OG&E 2013 Annual Report Download - page 33

OGE Energy Corp. 27
To the extent the historical collection rates are not representative of
future collections, there could be an effect on the amount of uncollectible
expense recognized. Also, a portion of the uncollectible provision related
to fuel within the Oklahoma jurisdiction is being recovered through the
fuel adjustment clause. At December 31, 2013, if the provision rate were
to increase or decrease by 10 percent, this would cause a change in
the uncollectible expense recognized of $0.2 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 $1.9 million
and $2.6 million at December 31, 2013 and 2012, respectively.
Accounting Pronouncements
See Note 2 of Notes to Consolidated Financial Statements for discussion
of current accounting pronouncements that are applicable to the Company.
Commitments and Contingencies
In the normal course of business, the Company is confronted with issues
or events that may result in a contingent liability. These generally relate
to lawsuits or claims made by third parties, including governmental
agencies. When appropriate, management consults with legal counsel
and other appropriate experts to assess the claim. If, in management’s
opinion, the Company has incurred a probable loss as set forth by
GAAP, an estimate is made of the loss and the appropriate accounting
entries are reflected in the Company’s Consolidated Financial Statements.
At the present time, based on currently available information, except as
disclosed otherwise in this Form 10-K, the Company believes that any
reasonably possible losses in excess of accrued amounts arising out
of pending or threatened lawsuits or claims would not be quantitatively
material to its financial statements and would not have a material adverse
effect on the Company’s consolidated financial position, results of oper-
ations or cash flows. See Notes 15 and 16 of Notes to Consolidated
Financial Statements and Item 3 of Part I in this Form 10-K for a
discussion of the Company’s commitments and contingencies.
Environmental Laws and Regulations
The activities of the Company are subject to stringent and complex
Federal, state and local laws and regulations governing environmental
protection relating to air quality, water quality, waste management, wildlife
conservation and natural resources. These laws and regulations can
restrict or impact business activities in many ways, such as restricting
the way it can handle or dispose of its wastes, requiring remedial action
to mitigate environmental issues that may be caused by its operations
or that are attributable to former operators, requiring changes in opera-
tions and requiring the installation and operation of pollution control
equipment. Failure to comply with these laws and regulations could
result in the assessment of administrative, civil and criminal penalties,
the imposition of remedial requirements and the issuance of orders
enjoining future operations.
Environmental regulation can increase the cost of planning, design,
initial installation and operation of OG&E’s facilities. Historically, OG&E’s
total expenditures for environmental control facilities and for remediation
have not been significant in relation to its consolidated financial position
or results of operations. The Company believes, however, that it is rea-
sonably likely that the trend in environmental legislation and regulations
will continue towards more restrictive standards. Compliance with these
standards is expected to increase the cost of conducting business.
Management continues to evaluate its compliance with existing and
proposed environmental legislation and regulations and implement
appropriate environmental programs in a competitive market.
OG&E expects that environmental capital expenditures necessary
to comply with the environmental laws and regulations discussed below
will qualify as part of a regulatory plan to handle state and Federally
mandated environmental upgrades which will be recoverable in Oklahoma
from OG&E’s retail customers under House Bill 1910, which was enacted
into law in May 2005.
It is estimated that OG&E’s total expenditures to comply with
environmental laws, regulations and requirements for 2014 will be
$72.6 million, of which $55.0 million is for capital expenditures. It is esti-
mated that OG&E’s total expenditures to comply with environmental
laws, regulations and requirements for 2015 will be $49.6 million, of
which $31.3 million is for capital expenditures. The amounts for OG&E
above include capital expenditures for low NOX burners and activated
carbon injection and exclude certain other capital expenditures as dis-
cussed in footnote D to the capital expenditures table in “Future Capital
Requirements and Financing Activities” above.
Air
Federal Clean Air Act Overview
OG&E’s operations are subject to the Federal Clean Air Act, as amended,
and comparable state laws and regulations. These laws and regulations
regulate emissions of air pollutants from various industrial sources,
including electric generating units, and also impose various monitoring
and reporting requirements. Such laws and regulations may require that
OG&E obtain pre-approval for the construction or modification of certain
projects or facilities expected to produce air emissions or result in the
increase of existing air emissions, obtain and strictly comply with air
permits containing various emissions and operational limitations or
install emission control equipment. OG&E likely will be required to incur
certain capital expenditures in the future for air pollution control equip-
ment and technology in connection with obtaining and maintaining
operating permits and approvals for air emissions.
Regional Haze Control Measures
On June 15, 2005, the EPA issued final amendments to its 1999
regional haze rule. Regional haze is visibility impairment caused by the
cumulative air pollutant emissions from numerous sources over a wide
geographic area.