OG&E 2013 Annual Report Download - page 51

to Enable is limited to OGE Energy’s equity investment in Enable as pre-
sented on the Company’s Consolidated Balance Sheet at December 31,
2013. The Company evaluates its equity method investments for impair-
ment when events or changes in circumstances indicate there is a loss
in value of the investment that is other than a temporary decline.
The Company considers distributions received from its unconsolidated
affiliates which do not exceed cumulative equity in earnings subsequent
to the date of investment to be a return on investment which are classi-
fied as operating activities in the Consolidated Statements of Cash Flows.
The Company considers distributions received from its unconsolidated
affiliates in excess of cumulative equity in earnings subsequent to the
date of investment to be a return of investment which are classified as
investing activities in the Consolidated Statements of Cash Flows.
Asset Retirement Obligations
The Company has previously recorded asset retirement obligations
that are being amortized over their respective lives ranging from 20 to
74 years.
The following table summarizes changes to the Company’s asset
retirement obligations during the years ended December 31, 2013
and 2012.
(In millions) 2013 2012
Balance at January 1 $54.0 $24.8
Liabilities settled(A) (0.4) 0.4
Accretion expense 2.3 1.9
Revisions in estimated cash flows(B) (0.7) 26.9
Balance at December 31 $55.2 $54.0
(A) As a result of the formation of Enable on May 1, 2013, the Company has no obligations at
December 31, 2013 under OGE Holdings’ asset retirement obligations previously disclosed
in the Company’s 2012 10-K.
(B) Due to changes to OG&E’s asset retirement obligations related to its wind farms as a result
of changes in the assumption related to the timing of removal used in the valuation of the
asset retirement obligations.
Assessing Impairment of Long-Lived Assets
(Including Intangible Assets) and Goodwill
As a result of the formation of Enable Midstream Partners on May 1,
2013 and the Company’s deconsolidation of Enogex Holdings, the
Company no longer has intangible assets or goodwill.
The Company assesses its long-lived assets (inclusive of definite-
lived intangible assets prior to the deconsolidation of Enogex Holdings)
for impairment when there is evidence that events or changes in circum-
stances require an analysis of the recoverability of an asset’s carrying
amount. Estimates of future cash flows used to test the recoverability
of long-lived assets and intangible assets shall include only the future
cash flows (cash inflows less associated cash outflows) that are directly
associated with and that are expected to arise as a direct result of the
use and eventual disposition of the asset. The fair value of these assets
is based on third-party evaluations, prices for similar assets, historical
data and projected cash flows. An impairment loss is recognized when
the sum of the expected future net cash flows is less than the carrying
amount of the asset. The amount of any recognized impairment is based
on the estimated fair value of the asset subject to impairment compared
to the carrying amount of such asset. In 2011, the Company recorded
a pre-tax impairment loss of $5.0 million, of which $2.5 million was
the noncontrolling interest portion (see Note 4), related to the Atoka
processing plant. The Company recorded no other material impairments
in 2013, 2012 or 2011.
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 8.33 percent, 8.93 percent and
8.71 percent for the years ended December 31, 2013, 2012 and 2011,
respectively. The decrease in the allowance for funds used during
construction rates in 2013 was primarily due to two factors. First, a
decrease in the common equity cost rate caused the equity portion
of allowance for equity funds used during construction to decrease.
Second, an increase in the average daily balance of short term debt
allowed the fixed commercial paper fees to be lower per dollar of short
term debt, resulting in a lower short term debt rate, which caused the
debt portion of allowance for funds used during construction to decrease.
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
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 cus-
tomers’ 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.
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