OG&E 2012 Annual Report Download - page 51

OG&E recovers a return on the capital expenditures along with
operation and maintenance expense and depreciation expense related
to the Crossroads wind farm through a rider established by the OCC.
OG&E began recovery in the fourth quarter of 2011 and believes the
rider will continue until new rates are implemented in OG&E’s next
general rate case.
OG&E recovers program costs related to the Demand and Energy
Efficiency Program. An extension of the demand program rider was
approved in December 2012, which allows for the recovery of demand
program costs, lost revenues associated with any achieved energy,
demand savings and performance based incentives and the recovery of
costs associated with research and development investments through
December 2015.
Fuel clause under recoveries are generated from under recoveries
from OG&E’s customers when OG&E’s cost of fuel exceeds the amount
billed to its customers. Fuel clause over recoveries are generated from
over recoveries from OG&E’s customers when the amount billed to its
customers exceeds OG&E’s cost of fuel. OG&E’s fuel recovery clauses
are designed to smooth the impact of fuel price volatility on customers’
bills. As a result, OG&E under recovers fuel costs in periods of rising
fuel prices above the baseline charge for fuel and over recovers fuel
costs when prices decline below the baseline charge for fuel. Provisions
in the fuel clauses are intended to allow OG&E to amortize under and
over recovery balances.
The benefit obligations regulatory asset is comprised of expenses
recorded which are probable of future recovery and that have not yet
been recognized as components of net periodic benefit cost, including
net loss, prior service cost and net transition obligation. These expenses
were allowed to be recorded as a regulatory asset as OG&E had histori-
cally recovered and currently recovers pension and postretirement
benefit plan expense in its electric rates and there was no negative
evidence that the existing regulatory treatment would change. If, in the
future, the regulatory bodies indicate a change in policy related to the
recovery of pension and postretirement benefit plan expenses, this
could cause the benefit obligations regulatory asset balance to be
reclassified to Accumulated Other Comprehensive Income.
The following table is a summary of the components of the benefit
obligations regulatory asset at:
(In millions, December 31) 2012 2011
Pension plan and restoration
of retirement income plan:
Net loss $278.6 $266.3
Prior service cost 4.5 7.0
Postretirement plans:
Net loss 134.6 144.2
Prior service cost (47.1) (60.8)
Net transition obligation –2.5
Total $370.6 $359.2
The following amounts in the benefit obligations regulatory asset at
December 31, 2012 are expected to be recognized as components of
net periodic benefit cost in 2013:
(In millions)
Pension plan and restoration
of retirement income plan:
Net loss $«19.8
Prior service cost 2.0
Postretirement plans:
Net loss 18.1
Prior service cost (13.7)
Total $«26.2
Income taxes recoverable from customers, which represents
income tax benefits previously used to reduce OG&E’s revenues, are
treated as regulatory assets and liabilities and are being amortized over
the estimated remaining life of the assets to which they relate. These
amounts are being recovered in rates as the temporary differences that
generated the income tax benefit turn around. The income tax related
regulatory assets and liabilities are netted in Income Taxes Recoverable
from Customers, Net in the regulatory assets and liabilities table above.
OG&E recovers the cost of system-wide deployment of smart grid
technology and implementing the smart grid pilot program, the incremen-
tal costs for web portal access, education and providing home energy
reports and stranded costs associated with OG&E’s existing meters.
The costs recoverable from Oklahoma customers for system-wide
deployment of smart grid technology and implementing the smart grid
pilot program were capped at $366.4 million (inclusive of the U.S.
Department of Energy grant award amount) subject to an offset for any
recovery of those costs from Arkansas customers and are currently
being recovered through a rider which will remain in effect until the
smart grid project costs are included in base rates in OG&E’s next
general rate case. This project was completed in late 2012 and the
smart grid project costs did not exceed $366.4 million. The incremental
costs for web portal access, education and home energy reports are
capped at $6.9 million and will be recovered in base rates in OG&E’s
next general rate case. The stranded costs associated with OG&E’s
existing meters, which have been replaced by smart meters, were accu-
mulated during the smart grid deployment and recovery of the stranded
costs will be included in future rate cases. OG&E began recovering the
estimated capital costs of $14 million and associated operation and
maintenance costs for deployment of smart grid technology, along with
incremental costs for web portal access and education of $0.8 million,
through a rider beginning with the first billing cycle in January 2013
through December 2013.
OG&E defers the Oklahoma storm-related operation and maintenance
expenses in excess of $2.7 million and reserves for any Oklahoma storm-
related operation and maintenance expenses less than $2.7 million.
OG&E will recover the deferred amounts over a five-year period ending
in August 2017.
OGE Energy Corp. 49