OG&E 2013 Annual Report Download - page 78

Other
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 otherwise stated above, in Note 16 below, in Item 3 of Part I and
under “Environmental Laws and Regulations” in Item 7 of Part II of the
Company’s 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 operations
or cash flows.
16. Rate Matters and Regulation
Regulation and Rates
OG&E’s retail electric tariffs are regulated by the OCC in Oklahoma and
by the APSC in Arkansas. The issuance of certain securities by OG&E
is also regulated by the OCC and the APSC. OG&E’s wholesale electric
tariffs, transmission activities, short-term borrowing authorization and
accounting practices are subject to the jurisdiction of the FERC. The
Secretary of the U.S. Department of Energy has jurisdiction over some
of OG&E’s facilities and operations. In 2013, 85 percent of OG&E’s elec-
tric revenue was subject to the jurisdiction of the OCC, eight percent
to the APSC and seven percent to the FERC.
The OCC issued an order in 1996 authorizing OG&E to reorganize
into a subsidiary of OGE Energy. The order required that, among other
things, (i) OGE Energy permit the OCC access to the books and records
of OGE Energy and its affiliates relating to transactions with OG&E, (ii)
OGE Energy employ accounting and other procedures and controls to
protect against subsidization of non-utility activities by OG&E’s customers
and (iii) OGE Energy refrain from pledging OG&E assets or income for
affiliate transactions. In addition, the Energy Policy Act of 2005 enacted
the Public Utility Holding Company Act of 2005, which in turn granted
to the FERC access to the books and records of OGE Energy and its
affiliates as the FERC deems relevant to costs incurred by OG&E or
necessary or appropriate for the protection of utility customers with
respect to the FERC jurisdictional rates.
Completed Regulatory Matters
Crossroads Wind Farm
As previously reported, OG&E signed memoranda of understanding
in February 2010 for approximately 197.8 megawatts of wind turbine
generators and certain related balance of plant engineering, procure-
ment and construction services associated with the Crossroads wind
farm. Also as part of this project, on June 16, 2011, OG&E entered
into an interconnection agreement with the SPP for the Crossroads
wind farm which allowed the Crossroads wind farm to interconnect at
227.5 megawatts. On August 31, 2012, OG&E filed an application with
the APSC requesting approval to recover the Arkansas portion of the
costs of the Crossroads wind farm through a rider until such costs are
included in OG&E’s base rates as part of its next general rate proceed-
ing. On April 15, 2013, the APSC issued an order authorizing OG&E to
recover the Arkansas portion of the cost to construct the Crossroads
wind farm, effective retroactively to August 1, 2012. The costs will be
recovered through the Energy Cost Recovery Rider.
Fuel Adjustment Clause Review for Calendar Year 2011
The OCC routinely reviews the costs recovered from customers
through OG&E’s fuel adjustment clause. On July 31, 2012, the OCC
Staff filed an application for a public hearing to review and monitor
OG&E’s application of the 2011 fuel adjustment clause and for a pru-
dence review of OG&E’s electric generation, purchased power and
fuel procurement processes and costs in calendar year 2011. OG&E
filed information and documents in response to the OCC’s application
on October 1, 2012. On December 19, 2012, witnesses for the OCC
Staff filed responsive testimony recommending that the OCC approve
OG&E’s fuel adjustment clause costs and recoveries for the calendar
year 2011 and recommending that the OCC find that OG&E’s electric
generation, purchased power, fuel procurement and other fuel related
practices, policies and decisions during calendar year 2011 were
fair, just and reasonable and prudent. On April 9, 2013, the OCC
administrative law judge recommended that the OCC find that for
the calendar year 2011 OG&E’s electric generation, purchased power
and fuel procurement processes and costs were prudent. On June 18,
2013, the OCC issued an order approving the administrative law
judge’s recommendation.
72 OGE Energy Corp.