, if the provision rate were to increase or decrease by 10 percent,
this would cause a change in the uncollectible expense recognized of
$0.3 million. The allowance for uncollectible accounts receivable is a
reduction to Accounts Receivable on the Consolidated Balance Sheets
and is included in Other Operation and Maintenance Expense on the
Consolidated Statements of Income. The allowance for uncollectible
accounts receivable was $2.6 million and $3.7 million at December 31,
2012 and 2011, respectively.
Natural Gas Transportation and Storage and
Natural Gas Gathering and Processing Segments
Operating Revenues
Operating revenues for gathering, processing, transportation and storage
services for Enogex are recorded each month based on the current
month’s estimated volumes, contracted prices (considering current
commodity prices), historical seasonal fluctuations and any known
adjustments. The estimates are reversed in the following month and
customers are billed on actual volumes and contracted prices. Gas
sales are calculated on current-month nominations and contracted
prices. Operating revenues associated with the production of NGLs are
estimated based on current-month estimated production and contracted
prices. These amounts are reversed in the following month and the cus-
tomers are billed on actual production and contracted prices. Estimated
operating revenues are reflected in Accounts Receivable on the
Consolidated Balance Sheets and in Operating Revenues on the
Consolidated Statements of Income.
Enogex recognizes revenue from natural gas gathering, processing,
transportation and storage services to third parties as services are
provided. Revenue associated with NGLs is recognized when the
production is sold.
Enogex records deferred revenue when it receives consideration
from a third party before achieving certain criteria that must be met for
revenue to be recognized in accordance with GAAP. In August 2010,
Enogex completed construction of transportation and compression
facilities necessary to provide gas delivery service to a new natural gas-
fired electric generation facility near Pryor, Oklahoma. Aid in Construction
payments of $36.4 million received in excess of construction costs
were recognized as Deferred Revenues on the Company’s Consolidated
Balance Sheet and are being amortized on a straight-line basis of
$1.2 million per year over the life of the related firm transportation service
agreement under which service commenced in June 2011. Also, in
August 2011, Enogex and one of its five largest customers entered into
new agreements, effective July 1, 2011, relating to the customer’s natural
gas gathering and processing volumes on the Oklahoma portion of
Enogex’s system. As a result, Enogex has recorded $7.1 million in
Deferred Revenues on the Company’s Consolidated Balance Sheet at
December 31, 2012, which are expected to be recognized based on the
estimated average fee per MMBtu processed by the end of 2014. Enogex
has also recorded $1.5 million in Deferred Revenues on the Company’s
Consolidated Balance Sheet at December 31, 2012 in connection with
other gathering and processing agreements.