OG&E 2012 Annual Report Download - page 56

Allowance for Funds Used During Construction
For OG&E, allowance for funds used during construction is calculated
according to the FERC pronouncements for the imputed cost of equity
and borrowed funds. Allowance for funds used during construction, a
non-cash item, is reflected as an increase to net other income and a
reduction to interest expense in the Consolidated Statements of Income
and as an increase to Construction Work in Progress in the Consolidated
Balance Sheets. Allowance for funds used during construction rates,
compounded semi-annually, were 8.93 percent, 8.71 percent and
8.89 percent for the years ended December 31, 2012, 2011 and 2010,
respectively. The increase in the allowance for funds used during con-
struction rates in 2012 was primarily due to an increase in commercial
paper fees in 2012 which resulted in an increase in the cost of short-
term debt borrowings.
Collection of Sales Tax
In the normal course of its operations, OG&E collects sales tax from its
customers. OG&E records a current liability for sales taxes when it bills
its customers and eliminates this liability when the taxes are remitted to
the appropriate governmental authorities. OG&E excludes the sales tax
collected from its operating revenues.
Revenue Recognition
OG&E
General. 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. The estimates that management
uses in this calculation could vary from the actual amounts to be paid
by customers.
SPP Purchases and Sales. OG&E participates in the SPP energy
imbalance service market in a dual role as a load serving entity and as
a generation owner. The energy imbalance service market requires cash
settlements for over or under schedules of generation and load. Market
participants, including OG&E, are required to submit resource plans and
can submit offer curves for each resource available for dispatch. A
function of interchange accounting is to match participants’ MWH enti-
tlements (generation plus scheduled bilateral purchases) against their
MWH obligations (load plus scheduled bilateral sales) during every hour
of every day. If the net result during any given hour is an entitlement,
the participant is credited with a spot-market sale to the SPP at the
respective market price for that hour; if the net result is an obligation,
the participant is charged with a spot-market purchase from the SPP at
the respective market price for that hour. The SPP purchases and sales
are not allocated to individual customers. OG&E records the hourly
sales to the SPP at market rates in Operating Revenues and the hourly
purchases from the SPP at market rates in Cost of Goods Sold in its
Consolidated Financial Statements.
Enogex
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
customers 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’s key natural gas producer
customers in 2012 included Chesapeake Energy Marketing Inc., Apache
Corporation and Devon Energy Production Company, L.P. In 2012, these
customers accounted for 19.6 percent, 17.8 percent and 10.6 percent,
respectively, of Enogex’s gathering and processing volumes. In 2012,
Enogex’s top 10 natural gas producer customers accounted for 73.0 per-
cent of Enogex’s gathering and processing volumes.
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 pro-
duction is sold. Enogex depends on third-party facilities to transport
and fractionate NGLs that it delivers to third parties at the inlet of their
facilities. Additionally, one third party purchases 50 percent of the NGLs
delivered to its system, which accounted for $297.3 million (43.3 per-
cent), $285.4 million (38.8 percent) and $279.8 million (46.0 percent),
respectively, of Enogex’s total NGLs sales for the years ended
December 31, 2012, 2011 and 2010.
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.
54 OGE Energy Corp.