OG&E 2015 Annual Report Download - page 7

10 OGE Energy Corp.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Glossary of Terms
The฀following฀is฀a฀glossary฀of฀frequently฀used฀abbreviations฀that฀are฀
found฀throughout฀this฀Annual฀Report.
Abbreviation฀ Definitio
401(k)฀Plan฀ Qualified฀defined฀con ibution฀retirement฀plan
ALJ฀ ฀Administrative฀Law฀Judge
APSC฀ ฀Arkansas฀Public฀Service฀Commission
ArcLight฀group฀ ฀Bronco฀Midstream฀Holdings,฀LLC,฀Bronco฀
Midstream฀Holdings฀II,฀LLC,฀collectively
ASC฀ ฀Financial฀Accounting฀Standards฀Board฀
Accounting฀Standards฀Codificatio
ASU฀ ฀Financial฀Accounting฀Standards฀Board฀
Accounting฀Standards฀Update
AVEC฀ ฀Arkansas฀Valley฀Electric฀Cooperative฀
Corporation
BART฀ Best฀available฀retrofit฀technolog
Btu฀ British฀thermal฀unit
CSAPR฀ Cross-State฀Air฀Pollution฀Rule
CenterPoint฀ ฀CenterPoint฀Energy฀Resources฀Corp.,฀
wholly-owned฀Subsidiary฀of฀CenterPoint฀
Energy,฀Inc.
CO2฀ Carbon฀dioxide
Code฀ Internal฀Revenue฀Code฀of฀1986
Company฀ ฀OGE฀Energy฀Corp,฀collectively฀with฀its฀
subsidiaries฀and฀Enable฀Midstream฀Partners
Dry฀Scrubbers฀ ฀Dry฀flue฀gas฀desulfu ization฀units฀with฀spray฀
dryer฀absorber
ECP฀ ฀Environmental฀Compliance฀Plan
Enable฀ ฀Enable฀Midstream฀Partners,฀LP,฀partnership฀
between฀OGE฀Energy,฀the฀ArcLight฀Group฀and฀
CenterPoint฀Energy,฀Inc.฀formed฀to฀own฀and฀
operate฀the฀midstream฀businesses฀of฀
OGE฀Energy฀and฀CenterPoint
Enogex฀Holdings฀ ฀Enogex฀Holdings฀LLC,฀the฀parent฀company฀of฀
Enogex฀LLC฀and฀a฀majority-owned฀subsidiary฀
of฀OGE฀Holdings฀LLC฀(prior฀to฀May฀1,฀2013)
Enogex฀LLC฀ ฀Enogex฀LLC฀collectively฀with฀its฀subsidiaries฀
(effective฀June฀30,฀2013,฀the฀name฀was฀
changed฀to฀Enable฀Oklahoma฀Intrastate฀
Transmission,฀LLC)
EPA฀ ฀U.S.฀Environmental฀Protection฀Agency
FASB฀ ฀Financial฀Accounting฀Standards฀Board
Federal฀Clean฀฀ ฀Federal฀Water฀Pollution฀Control฀Act฀of฀1972,฀
฀ Water฀Act฀ as฀amended฀as฀amended
FERC฀ ฀Federal฀Energy฀Regulatory฀Commission
FIP฀ ฀Federal฀implementation฀plan
GAAP฀ ฀Accounting฀principles฀generally฀accepted฀in฀
the฀United฀States
IRP฀ ฀Integrated฀Resource฀Plans
LTSA฀ ฀Long-Term฀Service฀Agreement
MATS฀ ฀Mercury฀and฀Air฀Toxics฀Standards
MMBtu฀ ฀Million฀British฀thermal฀unit
Mustang฀฀ OG&E’s฀plan฀to฀replace฀the฀soon-to-be฀retired
฀ Modernization฀Plan฀ ฀Mustang฀steam฀turbines฀in฀late฀2017฀with฀
400฀MW฀of฀new,฀efficient฀com ustion฀turbines฀
at฀the฀Mustang฀site฀in฀2018฀and฀2019
MW฀ ฀Megawatt
MWh฀ ฀Megawatt-hour
NAAQS฀ ฀National฀Ambient฀Air฀Quality฀Standards
NGLs฀ ฀Natural฀gas฀liquids
NOX฀ ฀Nitrogen฀oxide
OCC฀ ฀Oklahoma฀Corporation฀Commission
Off-system฀sales฀ ฀Sales฀to฀other฀utilities฀and฀power฀marketers
OG&E฀ ฀Oklahoma฀Gas฀and฀Electric฀Company,฀
wholly-owned฀subsidiary฀of฀OGE฀Energy฀Corp.
OGE฀Holdings฀ ฀OGE฀Enogex฀Holdings฀LLC,฀wholly-owned฀
subsidiary฀of฀OGE฀Energy฀Corp.,฀parent฀
company฀of฀Enogex฀Holdings฀(prior฀to฀May฀1,฀
2013)฀and฀26.3฀percent฀owner฀of฀Enable฀
Midstream฀Partners
Pension฀Plan฀ Qualified฀defined฀benefit฀retirement฀p
Ppb฀ Parts฀per฀billion
PUD฀ ฀Public฀Utility฀Division฀of฀the฀Oklahoma฀
Corporation฀Commission
QF฀ Qualified฀cogene ation฀facilities
QF฀contracts฀ ฀Contracts฀with฀QFs฀and฀small฀power฀
production฀producers
Regional฀Haze฀ ฀The฀EPA’s฀regional฀haze฀rule
Restoration฀of฀฀ Supplemental฀retirement฀plan฀to฀the฀
฀ Retirement฀Income฀ Pension฀Plan
฀ Plan
SESH฀ Southeast฀Supply฀Header,฀LLC
SIP฀ State฀implementation฀plan
SO2฀ Sulfur฀dioxide
SPP฀ Southwest฀Power฀Pool
Stock฀Incentive฀Plan฀ 2013฀Stock฀Incentive฀Plan
System฀sales฀ Sales฀to฀OG&E’s฀customers
TBtu/d฀ Trillion฀British฀thermal฀units฀per฀day
Forward-Looking Statements
Except฀for฀the฀historical฀statements฀contained฀herein,฀the฀matters฀
discussed฀in฀this฀Annual฀Report,฀including฀those฀matters฀discussed฀in฀
Management’s฀Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀
Results฀of฀Operations,฀are฀forward-looking฀statements฀that฀are฀subject฀
to฀certain฀risks,฀uncertainties฀and฀assumptions.฀Such฀forward-looking฀
statements฀are฀intended฀to฀be฀identified฀in฀this฀document฀ y฀the฀words฀
“anticipate”,฀“believe”,฀“estimate”,฀“expect”,฀“intend”,฀“objective”,฀“plan”,฀
“possible”,฀“potential”,฀“project”฀and฀similar฀expressions.฀Actual฀results฀
may฀vary฀materially฀from฀those฀expressed฀in฀forward-looking฀
statements.฀In฀addition฀to฀the฀specific฀ isk฀factors฀discussed฀in฀
Management’s฀Discussion฀and฀Analysis฀of฀Financial฀Condition฀and฀
Results฀of฀Operations฀herein,฀factors฀that฀could฀cause฀actual฀results฀to฀
differ฀materially฀from฀the฀forward-looking฀statements฀include,฀but฀are฀
not฀limited฀to:
•฀ ฀general฀economic฀conditions,฀including฀the฀availability฀of฀credit,฀
access฀to฀existing฀lines฀of฀credit,฀access฀to฀the฀commercial฀paper฀
markets,฀actions฀of฀rating฀agencies฀and฀their฀impact฀on฀capital฀
expenditures;
Abbreviation฀ Definitio
OGE Energy Corp. 1 1
•฀ ฀the฀ability฀of฀the฀Company฀and฀its฀subsidiaries฀to฀access฀the฀capital฀
markets฀and฀obtain฀financing฀on฀ avorable฀terms฀as฀well฀as฀inflation
rates฀and฀monetary฀fluctuations ฀
•฀ ฀prices฀and฀availability฀of฀electricity,฀coal,฀natural฀gas฀and฀NGLs;
•฀ ฀the฀timing฀and฀extent฀of฀changes฀in฀commodity฀prices,฀particularly฀
natural฀gas฀and฀NGLs,฀the฀competitive฀effects฀of฀the฀available฀
pipeline฀capacity฀in฀the฀regions฀Enable฀serves,฀and฀the฀effects฀of฀
geographic฀and฀seasonal฀commodity฀price฀differentials,฀including฀the฀
effects฀of฀these฀circumstances฀on฀re-contracting฀available฀capacity฀
on฀Enable’s฀interstate฀pipelines;฀
•฀ ฀the฀timing฀and฀extent฀of฀changes฀in฀the฀supply฀of฀natural฀gas,฀
particularly฀supplies฀available฀for฀gathering฀by฀Enable’s฀gathering฀
and฀processing฀business฀and฀transporting฀by฀Enable’s฀interstate฀
pipelines,฀including฀the฀impact฀of฀natural฀gas฀and฀NGLs฀prices฀on฀the฀
level฀of฀drilling฀and฀production฀activities฀in฀the฀regions฀Enable฀serves;฀
•฀ ฀business฀conditions฀in฀the฀energy฀and฀natural฀gas฀midstream฀
industries,฀including฀the฀demand฀for฀natural฀gas,฀NGLs,฀crude฀oil฀and฀
midstream฀services;฀
•฀ ฀competitive฀factors฀including฀the฀extent฀and฀timing฀of฀the฀entry฀of฀
additional฀competition฀in฀the฀markets฀served฀by฀the฀Company;
•฀ ฀unusual฀weather;฀
•฀ ฀availability฀and฀prices฀of฀raw฀materials฀for฀current฀and฀future฀
construction฀projects;฀
•฀ ฀Federal฀or฀state฀legislation฀and฀regulatory฀decisions฀and฀initiatives฀
that฀affect฀cost฀and฀investment฀recovery,฀have฀an฀impact฀on฀rate฀
structures฀or฀affect฀the฀speed฀and฀degree฀to฀which฀competition฀
enters฀the฀Company’s฀markets;฀
•฀ ฀environmental฀laws฀and฀regulations฀that฀may฀impact฀the฀Company’s฀
operations;฀
•฀ ฀changes฀in฀accounting฀standards,฀rules฀or฀guidelines;
•฀ ฀the฀discontinuance฀of฀accounting฀principles฀for฀certain฀types฀of฀
rate-regulated฀activities;
•฀ ฀the฀cost฀of฀protecting฀assets฀against,฀or฀damage฀due฀to,฀terrorism฀or฀
cyber฀attacks฀and฀other฀catastrophic฀events;
•฀ ฀advances฀in฀technology;
•฀ ฀creditworthiness฀of฀suppliers,฀customers฀and฀other฀contractual฀
parties;
•฀ ฀difficulty฀in฀making฀accu ate฀assumptions฀and฀projections฀regarding฀
future฀revenues฀and฀costs฀associated฀with฀the฀Company’s฀equity฀
investment฀in฀Enable฀that฀the฀Company฀does฀not฀control;฀and
•฀ ฀other฀risk฀factors฀listed฀in฀the฀reports฀filed฀ y฀the฀Company฀with฀the฀
Securities฀and฀Exchange฀Commission.
The฀Company฀undertakes฀no฀obligation฀to฀publicly฀update฀or฀revise฀any฀
forward-looking฀statements,฀whether฀as฀a฀result฀of฀new฀information,฀
future฀events฀or฀otherwise.
Introduction
The฀Company฀is฀an฀energy฀and฀energy฀services฀provider฀offering฀
physical฀delivery฀and฀related฀services฀for฀both฀electricity฀and฀natural฀
gas฀primarily฀in฀the฀south฀central฀United฀States.฀The฀Company฀
conducts฀these฀activities฀through฀two฀business฀segments:฀(i)฀electric฀
utility฀and฀(ii)฀natural฀gas฀midstream฀operations.฀The฀accounts฀of฀the฀
Company฀and฀its฀wholly฀owned฀subsidiaries฀are฀included฀in฀the฀
consolidated฀financial฀statement .฀All฀intercompany฀transactions฀and฀
balances฀are฀eliminated฀in฀consolidation.฀The฀Company฀generally฀uses฀
the฀equity฀method฀of฀accounting฀for฀investments฀where฀its฀ownership฀
interest฀is฀between฀20฀percent฀and฀50฀percent฀and฀has฀the฀ability฀to฀
exercise฀significant฀influen .฀
The฀electric฀utility฀segment฀generates,฀transmits,฀distributes฀and฀
sells฀electric฀energy฀in฀Oklahoma฀and฀western฀Arkansas.฀Its฀operations฀
are฀conducted฀through฀OG&E฀and฀are฀subject฀to฀regulation฀by฀the฀
OCC,฀the฀APSC฀and฀the฀FERC.฀OG&E฀was฀incorporated฀in฀1902฀under฀
the฀laws฀of฀the฀Oklahoma฀Territory,฀and฀is฀a฀wholly฀owned฀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฀and฀is฀no฀longer฀engaged฀in฀the฀natural฀gas฀distribution฀business.฀
The฀natural฀gas฀midstream฀operations฀segment฀currently฀represents฀
the฀Company’s฀investment฀in฀Enable฀through฀its฀wholly฀owned฀
subsidiary฀OGE฀Holdings.฀Enable฀is฀engaged฀in฀the฀business฀of฀
gathering,฀processing,฀transporting฀and฀storing฀natural฀gas.฀Enable’s฀
natural฀gas฀gathering฀and฀processing฀assets฀are฀strategically฀located฀
in฀four฀states฀and฀serve฀natural฀gas฀production฀from฀shale฀
developments฀in฀the฀Anadarko,฀Arkoma฀and฀Ark-La-Tex฀basins.฀Enable฀
also฀owns฀a฀crude฀oil฀gathering฀business฀in฀the฀Bakken฀shale฀
formation,฀principally฀located฀in฀the฀Williston฀basin฀of฀North฀Dakota.฀
Enable’s฀natural฀gas฀transportation฀and฀storage฀assets฀extend฀from฀
western฀Oklahoma฀and฀the฀Texas฀Panhandle฀to฀Alabama฀and฀from฀
Louisiana฀to฀Illinois.฀For฀periods฀prior฀to฀the฀formation฀of฀Enable,฀the฀
natural฀gas฀midstream฀operations฀segment฀reflected฀the฀consolidated
results฀of฀Enogex฀Holdings.฀
Enable฀was฀formed฀effective฀May฀1,฀2013฀by฀the฀Company,฀the฀
ArcLight฀group฀and฀CenterPoint฀to฀own฀and฀operate฀the฀midstream฀
businesses฀of฀the฀Company฀and฀CenterPoint.฀In฀the฀formation฀
transaction,฀the฀Company฀and฀the฀ArcLight฀group฀contributed฀
Enogex฀LLC฀to฀Enable฀and฀the฀Company฀deconsolidated฀its฀previously฀
held฀investment฀in฀Enogex฀Holdings฀and฀acquired฀an฀equity฀interest฀in฀
Enable.฀The฀Company’s฀contribution฀of฀Enogex฀LLC฀to฀Enable฀met฀the฀
requirements฀of฀being฀in฀substance฀real฀estate฀and฀was฀recorded฀at฀
historical฀cost.฀The฀general฀partner฀of฀Enable฀is฀equally฀controlled฀by฀
CenterPoint฀and฀OGE฀Energy,฀who฀each฀have฀50฀percent฀management฀
ownership.฀Based฀on฀the฀50/50฀management฀ownership,฀with฀neither฀
company฀having฀control,฀effective฀May฀1,฀2013,฀the฀Company฀began฀
accounting฀for฀its฀interest฀in฀Enable฀using฀the฀equity฀method฀
of฀accounting.฀
In฀April฀2014,฀Enable฀completed฀an฀initial฀public฀offering฀of฀
25,000,000฀common฀units฀resulting฀in฀Enable฀becoming฀a฀publicly฀
traded฀Master฀Limited฀Partnership.฀At฀December฀31,฀2015,฀the฀
Company฀owned฀approximately฀111.0฀million฀limited฀partner฀units,฀฀
or฀26.3฀percent,฀of฀which฀68.2฀million฀limited฀partner฀units฀were฀
subordinated.฀
On฀January฀22,฀2016,฀Enable฀announced฀a฀quarterly฀dividend฀
distribution฀of฀$0.31800฀per฀unit฀on฀its฀outstanding฀common฀and฀
subordinated฀units,฀which฀is฀unchanged฀from฀the฀previous฀quarter.฀
Based฀on฀current฀commodity฀prices,฀Enable฀has฀seen฀changes฀in฀
producer฀activity฀that฀have฀negatively฀impacted฀Enable’s฀operations฀
and฀financial฀position฀and฀could฀see฀additional฀changes฀in฀producer
activity฀that฀may฀negatively฀impact฀Enable’s฀operations฀and฀affect฀its฀
future฀distribution฀rates.฀If฀cash฀distributions฀to฀Enable’s฀unitholders฀
exceed฀$0.330625฀per฀unit฀in฀any฀quarter,฀the฀general฀partner฀will฀
receive฀increasing฀percentages,฀up฀to฀50฀percent,฀of฀the฀cash฀Enable฀
distributes฀in฀excess฀of฀that฀amount.฀OGE฀Holdings฀is฀entitled฀to฀
60฀percent฀of฀those฀“incentive฀distributions.”