OG&E 2013 Annual Report Download - page 76

Public Utility Regulatory Policy Act of 1978
At December 31, 2013, OG&E has QF contracts having terms of
15 to 32 years. These contracts were entered into pursuant to the Public
Utility Regulatory Policy Act of 1978. Stated generally, the Public Utility
Regulatory Policy Act of 1978 and the regulations thereunder promul-
gated by the FERC require OG&E to purchase power generated in a
manufacturing process from a QF. The rate for such power to be paid
by OG&E was approved by the OCC. The rate generally consists of two
components: one is a rate for actual electricity purchased from the QF
by OG&E; the other is a capacity charge, which OG&E must pay the
QF for having the capacity available. However, if no electrical power is
made available to OG&E for a period of time (generally three months),
OG&E’s obligation to pay the capacity charge is suspended. The total
cost of cogeneration payments is recoverable in rates from customers.
For the 320 MW AES-Shady Point, Inc. QF contract and the 120 MW
PowerSmith Cogeneration Project, L.P. QF contract, OG&E purchases
100 percent of the electricity generated by the QFs.
For the years ended December 31, 2013, 2012 and 2011, OG&E
made total payments to cogenerators of $134.8 million, $135.1 million
and $140.7 million, respectively, of which $74.4 million, $77.1 million
and $78.0 million, respectively, represented capacity payments. All
payments for purchased power, including cogeneration, are included
in the Consolidated Statements of Income as Cost of Sales.
OG&E Minimum Fuel Purchase Commitments
OG&E purchased necessary fuel supplies of coal and natural gas for
its generating units of $657.3 million, $585.6 million and $647.6 million
for the years ended December 31, 2013, 2012 and 2011, respectively.
OG&E has coal contracts for purchases from through December 2016.
OG&E has entered into multiple month term natural gas contracts for
31.5 percent of its 2014 annual forecasted natural gas requirements.
Additional gas supplies to fulfill OG&E’s remaining 2014 natural gas
requirements will be acquired through additional requests for proposal
in early to mid-2014, along with monthly and daily purchases, all of
which are expected to be made at market prices.
OG&E Wind Purchase Commitments
OG&E’s current wind power portfolio includes: (i) the 120 MW Centennial
wind farm, (ii) the 101 MW OU Spirit wind farm, (iii) the 227.5 MW
Crossroads wind farm, (iv) access to up to 50 MWs of electricity gener-
ated at a wind farm near Woodward, Oklahoma from a 15-year contract
OG&E entered into with FPL Energy that expires in 2018, (v) access to
up to 150 MWs of electricity generated at a wind farm in Woodward
County, Oklahoma from a 20-year contract OG&E entered into with CPV
Keenan that expires in 2030, (vi) access to up to 130 MWs of electricity
generated at a wind farm in Dewey County, Oklahoma from a 20-year
contract OG&E entered into with Edison Mission Energy that expires in
2030 and (vii) access to up to 60 MWs of electricity generated at a wind
farm near Blackwell, Oklahoma from a 20-year contract OG&E entered
into with NextEra Energy that expires in 2032.
The following table summarizes OG&E’s wind power purchases
for the years ended December 31, 2013, 2012 and 2011.
(In millions, year ended December 31) 2013 2012 2011
CPV Keenan $30.9 $25.1 $24.5
Edison Mission Energy 20.6 20.2 8.5
FPL Energy 3.3 3.4 3.7
NextEra Energy 7.2 0.8 –
Total wind power purchased $62.0 $49.5 $36.7
OG&E Long-Term Service Agreement Commitments
OG&E has a long-term parts and service maintenance contract for
the upkeep of the McClain Plant. The existing contract will expire on
January 1, 2015. In May 2013, a new contract was signed that is expected
to run for the earlier of 128,000 factored-fired hours or 3,600 factored-
fired starts. Based on historical usage and current expectations for
future usage, this contract is expected to run until 2030. The contract
requires payments based on both a fixed and variable cost component,
depending on how much the McClain Plant is used.
OG&E has a long-term parts and service maintenance contract for the
upkeep of the Redbud Plant. In March 2013, the contract was amended
to extend the contract coverage for an additional 24,000 factored-fired
hours resulting in a maximum of the earlier of 144,000 factored-fired
hours or 4,500 factored-fired starts. Based on historical usage and current
expectations for future usage, this contract is expected to run until 2031.
The contract requires payments based on both a fixed and variable
cost component, depending on how much the Redbud Plant is used.
Enogex Energy Resources LLC Commitments
As a result of the formation of Enable on May 1, 2013 and the Company’s
deconsolidation of Enogex Holdings, the Company has no obligations
included in its Consolidated Financial Statements at December 31, 2013
under OGE Holdings’ noncancellable lease obligations previously dis-
closed in the Company’s 2012 Form 10-K.
OG&E Wind Energy Purchased Power Lawsuit
In 2009, OG&E entered into a wind energy purchase power agreement
with CPV Keenan for the purchase of all the energy output from its
150 MW wind farm in Woodward County, Oklahoma. In August of 2013,
CPV Keenan filed suit against OG&E for the non-payment of curtailment
charges. In December 2013, the Company settled its current case with
CPV Keenan and recorded additional purchased power expense of
$4.3 million, which will be recovered through the fuel adjustment clause.
70 OGE Energy Corp.