OG&E 2015 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... new product offerings. OGE Energy Corp. OGE Energy Corp. (NYSE: OGE), is headquartered in Oklahoma City and is the parent company of Oklahoma Gas and Electric Company (OG&E), a regulated electric utility serving approximately 825,000 customers in Oklahoma and western Arkansas. In addition, OGE...

  • Page 3
    ... lighting. We're also increasing awareness and interest in electric vehicles. We are improving processes and reducing costs in order to protect our customers' bills, because we believe low rates and high reliability benefit our current customers and help to attract new ones. Lastly, our company...

  • Page 4
    ... of the company's generation in 2015. Solar With OG&E's solar program, customers will receive the benefits of solar power without having to pay the upfront system costs. AVERAGE REDUCTION IN ENERGY CONSUMPTION 55 % Supporting STEM education Checotah, Okla. Middle School science teacher Patty...

  • Page 5
    ..., Director of Engineering Innovation & Technology, Oklahoma City 2. 1MILLION THAT'S HOW MANY TIMES CUSTOMERS PAID THEIR BILL ONLINE IN 2015, USING THE NEWLY REDESIGNED, MOBILEFRIENDLY OGE.COM WEBSITE. Robust outage-related communications Customers experiencing a non-storm-related outage can now see...

  • Page 6
    ..., Power Supply Operations Kenneth R. Grant Vice President, Sales and Marketing Jean C. Leger, Jr. Vice President, Utility Operations Michael R. Mathews Vice President, Transmission and Distribution Operations Cristina F. McQuistion Vice President, Chief Information Officer and Utility Strategy Jerry...

  • Page 7
    ...฀subsidiary฀of฀ the฀Company.฀OG&E฀is฀the฀largest฀electric฀utility฀in฀Oklahoma฀and฀its฀ franchised฀service฀territory฀includes฀Fort฀Smith,฀Arkansas฀and฀the฀ surrounding฀communities.฀OG&E฀sold฀its฀retail฀natural฀gas฀business฀in฀ 1928...

  • Page 8
    ...฀utility฀and฀ natural฀gas฀midstream฀pipeline฀infrastructure฀and฀meet฀individual฀ customers'฀needs฀for฀energy฀and฀related฀services฀focusing฀on฀safety,฀ efficienc ,฀reliability,฀customer฀service฀and฀risk฀management.฀The฀ Company's฀corporate...

  • Page 9
    ...฀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(A) Heating฀-฀Actual...

  • Page 10
    ...฀using฀the฀equity฀method฀of฀accounting.฀ Prior฀to฀May฀1,฀2013,฀the฀Company฀reported฀the฀results฀of฀Enogex฀ Holdings฀in฀the฀natural฀gas฀midstream฀operations฀segment. Equity฀in฀earnings฀of฀unconsolidated฀affiliates฀includes฀OGE Energy...

  • Page 11
    ...Months฀ Ended฀December฀31,฀2013)฀ Total (Year฀Ended December฀31,฀2013) Operating฀revenues฀ Cost฀of฀sales฀ Operating฀expenses฀ Operating฀income฀(loss)฀ Equity฀in฀earnings฀of฀unconsolidated฀affiliate ฀ Other฀income฀(expense)฀ Interest฀expense...

  • Page 12
    ...will฀decide฀at฀that฀ time฀whether฀to฀cancel฀the฀dry฀scrubber฀equipment฀and฀installation฀contracts฀and฀make฀plans฀to฀convert฀the฀Sooner฀coal฀units฀to฀natural฀gas.฀As฀of฀December฀31,฀2015,฀OG&E฀had฀ incurred฀$94.8฀million฀of...

  • Page 13
    ...per฀ share฀effective฀in฀October฀2015.฀ Security Ratings Moody's฀฀ Investors฀฀ Services฀ Standard &฀Poor's Ratings฀ Services฀ Fitch฀ Ratings OG&E฀Senior฀Notes฀ OGE฀Energy฀Senior฀Notes฀ OGE฀Energy฀Commercial฀Paper฀ A1฀ A3฀ P2฀ A-฀ BBB...

  • Page 14
    ...is฀based฀on฀ management's฀expectation฀of฀the฀long-term฀return฀on฀the฀plan฀assets฀ portfolio.฀The฀discount฀rate฀used฀to฀compute฀the฀present฀value฀of฀plan฀ liabilities฀is฀based฀generally฀on฀rates฀of฀high-grade฀corporate฀bonds฀ with...

  • Page 15
    ...฀net฀loss฀and฀p ior฀ service฀cost.฀ Unbilled Revenues OG&E฀recognizes฀revenue฀from฀electric฀sales฀when฀power฀is฀delivered฀ to฀customers.฀OG&E฀reads฀its฀customers'฀meters฀and฀sends฀bills฀to฀its฀ customers฀throughout฀each฀month.฀As...

  • Page 16
    ...฀in฀2020฀ or฀later฀depending฀on฀the฀degree฀of฀the฀area's฀non-attainment฀ designation.฀All฀areas฀in฀Oklahoma฀currently฀meet฀the฀new฀standard.฀ The฀Company฀is฀monitoring฀those฀processes฀and฀their฀possible฀ impact฀on฀its฀operations...

  • Page 17
    ...฀Smart฀Grid฀technology฀helps฀to฀ reduce฀the฀peak฀load฀demand.฀OG&E฀also฀seeks฀to฀utilize฀renewable฀ energy฀sources฀that฀do฀not฀emit฀greenhouse฀gases.฀OG&E's฀service฀ territory฀borders฀one฀of฀the฀nation's฀best฀wind฀resource฀areas...

  • Page 18
    ...the฀Company฀would฀change฀interest฀expense฀by฀$2.4฀million฀annually฀through฀2017฀and฀ $1.4฀million฀thereafter. Operating revenues Electric฀Utility฀฀ Natural฀Gas฀Midstream฀Operations฀(Note฀1 Total฀operating฀revenues฀฀ Cost of Sales ฀ Electric...

  • Page 19
    ...liabilities฀ Change฀in฀certain฀current฀assets฀and฀liabilities Accounts฀receivable,฀net฀ Accounts฀receivable฀-฀unconsolidated฀affiliate ฀ Accrued฀unbilled฀revenues฀ Income฀taxes฀receivable฀฀ Fuel,฀materials฀and฀supplies฀inventories฀ Fuel฀clause...

  • Page 20
    ...฀of฀$1.4฀and฀$1.6,฀respectively฀฀ Accounts฀receivable฀-฀unconsolidated฀affiliates ฀ Accrued฀unbilled฀revenues฀฀ Income฀taxes฀receivable฀฀ Fuel฀inventories฀฀ Materials฀and฀supplies,฀at฀average฀cost฀฀ Deferred฀income฀taxes฀฀ Fuel...

  • Page 21
    ...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...฀are฀an฀integral฀part฀hereof. 38 OGE Energy Corp. OGE Energy Corp. 39

  • Page 22
    ...฀subsidiary฀of฀ the฀Company.฀OG&E฀is฀the฀largest฀electric฀utility฀in฀Oklahoma฀and฀its฀ franchised฀service฀territory฀includes฀Fort฀Smith,฀Arkansas฀and฀the฀ surrounding฀communities.฀OG&E฀sold฀its฀retail฀natural฀gas฀business฀in฀ 1928...

  • Page 23
    ...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...

  • Page 24
    ...the฀estimated฀service฀life฀฀ of฀the฀utility฀assets.฀Depreciation฀is฀provided฀at฀the฀unit฀level฀for฀ production฀plant฀and฀at฀the฀account฀or฀sub-account฀level฀for฀all฀other฀ plant,฀and฀is฀based฀on฀the฀average฀life฀group฀method...

  • Page 25
    ...฀31,฀2015฀and฀2014,฀respectively,฀฀ for฀amounts฀billed฀for฀transitional฀services,฀including฀the฀cost฀of฀ seconded฀employees.฀ Enable฀reimbursed฀the฀Company฀for฀Mr.฀Delaney's฀services฀as฀ interim฀President฀and฀Chief฀Executive฀Officer...

  • Page 26
    ...,฀restricted฀stock฀grants฀(net฀of฀forfeitures)฀and฀ payouts฀of฀earned฀performance฀units.฀In฀2015,฀there฀were฀1,070฀shares฀ of฀restricted฀stock฀returned฀to฀the฀Company฀to฀satisfy฀tax฀liabilities. 48 OGE Energy Corp. OGE Energy Corp. 49

  • Page 27
    ...on฀the฀non-vested฀period฀since฀inception฀of฀the฀award฀cycle.฀ There฀are฀no฀post-vesting฀restrictions฀related฀to฀the฀Company's฀ performance฀units฀based฀on฀total฀shareholder฀return.฀The฀number฀฀ of฀performance฀units฀granted฀based฀on...

  • Page 28
    ...฀current฀ taxes฀payable.฀ 9. Common Equity Automatic Dividend Reinvestment and Stock Purchase Plan The฀Company฀issued฀217,370฀shares฀of฀common฀stock฀under฀its฀ Automatic฀Dividend฀Reinvestment฀and฀Stock฀Purchase฀Plan฀in฀2015฀ 52 OGE Energy Corp. OGE...

  • Page 29
    ...฀the฀Company's฀ Automatic฀Dividend฀Reinvestment฀and฀Stock฀Purchase฀Plan. Earnings Per Share Basic฀earnings฀per฀share฀is฀calculated฀by฀dividing฀net฀income฀ attributable฀to฀OGE฀Energy฀by฀the฀weighted฀average฀number฀of฀the฀ Company's฀common...

  • Page 30
    ... Cost ฀ ฀฀ Year฀ended฀December฀31฀(In฀millions)฀ 2015฀ ฀ Pension฀Plan฀ 2014฀ 2013฀ Restoration฀of฀ Retirement฀Income฀Plan฀ 2015฀ 2014฀ 2013฀ Postretirement฀Benefit฀Plan 2015฀ 2014฀ 2013 The฀overall฀expected฀rate฀of฀return฀on฀plan...

  • Page 31
    ...฀securities฀purchased฀ (8.8) Total฀Plan฀assets฀ $581.7฀ ฀ This฀category฀represents฀U.S.฀treasury฀notes฀and฀bonds฀with฀a฀Moody's฀Investors฀ Services฀rating฀of฀Aaa฀and฀Government฀Agency฀Bonds฀with฀a฀Moody's฀Investors฀ Services฀rating...

  • Page 32
    ...฀stocks,฀bonds฀and฀money฀market฀accounts,฀of฀which฀a฀significant portion฀is฀comprised฀of฀mortgage-backed฀securities. The฀following฀table฀summarizes฀the฀benefit฀p yments฀the฀Company฀ expects฀to฀pay฀related฀to฀OGE฀Energy's฀Pension฀Plan...

  • Page 33
    ...฀Company's฀ business฀segments฀for฀the฀years฀ended฀December฀31,฀2015,฀2014฀ and฀2013. Natural฀Gas Midstream฀ Operations฀ Other Operations฀ ฀ 2015฀ (In฀millions)฀ ฀ Electric฀ Utility฀ Eliminations฀ Total Operating฀revenues฀ Cost฀of฀sales...

  • Page 34
    ...with฀a฀non-affiliated company฀to฀furnish฀this฀maintenance. OG&E Wind Farm Land Lease Agreements OG&E฀has฀operating฀leases฀related฀to฀land฀for฀its฀Centennial,฀OU฀Spirit฀ and฀Crossroads฀wind฀farms฀expiring฀at฀various฀dates.฀The฀Centennial฀ lease...

  • Page 35
    ...฀of฀the฀Company฀and฀its฀affiliates฀relating฀to฀t ansactions฀with฀ OG&E,฀(ii)฀the฀Company฀employ฀accounting฀and฀other฀procedures฀and฀ controls฀to฀protect฀against฀subsidization฀of฀non-utility฀activities฀by฀ OG&E's฀customers฀and฀(iii...

  • Page 36
    ...฀lower฀incentivized฀rates.฀Non-SmartHours฀program฀ customers฀benefit฀from฀the฀reduction฀of฀on-peak฀usage฀ y฀SmartHours฀ customers฀by฀the฀reduction฀of฀more฀costly฀on-peak฀generation฀and฀the฀ delay฀in฀adding฀new฀on-peak฀generation.฀ In...

  • Page 37
    ...฀ended฀December฀31,฀2015฀of฀OGE฀Energy฀Corp.฀ and฀our฀report฀dated฀February฀26,฀2016฀expressed฀an฀unqualified opinion฀thereon. Ernst & Young LLP Oklahoma฀City,฀Oklahoma February฀26,฀2016 Controls and Procedures. The฀Company฀maintains฀a฀set฀of...

  • Page 38
    ... their OGE stock accounts should contact 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 $150 OGE Energy Corp...

  • Page 39