OG&E 2014 Annual Report Download

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2014 Annual Report
COMMITMENTS
2014 Annual Report
COMMITMENTS

Table of contents

  • Page 1
    2014 Annual Repor t COMMITMENTS

  • Page 2
    ... of Financial Condition and Results of Operations. 2 Adjusted to reï¬,ect stock split. OGE Energy Corp. (NYSE: OGE), with headquarters in Oklahoma City, is the parent company of Oklahoma Gas and Electric Company (OG&E), a regulated electric utility, and holds a 26.3 percent limited partner interest...

  • Page 3
    ... robust electric grid. Increased transmission also helps support the development of wind power in the state. OG&E has 841 megawatts of wind on our system, or approximately 10 percent of our total generating capability. The year brought positive job growth for Oklahoma City, the largest city served...

  • Page 4
    ... generation A backup generation product will provide small business and residential customers the confidence that they will always have electricity when they need it. LED street lighting Enabled by the smart grid, new LED street lights throughout OG&E's service area will include a communications...

  • Page 5
    ... in our service area who are inspiring future generations with innovative classroom programs in reading, science and mathematics. OGE Energy Field Company president Sean Trauschke throws out the first pitch at the newly named OGE Energy Field at the ASA Hall of Fame Stadium, home to the 2014 women...

  • Page 6
    ... 2014 Financial Section (As Included in the Company's Form 10-K filed with the SEC February 26, 2015) Board of Directors Peter B. Delaney Chairman and CEO OGE Energy Corp., OG&E Oklahoma City Luke R. Corbett 1, 2 Former Chairman and Chief Executive Officer, Kerr-McGee Corporation (oil and gas...

  • Page 7
    ... retirement plan Arkansas Public Service Commission Bronco Midstream Holdings, LLC, Bronco Midstream Holdings II, LLC, collectively Financial Accounting Standards Board Accounting Standards Codification Best available retrofit technology Billion cubic feet CenterPoint Energy Resources Corp...

  • Page 8
    ...critical role in the nation's electric utility and natural gas midstream pipeline infrastructure and meet individual customers' needs for energy and related services focusing on safety, efficiency, reliability, customer service and risk management. The Company's corporate strategy is to continue to...

  • Page 9
    ... (in millions) Residential Commercial Industrial Oilfield Public authorities and street light Sales for resale System sales Off-system sales Total sales Number of customers Weighted-average cost of energy per kilowatt-hour-cents Natural gas Coal Total fuel Total fuel and purchased power Degree days...

  • Page 10
    ..., 2013) Cost of sales for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. Fuel expense was $672.7 million in 2013 as compared to $642.4 million in 2012, an increase of $30.3 million, or 4.7 percent, primarily due to higher natural gas prices. OG...

  • Page 11
    ... net operating losses. The balance of Fuel Clause Under Recoveries was $68.3 million and $26.2 million at December 31, 2014 and 2013, respectively, an increase of $42.1 million, primarily due to lower amounts billed to OG&E retail customers as compared to the actual cost of fuel and purchased power...

  • Page 12
    ...-term debt; • the payment to retire $240 million of long-term debt in 2014; • payments in 2013 on advances from unconsolidated affiliates due to the deconsolidation of Enogex Holdings; and • contributions in 2013 from the ArcLight group related to the closing of the transaction to form Enable...

  • Page 13
    ... long-term borrowing costs and, if below investment grade, would require the Company to post collateral or letters of credit. On November 8, 2013, Moody's Investors Services placed the credit ratings of OGE Energy and OG&E on review for possible upgrade. On January 31, 2014, Moody's upgraded the...

  • Page 14
    ...74 years. The inputs used in the valuation of asset retirement obligations include the assumed life of the asset placed into service, the average inï¬,ation rate, market risk premium, the credit-adjusted risk free interest rate and the timing of incurring costs related to the retirement of the asset...

  • Page 15
    ...Act New Source Review Litigation As previously reported, in July 2008, OG&E received a request for information from the EPA regarding Federal Clean Air Act compliance at OG&E's Muskogee and Sooner generating plants. On July 8, 2013, the Department of Justice filed a complaint against OG&E in United...

  • Page 16
    ...reporting rules. In January 2014, the EPA used the Clean Air Act authority and reproposed New Source Performance Standards that specify permissible levels of greenhouse gas emissions from newly-constructed fossil fuelfired electric generating units. The proposed New Source Performance Standards set...

  • Page 17
    ... per share data) 2014 2013 2012 Year ended December 31 (Dollars in millions) 2015 2016 2017 2018 2019 Thereafter Total Fixed-rate debt (A) Principal amount Weighted-average interest rate Variable-rate debt (B) Principal amount Weighted-average interest rate (A) $ 0.2 3.02% $ - -% $110...

  • Page 18
    ... stock Payment of long-term debt (Decrease) increase in short-term debt Changes in advances with unconsolidated affiliates Contributions from noncontrolling interest partners Repayment of line of credit Purchase of treasury stock Distributions to noncontrolling interest partners Net Cash (Used...

  • Page 19
    ... and supplies, at average cost Deferred income taxes Fuel clause under recoveries Other Total current assets Other Property and Investments Investment in unconsolidated affiliates Other Total other property and investments Property, Plant and Equipment In service Construction work in progress Total...

  • Page 20
    ... of Enogex Holdings Deferred income taxes attributable to contributions from noncontrolling interest partners 2-for-1 forward stock split Balance at December 31, 2013 Net income Other comprehensive income, net of tax Dividends declared on common stock Issuance of common stock Stock-based...

  • Page 21
    ...the Company. OG&E is the largest electric utility in Oklahoma and its franchised service territory includes the Fort Smith, Arkansas area. OG&E sold its retail natural gas business in 1928 and is no longer engaged in the natural gas distribution business. The natural gas midstream operations segment...

  • Page 22
    ... risk within the meaning of the applicable utility regulation, customers will be required to provide a security deposit. Fuel Inventories Fuel inventories for the generation of electricity consist of coal, natural gas and oil. OG&E uses the weighted-average cost method of accounting for inventory...

  • Page 23
    ..., operating and regulation by the FERC or the SPP. Fuel Adjustment Clauses The actual cost of fuel used in electric generation and certain purchased power costs are passed through to OG&E's customers through fuel adjustment clauses. The fuel adjustment clauses are subject to periodic review by...

  • Page 24
    ... using the "Distrigas" method. Effective April 1, 2014, Enable's general partner, OGE Energy and CenterPoint agreed to reduce certain governance related costs billed to Enable for transition services. Additionally, OGE Energy agreed to provide seconded employees to Enable to support its operations...

  • Page 25
    ... and related income tax benefit for the years ended December 31, 2014, 2013 and 2012 related to the Company's performance units and restricted stock. Year ended December 31 (In millions) 2014 2013 2012 (In millions) Amount Recognized in Income Natural Gas Financial Futures/Swaps Interest Rate...

  • Page 26
    ... price volatility is based on the historical volatility of the Company's common stock for the past three years and was simulated using the Geometric Brownian Motion process. The risk-free interest rate for the performance unit grants is based on the three-year U.S. Treasury yield curve in effect...

  • Page 27
    ... and Oklahoma state tax credits associated with production from its wind farms. In addition, OG&E and Enable earn Oklahoma state tax credits associated with their investments in electric generating and natural gas processing facilities which further reduce the Company's effective tax rate. Non...

  • Page 28
    ... Plan during 2015 would be a discretionary contribution, anticipated to be in the form of cash, and is not required to satisfy the minimum regulatory funding requirement specified by the Employee Retirement Income Security Act of 1974, as amended. OGE Energy could be required to make additional...

  • Page 29
    ... in 2015 with the rates trending downward to 4.48 percent by 2028. A one-percentage point change in the assumed health care cost trend rate would have the following effects: One-Percentage Point Increase Year ended December 31 (In millions) 2014 2013 2012 Effect on aggregate of the service and...

  • Page 30
    ... U.S. corporate bonds with an investment grade rating at or above Baa3 or BBB- by Moody's Investors Services, Standard & Poor's Ratings Services or Fitch Ratings. (C) This category represents units of participation in a commingled fund that primarily invested in stocks of international companies and...

  • Page 31
    ... in the generation, transmission, distribution and sale of electric energy, and (ii) natural gas midstream operations segment. As discussed in Note 3, in connection with the formation of Enable, effective May 1, 2013, OGE Energy deconsolidated its interest in Enogex Holdings and began accounting for...

  • Page 32
    ... at prices comparable to those of unaffiliated customers and are affected by regulatory considerations. 2014 (In millions) Electric Utility The following tables summarize the results of the Company's business segments for the years ended December 31, 2014, 2013 and 2012. Natural Gas Midstream...

  • Page 33
    ...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 Oklahoma Cogeneration, LLC QF contract, OG&E purchases 100 percent of the electricity generated by the QFs. For the years ended December 31, 2014, 2013 and 2012...

  • Page 34
    ... reviews the costs recovered from customers through OG&E's fuel adjustment clause. On July 31, 2013, the OCC Staff filed an application to review OG&E's fuel adjustment clause for calendar year 2012, including the prudence of OG&E's electric generation, purchased power and fuel procurement costs...

  • Page 35
    ... the period ended December 31, 2014 of OGE Energy Corp. and our report dated February 26, 2015 expressed an unqualified opinion thereon. Ernst & Young LLP Oklahoma City, Oklahoma February 26, 2015 Controls and Procedures. The Company maintains a set of disclosure controls and procedures designed...

  • Page 36
    ...OGE's registrar, stock plan administrator, transfer agent and dividend disbursing agent: Computershare P.O. Box 30170 College Station, TX 77842-3170 Phone toll free: 1-888-216-8114 Internet account access: www.computershare.com/investor $200 OGE Energy Corp. S&P 500 index S&P 1500 Utilities Sector...

  • Page 37
    P.O. Box 321 Oklahoma City, Oklahoma 73101-0321 (405) 553-3000