OG&E 2014 Annual Report Download - page 23

42 OGE Energy Corp. OGE Energy Corp. 43
returns. However, OGE Energy is not considered the primary
beneficiary of Enable since it does not have the power to direct
the activities of Enable that are considered most significant to the
economic performance of Enable. As discussed above, OGE Energy
accounts for the investment in Enable using the equity method of
accounting. Under the equity method, the investment will be adjusted
each period for contributions made, distributions received and the
Company’s share of the investee’s comprehensive income.
OGE Energy’s maximum exposure to loss related to Enable is limited
to OGE Energy’s equity investment in Enable as presented on the
Company’s Consolidated Balance Sheet at December 31, 2014. The
Company evaluates its equity method investments for impairment
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 Enable which
do not exceed cumulative equity in earnings subsequent to the date
of investment to be a return on investment which are classified as
operating activities in the Consolidated Statements of Cash Flows. The
Company considers distributions received from Enable 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 4 to
74 years.
The following table summarizes changes to the Company’s asset
retirement obligations during the years ended December 31, 2014
and 2013.
(In millions) 2014 2013
Balance at January 1 $55.2 $54.0
Liabilities settled (0.8) (0.4)
Accretion expense 2.5 2.3
Revisions in estimated cash flows 1.7 (0.7)
Balance at December 31 $58.6 $55.2
Allowance for Funds Used During Construction
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 6.92 percent,
8.33 percent and 8.93 percent for the years ended December 31,
2014, 2013 and 2012, respectively. The decrease in the allowance for
funds used during construction rates in 2014 was primarily due to two
factors. First, an increase in the average daily balance of short-term
debt resulted in less equity being required to finance construction
projects, which caused the equity portion of allowance for funds using
during construction to decrease. Second, that same increase in the
average daily balance of short-term debt allowed the interest and
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
customers’ 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.
The Company deconsolidated the results of operations for
Enogex LLC as of May 1, 2013. Prior to this date, operating revenues
for gathering, processing, transportation and storage services for
Enogex LLC were recorded each month based on the current month’s
estimated volumes, contracted prices (considering current commodity
prices), historical seasonal fluctuations and any known adjustments.
The estimates were reversed in the following month and customers
were billed on actual volumes and contracted prices. Gas sales were
calculated on current-month nominations and contracted prices.
Operating revenues associated with the production of NGLs were
estimated based on current-month estimated production and
contracted prices. These amounts were reversed in the following
month and the customers were billed on actual production and
contracted prices.
Enogex LLC recognized revenue from natural gas gathering,
processing, transportation and storage services to third parties as
services were provided. Revenue associated with NGLs was
recognized when the production was sold.
Enogex LLC recorded deferred revenue when it received
consideration from a third party before achieving certain criteria that
must be met for revenue to be recognized in accordance with GAAP.
Enogex LLC engaged in asset management and hedging activities
related to the purchase and sale of natural gas and NGLs. Contracts
utilized in these activities generally included purchases and sales for
physical delivery, over-the-counter forward swap and options contracts
and exchange traded futures and options.
SPP Purchases and Sales
OG&E currently owns and operates transmission and generation
facilities as part of a vertically integrated utility. OG&E is a member
of the SPP regional transmission organization and has transferred
operational authority, but not ownership, of OG&E’s transmission
facilities to the SPP. On March 1, 2014, the SPP implemented FERC
approved regional day ahead and real-time markets for energy and
operating services, as well as associated transmission congestion
rights. Collectively the three markets operate together under the global
name, SPP Integrated Marketplace. OG&E represents owned and
contracted generation assets, and customer load in the SPP Integrated
Marketplace for the sole benefit of its customers. OG&E has not
participated in the SPP Integrated Marketplace for any speculative
trading activities. OG&E records SPP Integrated Marketplace
transactions as sales or purchases per FERC Order 668, which
requires that purchases and sales be recorded on a net basis for
each settlement period of the SPP Integrated Marketplace. These
results are reported as Operating Revenues or Cost of Goods Sold in
its Consolidated Financial Statements. OG&E revenues, expenses,
assets and liabilities may be adversely affected by changes in the
organization, 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 the OCC, the APSC and the FERC.
The OCC, the APSC and the FERC have authority to review the
appropriateness of gas transportation charges or other fees OG&E
pays to its affiliate, Enable.
Income Taxes
The Company files consolidated income tax returns in the U.S. Federal
jurisdiction and various state jurisdictions. Income taxes are generally
allocated to each company in the affiliated group based on its
stand-alone taxable income or loss. Federal investment tax credits
previously claimed on electric utility property have been deferred and
are being amortized to income over the life of the related property. The
Company uses the asset and liability method of accounting for income
taxes. Under this method, a deferred tax asset or liability is recognized
for the estimated future tax effects attributable to temporary differences
between the financial statement basis and the tax basis of assets and
liabilities as well as tax credit carry forwards and net operating loss
carry forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the period of the change. The Company
recognizes interest related to unrecognized tax benefits in interest
expense and recognizes penalties in other expense.
Accrued Vacation
The Company accrues vacation pay monthly by establishing a liability
for vacation earned. Vacation may be taken as earned and is charged
against the liability. At the end of each year, the liability represents the
amount of vacation earned, but not taken.
Accumulated Other Comprehensive Income (Loss)
The following table summarizes changes in the components of
accumulated other comprehensive loss attributable to OGE Energy
during 2014. All amounts below are presented net of tax.
Pension Plan and
Restoration of Postretirement
Retirement Income Plan Benefit Plans
Deferred interest
Prior Prior rate swap
(In millions) Net loss service cost Net loss service cost headging losses Total
Balance at December 31, 2013 $(27.4) $0.1 $(5.8) $ 5.1 $(0.2) $(28.2)
Other comprehensive income before reclassifications (11.1) — (3.1) — — (14.2)
Amounts reclassified from accumulated other
comprehensive income (loss)(A) 1.7 — 0.9 (1.8) 0.2 1.0
Net current period other comprehensive income (loss) (9.4) — (2.2) (1.8) 0.2 (13.2)
Balance at December 31, 2014 $(36.8) $0.1 $(8.0) $ 3.3 $ — $(41.4)
(A)
Includes $0.1 million of pension curtailment charges.