OG&E 2012 Annual Report Download - page 50

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 three business segments: (i) electric utility, (ii)
natural gas transportation and storage and (iii) natural gas gathering
and processing. 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 and storing natural gas. Most of Enogex’s natural gas gathering,
processing, transportation and storage assets are strategically located
in the Arkoma and Anadarko basins of Oklahoma and the Texas
Panhandle. During the third quarter of 2012, the operations and activities
of EER were fully integrated with those of Enogex through the creation
of a new commodity management organization. This new organization
is intended to facilitate the execution of Enogex’s strategy through an
enhanced focus on asset optimization and active management of its
growing natural gas, NGLs and condensate positions. The operations of
EER, including asset management activities, have been included in the
natural gas transportation and storage segment and have been restated
for all prior periods presented. Enogex’s operations are now organized
into two business segments: (i) natural gas transportation and storage
and (ii) natural gas gathering and processing. At December 31, 2012,
OGE Energy indirectly owns a 79.9 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 consolidates 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 sub-
sidiaries 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,
2012 and 2011 and the results of its operations and cash flows for the
years ended December 31, 2012, 2011 and 2010, 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) 2012 2011
Regulatory assets
Current
Crossroads wind farm rider under recovery(A) $÷14.9 $÷÷2.5
Oklahoma demand program rider under recovery(A) 9.2 8.1
Fuel clause under recoveries –1.8
Other(A) 2.9 3.6
Total current regulatory assets $÷27.0 $÷16.0
Non-current
Benefit obligations regulatory asset $370.6 $359.2
Income taxes recoverable from customers, net 54.7 54.0
Smart Grid 42.8 37.2
Unamortized loss on reacquired debt 13.0 14.2
Deferred storm expenses 12.7 23.8
Deferred pension expenses 4.5 9.1
Other 12.3 10.4
Total non-current regulatory assets $510.6 $507.9
Regulatory Liabilities
Current
Fuel clause over recoveries $109.2 $÷÷7.7
Smart Grid rider over recovery(B) 24.1 24.3
Other(B) 7.8 13.7
Total current regulatory liabilities $141.1 $÷45.7
Non-Current
Accrued removal obligations, net $218.2 $208.2
Deferred pension credits 17.7 –
Pension tracker 9.2 22.5
Total non-current regulatory liabilities $245.1 $230.7
(A) Included in Other Current Assets on the Consolidated Balance Sheets.
(B) Included in Other Current Liabilities on the Consolidated Balance Sheets.
48 OGE Energy Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS