UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number | Exact name of registrants as specified in their charters, address of principal executive offices and registrants' telephone number | I.R.S. Employer Identification No. | ||||||
1-12579 | OGE ENERGY CORP. | 73-1481638 | ||||||
1-1097 | OKLAHOMA GAS AND ELECTRIC COMPANY | 73-0382390 | ||||||
321 North Harvey
P.O. Box 321
Oklahoma City, Oklahoma73101-0321
405
State or other jurisdiction of incorporation or organization: Oklahoma
Securities registered pursuant to Section 12(b) of the Act:
Registrant | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||
OGE Energy Corp. | Common Stock | OGE | New York Stock Exchange | ||||||||
Oklahoma Gas and Electric Company | None | N/A | N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
OGE Energy Corp. ☑ ☑Yes☐ No Oklahoma Gas and Electric Company ☑ ☑Yes ☐ NoYes
☐ No
OGE Energy Corp. ☑ ☑Yes☐ No Oklahoma Gas and Electric Company ☑ ☑Yes ☐ NoYes
☐ No
OGE Energy Corp. | Large accelerated filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
Oklahoma Gas and Electric Company | Large accelerated filer | ☐ | Accelerated filer | ☐ | Non-accelerated filer | ☑ | Smaller reporting company | ☐ | Emerging growth company | ☐ | ||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
OGE Energy Corp. ☐ Yes ☑ No Oklahoma Gas and Electric Company ☐Yes ☑ No☑
No
At SeptemberJune 30, 2022,2023, there were 200,202,672200,287,364 shares of OGE Energy Corp.'s common stock, par value $0.01 per share, outstanding.
At SeptemberJune 30, 2022,2023, there were 40,378,745 of Oklahoma Gas and Electric Company's common stock, par value $2.50 per share, outstanding, all of which were held by OGE Energy Corp. There were no other shares of capital stock of the registrants outstanding at such date.
Oklahoma Gas and Electric Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H(2).
FORM 10-Q
TABLE OF CONTENTS
i
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations that are found throughout this Form 10-Q.
Abbreviation | Definition |
| Annual Report on Form 10-K for the year ended December 31, | ||||
APSC | Arkansas Public Service Commission | ||||
ASC | Financial Accounting Standards Board Accounting Standards Codification | ||||
ASU |
| ||||
CO2 | Carbon dioxide | ||||
COVID-19 | Novel Coronavirus disease | ||||
Dry Scrubber | Dry flue gas desulfurization unit with spray dryer absorber | ||||
Enable | Enable Midstream Partners, LP, partnership formed to own and operate the former midstream businesses of OGE Energy and CenterPoint Energy, Inc. (prior to December 2, 2021) | ||||
Energy Transfer | Energy Transfer LP, a Delaware limited partnership, collectively with its subsidiaries | ||||
EPA | U.S. Environmental Protection Agency | ||||
Federal Clean Water Act | Federal Water Pollution Control Act of 1972, as amended | ||||
FERC | Federal Energy Regulatory Commission | ||||
FIP | Federal Implementation Program | ||||
GAAP | Accounting principles generally accepted in the U.S. | ||||
IRP | Integrated Resource Plan | ||||
|
| ||||
NAAQS | National Ambient Air Quality Standard | ||||
NOX | Nitrogen oxide | ||||
OCC | Oklahoma Corporation Commission | ||||
ODEQ | Oklahoma Department of Environmental Quality | ||||
OG&E | Oklahoma Gas and Electric Company, wholly-owned subsidiary of OGE Energy | ||||
OGE Energy | OGE Energy Corp., collectively with its subsidiaries, holding company and parent company of OG&E | ||||
OGE Holdings | OGE Enogex Holdings, LLC, wholly-owned subsidiary of OGE Energy and | ||||
PM | Particulate matter | ||||
Pension Plan | Qualified defined benefit retirement plan | ||||
Regional Haze | The EPA's Regional Haze Rule | ||||
Registrants | OGE Energy and OG&E | ||||
Restoration of Retirement Income Plan | Supplemental retirement plan to the Pension Plan | ||||
SIP | State Implementation Plan | ||||
SO2 | Sulfur dioxide | ||||
SPP | Southwest Power Pool | ||||
System sales | Sales to OG&E's customers | ||||
U.S. | United States of America | ||||
USFWS | United States Fish and Wildlife Service | ||||
Winter Storm Uri | Unprecedented, prolonged extreme cold weather event in February 2021 |
ii
FILING FORMAT
This combined Form 10-Q is separately filed by OGE Energy and OG&E. Information in this combined Form 10-Q relating to each individual Registrant is filed by such Registrant on its own behalf. OG&E makes no representation regarding information relating to any other companies affiliated with OGE Energy. Neither OGE Energy, nor any of OGE Energy's subsidiaries, other than OG&E, has any obligation in respect of OG&E's debt securities, and holders of such debt securities should not consider the financial resources or results of operations of OGE Energy nor any of OGE Energy's subsidiaries, other than OG&E (in relevant circumstances), in making a decision with respect to OG&E's debt securities. Similarly, none of OG&E nor any other subsidiary of OGE Energy has any obligation with respect to debt securities of OGE Energy. This combined Form 10-Q should be read in its entirety. No one section of this combined Form 10-Q deals with all aspects of the subject matter of this combined Form 10-Q.
FORWARD-LOOKING STATEMENTS
Except for the historical statements contained herein, the matters discussed within this Form 10-Q, including those matters discussed within "Item 2. 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 by the words "anticipate," "believe," "estimate," "expect," "forecast," "intend," "objective," "plan," "possible," "potential," "project," "target" and similar expressions. Actual results may vary materially from those expressed in forward-looking statements. In addition to the specific risk factors discussed within "Item 1A. Risk Factors" in the Registrants' 20212022 Form 10-K and within "Item 2. 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:
1
The Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
OGE ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)Three Months Ended September 30, Nine Months Ended September 30, (In millions, except per share data) 2022 2021 2022 2021 OPERATING REVENUES Revenues from contracts with customers $ 1,250.6 $ 848.2 $ 2,619.7 $ 3,033.7 Other revenues 20.2 16.2 44.1 38.7 Operating revenues 1,270.8 864.4 2,663.8 3,072.4 FUEL, PURCHASED POWER AND DIRECT TRANSMISSION EXPENSE 673.8 330.1 1,322.8 1,876.9 OPERATING EXPENSES Other operation and maintenance 131.4 115.4 364.5 343.9 Depreciation and amortization 122.4 108.6 341.4 310.2 Taxes other than income 25.3 25.5 77.5 78.5 Operating expenses 279.1 249.5 783.4 732.6 OPERATING INCOME 317.9 284.8 557.6 462.9 OTHER INCOME (EXPENSE) Gain on equity securities (Note 1) 39.4 — 282.1 — Equity in earnings of unconsolidated affiliates — 41.2 — 127.9 Allowance for equity funds used during construction 2.4 1.9 4.6 4.8 Other net periodic benefit income (expense) 0.3 (1.6) (11.8) (4.3) Other income 16.1 5.6 60.6 14.9 Other expense (19.5) (3.8) (33.1) (12.5) Net other income 38.7 43.3 302.4 130.8 INTEREST EXPENSE Interest on long-term debt 40.8 39.3 119.7 115.5 Allowance for borrowed funds used during construction (0.6) (1.0) (2.7) (2.5) Interest on short-term debt and other interest charges 2.0 1.2 7.7 5.8 Interest expense 42.2 39.5 124.7 118.8 INCOME BEFORE TAXES 314.4 288.6 735.3 474.9 INCOME TAX EXPENSE 51.6 36.1 119.9 56.8 NET INCOME $ 262.8 $ 252.5 $ 615.4 $ 418.1 BASIC AVERAGE COMMON SHARES OUTSTANDING 200.2 200.2 200.2 200.1 DILUTED AVERAGE COMMON SHARES OUTSTANDING 200.9 200.4 200.7 200.3 BASIC EARNINGS PER AVERAGE COMMON SHARE $ 1.31 $ 1.26 $ 3.07 $ 2.09 DILUTED EARNINGS PER AVERAGE COMMON SHARE $ 1.31 $ 1.26 $ 3.07 $ 2.09
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions, except per share data) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
OPERATING REVENUES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues from contracts with customers |
| $ | 589.2 |
|
| $ | 791.0 |
|
| $ | 1,133.8 |
|
| $ | 1,369.1 |
|
Other revenues |
|
| 15.8 |
|
|
| 12.7 |
|
|
| 28.4 |
|
|
| 23.9 |
|
Operating revenues |
|
| 605.0 |
|
|
| 803.7 |
|
|
| 1,162.2 |
|
|
| 1,393.0 |
|
FUEL, PURCHASED POWER AND DIRECT TRANSMISSION EXPENSE |
|
| 181.8 |
|
|
| 393.3 |
|
|
| 382.4 |
|
|
| 649.0 |
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other operation and maintenance |
|
| 128.3 |
|
|
| 118.1 |
|
|
| 258.7 |
|
|
| 233.1 |
|
Depreciation and amortization |
|
| 124.1 |
|
|
| 111.6 |
|
|
| 245.3 |
|
|
| 219.0 |
|
Taxes other than income |
|
| 24.4 |
|
|
| 24.1 |
|
|
| 52.9 |
|
|
| 52.2 |
|
Operating expenses |
|
| 276.8 |
|
|
| 253.8 |
|
|
| 556.9 |
|
|
| 504.3 |
|
OPERATING INCOME |
|
| 146.4 |
|
|
| 156.6 |
|
|
| 222.9 |
|
|
| 239.7 |
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for equity funds used during construction |
|
| 5.1 |
|
|
| 0.9 |
|
|
| 9.6 |
|
|
| 2.2 |
|
Other net periodic benefit income (expense) |
|
| 1.1 |
|
|
| (2.7 | ) |
|
| 2.6 |
|
|
| (12.1 | ) |
Gain (loss) on equity securities (Note 1) |
|
| — |
|
|
| (39.6 | ) |
|
| — |
|
|
| 242.7 |
|
Other income |
|
| 12.7 |
|
|
| 21.9 |
|
|
| 29.6 |
|
|
| 44.5 |
|
Other expense |
|
| (4.4 | ) |
|
| (8.4 | ) |
|
| (10.9 | ) |
|
| (13.6 | ) |
Net other income (expense) |
|
| 14.5 |
|
|
| (27.9 | ) |
|
| 30.9 |
|
|
| 263.7 |
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest on long-term debt |
|
| 52.9 |
|
|
| 39.5 |
|
|
| 101.0 |
|
|
| 78.9 |
|
Allowance for borrowed funds used during construction |
|
| (1.3 | ) |
|
| (0.9 | ) |
|
| (3.4 | ) |
|
| (2.1 | ) |
Interest on short-term debt and other interest charges |
|
| 6.1 |
|
|
| 3.8 |
|
|
| 7.9 |
|
|
| 5.7 |
|
Interest expense |
|
| 57.7 |
|
|
| 42.4 |
|
|
| 105.5 |
|
|
| 82.5 |
|
INCOME BEFORE TAXES |
|
| 103.2 |
|
|
| 86.3 |
|
|
| 148.3 |
|
|
| 420.9 |
|
INCOME TAX EXPENSE |
|
| 14.8 |
|
|
| 13.2 |
|
|
| 21.6 |
|
|
| 68.3 |
|
NET INCOME |
| $ | 88.4 |
|
| $ | 73.1 |
|
| $ | 126.7 |
|
| $ | 352.6 |
|
BASIC AVERAGE COMMON SHARES OUTSTANDING |
|
| 200.3 |
|
|
| 200.2 |
|
|
| 200.3 |
|
|
| 200.2 |
|
DILUTED AVERAGE COMMON SHARES OUTSTANDING |
|
| 200.8 |
|
|
| 200.7 |
|
|
| 200.8 |
|
|
| 200.6 |
|
BASIC EARNINGS PER AVERAGE COMMON SHARE |
| $ | 0.44 |
|
| $ | 0.37 |
|
| $ | 0.63 |
|
| $ | 1.76 |
|
DILUTED EARNINGS PER AVERAGE COMMON SHARE |
| $ | 0.44 |
|
| $ | 0.36 |
|
| $ | 0.63 |
|
| $ | 1.76 |
|
The accompanying Combined Notes to Condensed Financial Statements are an integral part hereof.
3
OGE ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)Three Months Ended September 30, Nine Months Ended September 30, (In millions) 2022 2021 2022 2021 Net income $ 262.8 $ 252.5 $ 615.4 $ 418.1 Other comprehensive income (loss), net of tax: Pension Plan and Restoration of Retirement Income Plan: Amortization of prior service cost, net of tax of $0.1, $0.0, $0.1 and $0.0, respectively — 0.1 0.1 0.1 Amortization of deferred net loss, net of tax of $0.0, $0.2, $0.3 and $0.6, respectively 0.4 0.4 0.9 1.2 Settlement cost, net of tax of $0.5, $0.3, $2.9 and $1.9, respectively 1.4 1.1 9.5 4.8 Postretirement benefit plans: Amortization of prior service credit, net of tax of ($0.1), ($0.1), ($0.1) and ($0.3), respectively (0.1) (0.3) (0.1) (1.0) Amortization of deferred net loss, net of tax of $0.0, $0.0, $0.0 and $0.0, respectively — — — 0.1 Other comprehensive gain from unconsolidated affiliates, net of tax of $0.0, $0.0, $0.0 and $0.1, respectively — 0.3 — 0.6 Other comprehensive income, net of tax 1.7 1.6 10.4 5.8 Comprehensive income $ 264.5 $ 254.1 $ 625.8 $ 423.9
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net income |
| $ | 88.4 |
|
| $ | 73.1 |
|
| $ | 126.7 |
|
| $ | 352.6 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Pension Plan and Restoration of Retirement Income Plan: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of prior service cost, net of tax of $0.0, $0.0, $0.0 and $0.0, respectively |
|
| — |
|
|
| — |
|
|
| 0.1 |
|
|
| 0.1 |
|
Amortization of deferred net loss, net of tax of $0.0, $0.2, $0.1 and $0.3, respectively |
|
| 0.3 |
|
|
| 0.2 |
|
|
| 0.5 |
|
|
| 0.5 |
|
Settlement cost, net of tax of $0.1, $0.2, $0.3 and $2.4, respectively |
|
| 0.2 |
|
|
| 0.7 |
|
|
| 1.1 |
|
|
| 8.1 |
|
Postretirement benefit plans: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of deferred net gain, net of tax of $0.0, $0.0, $0.0 and $0.0, respectively |
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
Other comprehensive income, net of tax |
|
| 0.5 |
|
|
| 0.9 |
|
|
| 1.6 |
|
|
| 8.7 |
|
Comprehensive income |
| $ | 88.9 |
|
| $ | 74.0 |
|
| $ | 128.3 |
|
| $ | 361.3 |
|
4
OGE ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)Nine Months Ended September 30, (In millions) 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 615.4 $ 418.1 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 341.4 310.2 Deferred income taxes and other tax credits, net (175.9) 40.9 Gain on investment in equity securities (282.1) — Equity in earnings of unconsolidated affiliates — (127.9) Distributions from unconsolidated affiliates — 55.0 Allowance for equity funds used during construction (4.6) (4.8) Stock-based compensation expense 6.9 7.1 Regulatory assets 702.1 (881.5) Regulatory liabilities (71.7) (50.0) Other assets 21.0 (6.7) Other liabilities (19.3) (41.6) Change in certain current assets and liabilities: Accounts receivable and accrued unbilled revenues, net (174.9) (99.4) Income taxes receivable 2.5 7.6 Fuel, materials and supplies inventories (84.5) 8.7 Fuel recoveries (355.3) (126.8) Other current assets (30.7) (4.9) Accounts payable 16.3 (41.4) Other current liabilities 261.2 43.3 Net cash provided from (used in) operating activities 767.8 (494.1) CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (less allowance for equity funds used during construction) (690.8) (540.6) Proceeds from sales of equity securities 1,067.2 — Other (3.5) (6.3) Net cash provided from (used in) investing activities 372.9 (546.9) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 49.8 999.6 Increase (decrease) in short-term debt (486.9) 288.2 Payment of long-term debt (0.1) (0.1) Dividends paid on common stock (246.4) (242.8) Cash paid for employee equity-based compensation and expense of common stock (0.9) (3.5) Net cash (used in) provided from financing activities (684.5) 1,041.4 NET CHANGE IN CASH AND CASH EQUIVALENTS 456.2 0.4 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD — 1.1 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 456.2 $ 1.5
|
| Six Months Ended June 30, |
| |||||
(In millions) |
| 2023 |
|
| 2022 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net income |
| $ | 126.7 |
|
| $ | 352.6 |
|
Adjustments to reconcile net income to net cash provided from operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 245.3 |
|
|
| 219.0 |
|
Deferred income taxes and other tax credits, net |
|
| 1.2 |
|
|
| (33.5 | ) |
Gain on investment in equity securities |
|
| — |
|
|
| (242.7 | ) |
Allowance for equity funds used during construction |
|
| (9.6 | ) |
|
| (2.2 | ) |
Stock-based compensation expense |
|
| 6.3 |
|
|
| 4.6 |
|
Regulatory assets |
|
| (65.9 | ) |
|
| (46.5 | ) |
Regulatory liabilities |
|
| (55.0 | ) |
|
| (43.2 | ) |
Other assets |
|
| (2.2 | ) |
|
| 19.4 |
|
Other liabilities |
|
| 2.3 |
|
|
| (11.1 | ) |
Change in certain current assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable and accrued unbilled revenues, net |
|
| (32.0 | ) |
|
| (101.5 | ) |
Income taxes receivable |
|
| 13.9 |
|
|
| 0.1 |
|
Fuel, materials and supplies inventories |
|
| (44.4 | ) |
|
| (53.0 | ) |
Fuel recoveries |
|
| 316.6 |
|
|
| (119.8 | ) |
Other current assets |
|
| 47.6 |
|
|
| (42.2 | ) |
Accounts payable |
|
| (111.8 | ) |
|
| 19.5 |
|
Other current liabilities |
|
| 17.9 |
|
|
| 88.6 |
|
Net cash provided from operating activities |
|
| 456.9 |
|
|
| 8.1 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| ||
Capital expenditures (less allowance for equity funds used during construction) |
|
| (580.6 | ) |
|
| (450.8 | ) |
Proceeds from sales of equity securities |
|
| — |
|
|
| 627.4 |
|
Other |
|
| (2.1 | ) |
|
| (2.9 | ) |
Net cash (used in) provided from investing activities |
|
| (582.7 | ) |
|
| 173.7 |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
| ||
Proceeds from long-term debt |
|
| 788.8 |
|
|
| 49.8 |
|
Payment of long-term debt |
|
| (1,000.1 | ) |
|
| — |
|
Increase (decrease) in short-term debt |
|
| 418.1 |
|
|
| (61.5 | ) |
Dividends paid on common stock |
|
| (166.5 | ) |
|
| (164.4 | ) |
Cash paid for employee equity-based compensation and expense of common stock |
|
| (2.3 | ) |
|
| (0.8 | ) |
Net cash provided from (used in) financing activities |
|
| 38.0 |
|
|
| (176.9 | ) |
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
| (87.8 | ) |
|
| 4.9 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
| 88.1 |
|
|
| — |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
| $ | 0.3 |
|
| $ | 4.9 |
|
5
OGE ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)September 30, December 31, (In millions) 2022 2021 ASSETS CURRENT ASSETS Cash and cash equivalents $ 456.2 $ — Accounts receivable, less reserve of $2.0 and $2.4, respectively 320.7 162.3 Accrued unbilled revenues 81.5 65.0 Income taxes receivable 0.1 2.6 Fuel inventories 85.3 40.6 Materials and supplies, at average cost 157.7 117.9 Fuel clause under recoveries 507.2 151.9 Other 104.1 73.3 Total current assets 1,712.8 613.6 OTHER PROPERTY AND INVESTMENTS Equity securities investment in Energy Transfer — 785.1 Other 104.6 120.0 Total other property and investments 104.6 905.1 PROPERTY, PLANT AND EQUIPMENT In service 14,438.4 13,899.8 Construction work in progress 345.7 252.0 Total property, plant and equipment 14,784.1 14,151.8 Less: accumulated depreciation 4,516.3 4,318.9 Net property, plant and equipment 10,267.8 9,832.9 DEFERRED CHARGES AND OTHER ASSETS Regulatory assets 493.9 1,230.8 Other 24.9 24.0 Total deferred charges and other assets 518.8 1,254.8 TOTAL ASSETS $ 12,604.0 $ 12,606.4
|
| June 30, |
|
| December 31, |
| ||
(In millions) |
| 2023 |
|
| 2022 |
| ||
ASSETS |
|
|
|
|
|
| ||
CURRENT ASSETS |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 0.3 |
|
| $ | 88.1 |
|
Accounts receivable, less reserve of $1.7 and $1.9, respectively |
|
| 262.2 |
|
|
| 250.1 |
|
Accrued unbilled revenues |
|
| 94.1 |
|
|
| 74.2 |
|
Income taxes receivable |
|
| 6.8 |
|
|
| 20.7 |
|
Fuel inventories |
|
| 117.7 |
|
|
| 108.8 |
|
Materials and supplies, at average cost |
|
| 216.0 |
|
|
| 180.5 |
|
Fuel clause under recoveries |
|
| 198.3 |
|
|
| 514.9 |
|
Other |
|
| 55.7 |
|
|
| 103.5 |
|
Total current assets |
|
| 951.1 |
|
|
| 1,340.8 |
|
OTHER PROPERTY AND INVESTMENTS |
|
|
|
|
|
| ||
Other |
|
| 108.7 |
|
|
| 105.8 |
|
Total other property and investments |
|
| 108.7 |
|
|
| 105.8 |
|
PROPERTY, PLANT AND EQUIPMENT |
|
|
|
|
|
| ||
In service |
|
| 15,211.9 |
|
|
| 14,695.2 |
|
Construction work in progress |
|
| 416.1 |
|
|
| 436.1 |
|
Total property, plant and equipment |
|
| 15,628.0 |
|
|
| 15,131.3 |
|
Less: accumulated depreciation |
|
| 4,688.4 |
|
|
| 4,584.5 |
|
Net property, plant and equipment |
|
| 10,939.6 |
|
|
| 10,546.8 |
|
DEFERRED CHARGES AND OTHER ASSETS |
|
|
|
|
|
| ||
Regulatory assets |
|
| 574.5 |
|
|
| 524.3 |
|
Other |
|
| 30.7 |
|
|
| 27.0 |
|
Total deferred charges and other assets |
|
| 605.2 |
|
|
| 551.3 |
|
TOTAL ASSETS |
| $ | 12,604.6 |
|
| $ | 12,544.7 |
|
6
OGE ENERGY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)September 30, December 31, (In millions) 2022 2021 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Short-term debt $ — $ 486.9 Accounts payable 299.7 274.0 Dividends payable 82.9 82.1 Customer deposits 86.4 81.1 Accrued taxes 263.8 52.9 Accrued interest 42.7 40.8 Accrued compensation 44.0 37.7 Long-term debt due within one year 999.9 — Other 56.6 34.1 Total current liabilities 1,876.0 1,089.6 LONG-TERM DEBT 3,548.2 4,496.4 DEFERRED CREDITS AND OTHER LIABILITIES Accrued benefit obligations 145.7 159.8 Deferred income taxes 1,201.3 1,333.3 Deferred investment tax credits 13.6 12.8 Regulatory liabilities 1,178.7 1,231.1 Other 199.8 227.1 Total deferred credits and other liabilities 2,739.1 2,964.1 Total liabilities 8,163.3 8,550.1 COMMITMENTS AND CONTINGENCIES (NOTE 13) STOCKHOLDERS' EQUITY Common stockholders' equity 1,131.7 1,125.8 Retained earnings 3,323.5 2,955.4 Accumulated other comprehensive loss, net of tax (14.4) (24.8) Treasury stock, at cost (0.1) (0.1) Total stockholders' equity 4,440.7 4,056.3 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,604.0 $ 12,606.4
|
| June 30, |
|
| December 31, |
| ||
(In millions) |
| 2023 |
|
| 2022 |
| ||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
| ||
CURRENT LIABILITIES |
|
|
|
|
|
| ||
Short-term debt |
| $ | 418.1 |
|
| $ | — |
|
Accounts payable |
| 337.7 |
|
|
| 448.9 |
| |
Dividends payable |
|
| 82.9 |
|
|
| 82.9 |
|
Customer deposits |
|
| 96.4 |
|
|
| 88.8 |
|
Accrued taxes |
|
| 47.6 |
|
|
| 54.0 |
|
Accrued interest |
|
| 57.3 |
|
|
| 41.1 |
|
Accrued compensation |
|
| 35.5 |
|
|
| 37.0 |
|
Long-term debt due within one year |
|
| — |
|
|
| 999.9 |
|
Other |
|
| 51.7 |
|
|
| 49.6 |
|
Total current liabilities |
|
| 1,127.2 |
|
|
| 1,802.2 |
|
LONG-TERM DEBT |
|
| 4,339.0 |
|
|
| 3,548.7 |
|
DEFERRED CREDITS AND OTHER LIABILITIES |
|
|
|
|
|
| ||
Accrued benefit obligations |
|
| 174.2 |
|
|
| 176.9 |
|
Deferred income taxes |
|
| 1,262.4 |
|
|
| 1,233.5 |
|
Deferred investment tax credits |
|
| 11.7 |
|
|
| 12.0 |
|
Regulatory liabilities |
|
| 1,100.0 |
|
|
| 1,147.1 |
|
Other |
|
| 211.0 |
|
|
| 210.9 |
|
Total deferred credits and other liabilities |
|
| 2,759.3 |
|
|
| 2,780.4 |
|
Total liabilities |
|
| 8,225.5 |
|
|
| 8,131.3 |
|
COMMITMENTS AND CONTINGENCIES (NOTE 12) |
|
|
|
|
|
| ||
STOCKHOLDERS' EQUITY |
|
|
|
|
|
| ||
Common stockholders' equity |
|
| 1,138.4 |
|
|
| 1,134.5 |
|
Retained earnings |
|
| 3,251.0 |
|
|
| 3,290.9 |
|
Accumulated other comprehensive loss, net of tax |
|
| (10.3 | ) |
|
| (11.9 | ) |
Treasury stock, at cost |
|
| — |
|
|
| (0.1 | ) |
Total stockholders' equity |
|
| 4,379.1 |
|
|
| 4,413.4 |
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 12,604.6 |
|
| $ | 12,544.7 |
|
7
OGE ENERGY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)Common Stock Treasury Stock
(In millions)Shares Value Shares Value Premium on Common Stock Retained Earnings Accumulated Other Comprehensive (Loss) Income Total Balance at December 31, 2021 200.1 $ 2.0 — $ (0.1) $ 1,123.8 $ 2,955.4 $ (24.8) $ 4,056.3 Net income — — — — — 279.5 — 279.5 Other comprehensive income, net of tax — — — — — — 7.8 7.8 Dividends declared on common stock ($0.4100 per share) — — — — — (82.3) — (82.3) Stock-based compensation — — — — 1.4 — — 1.4 Balance at March 31, 2022 200.1 $ 2.0 — $ (0.1) $ 1,125.2 $ 3,152.6 $ (17.0) $ 4,262.7 Net income — — — — — 73.1 — 73.1 Other comprehensive income, net of tax — — — — — — 0.9 0.9 Dividends declared on common stock ($0.4100 per share) — — — — — (82.1) — (82.1) Stock-based compensation 0.1 — — — 2.3 — — 2.3 Balance at June 30, 2022 200.2 $ 2.0 — $ (0.1) $ 1,127.5 $ 3,143.6 $ (16.1) $ 4,256.9 Net income — — — — — 262.8 — 262.8 Other comprehensive income, net of tax — — — — — — 1.7 1.7 Dividends declared on common stock ($0.4141 per share) — — — — — (82.9) — (82.9) Stock-based compensation — — — — 2.2 — — 2.2 Balance at September 30, 2022 200.2 $ 2.0 — $ (0.1) $ 1,129.7 $ 3,323.5 $ (14.4) $ 4,440.7 Balance at December 31, 2020 200.1 $ 2.0 0.1 $ (5.3) $ 1,122.6 $ 2,544.6 $ (32.1) $ 3,631.8 Net income — — — — — 52.7 — 52.7 Other comprehensive income, net of tax — — — — — — 3.5 3.5 Dividends declared on common stock ($0.4025 per share) — — — — — (81.7) — (81.7) Stock-based compensation — — (0.1) 5.2 (6.0) — — (0.8) Balance at March 31, 2021 200.1 $ 2.0 — $ (0.1) $ 1,116.6 $ 2,515.6 $ (28.6) $ 3,605.5 Net income — — — — — 112.9 — 112.9 Other comprehensive income, net of tax — — — — — — 0.7 0.7 Dividends declared on common stock ($0.4025 per share) — — — — — (80.6) — (80.6) Stock-based compensation — — — — 2.3 — — 2.3 Balance at June 30, 2021 200.1 $ 2.0 — $ (0.1) $ 1,118.9 $ 2,547.9 $ (27.9) $ 3,640.8 Net income — — — — — 252.5 — 252.5 Other comprehensive income, net of tax — — — — — — 1.6 1.6 Dividends declared on common stock ($0.4100 per share) — — — — — (82.1) — (82.1) Stock-based compensation — — — — 2.1 — — 2.1 Balance at September 30, 2021 200.1 $ 2.0 — $ (0.1) $ 1,121.0 $ 2,718.3 $ (26.3) $ 3,814.9
|
| Common Stock |
|
| Treasury Stock |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| Shares |
|
| Value |
|
| Shares |
|
| Value |
|
| Premium on Common Stock |
|
| Retained Earnings |
|
| Accumulated Other Comprehensive (Loss) Income |
|
| Total |
| ||||||||
Balance at December 31, 2022 |
|
| 200.2 |
|
| $ | 2.0 |
|
|
| — |
|
| $ | (0.1 | ) |
| $ | 1,132.5 |
|
| $ | 3,290.9 |
|
| $ | (11.9 | ) |
| $ | 4,413.4 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 38.3 |
|
|
| — |
|
|
| 38.3 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.1 |
|
|
| 1.1 |
|
Dividends declared on common stock ($0.4141 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (83.6 | ) |
|
| — |
|
|
| (83.6 | ) |
Stock-based compensation |
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
|
| 0.7 |
|
|
| — |
|
|
| — |
|
|
| 0.8 |
|
Balance at March 31, 2023 |
|
| 200.3 |
|
| $ | 2.0 |
|
|
| — |
|
| $ | — |
|
| $ | 1,133.2 |
|
| $ | 3,245.6 |
|
| $ | (10.8 | ) |
| $ | 4,370.0 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 88.4 |
|
|
| — |
|
|
| 88.4 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.5 |
|
|
| 0.5 |
|
Dividends declared on common stock ($0.4141 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (83.0 | ) |
|
| — |
|
|
| (83.0 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.2 |
|
|
| — |
|
|
| — |
|
|
| 3.2 |
|
Balance at June 30, 2023 |
|
| 200.3 |
|
| $ | 2.0 |
|
|
| — |
|
| $ | — |
|
| $ | 1,136.4 |
|
| $ | 3,251.0 |
|
| $ | (10.3 | ) |
| $ | 4,379.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Balance at December 31, 2021 |
|
| 200.1 |
|
| $ | 2.0 |
|
|
| — |
|
| $ | (0.1 | ) |
| $ | 1,123.8 |
|
| $ | 2,955.4 |
|
| $ | (24.8 | ) |
| $ | 4,056.3 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 279.5 |
|
|
| — |
|
|
| 279.5 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7.8 |
|
|
| 7.8 |
|
Dividends declared on common stock ($0.4100 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (82.3 | ) |
|
| — |
|
|
| (82.3 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1.4 |
|
|
| — |
|
|
| — |
|
|
| 1.4 |
|
Balance at March 31, 2022 |
|
| 200.1 |
|
| $ | 2.0 |
|
|
| — |
|
| $ | (0.1 | ) |
| $ | 1,125.2 |
|
| $ | 3,152.6 |
|
| $ | (17.0 | ) |
| $ | 4,262.7 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 73.1 |
|
|
| — |
|
|
| 73.1 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.9 |
|
|
| 0.9 |
|
Dividends declared on common stock ($0.4100 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (82.1 | ) |
|
| — |
|
|
| (82.1 | ) |
Stock-based compensation |
|
| 0.1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2.3 |
|
|
| — |
|
|
| — |
|
|
| 2.3 |
|
Balance at June 30, 2022 |
|
| 200.2 |
|
| $ | 2.0 |
|
|
| — |
|
| $ | (0.1 | ) |
| $ | 1,127.5 |
|
| $ | 3,143.6 |
|
| $ | (16.1 | ) |
| $ | 4,256.9 |
|
The accompanying Combined Notes to Condensed Financial Statements are an integral part hereof.
8
OKLAHOMA GAS AND ELECTRIC COMPANY
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)Three Months Ended September 30, Nine Months Ended September 30, (In millions) 2022 2021 2022 2021 OPERATING REVENUES Revenues from contracts with customers $ 1,250.6 $ 848.2 $ 2,619.7 $ 3,033.7 Other revenues 20.2 16.2 44.1 38.7 Operating revenues 1,270.8 864.4 2,663.8 3,072.4 FUEL, PURCHASED POWER AND DIRECT TRANSMISSION EXPENSE 673.8 330.1 1,322.8 1,876.9 OPERATING EXPENSES Other operation and maintenance 121.5 115.8 355.3 344.4 Depreciation and amortization 122.4 108.6 341.4 310.2 Taxes other than income 24.5 24.6 74.6 75.3 Operating expenses 268.4 249.0 771.3 729.9 OPERATING INCOME 328.6 285.3 569.7 465.6 OTHER INCOME (EXPENSE) Allowance for equity funds used during construction 2.4 1.9 4.6 4.8 Other net periodic benefit income (expense) 2.2 (1.1) (1.0) (3.2) Other income 2.1 2.4 4.3 5.2 Other expense (1.1) (0.3) (1.9) (1.0) Net other income 5.6 2.9 6.0 5.8 INTEREST EXPENSE Interest on long-term debt 39.8 38.4 116.9 114.2 Allowance for borrowed funds used during construction (0.6) (1.0) (2.7) (2.5) Interest on short-term debt and other interest charges 1.0 0.6 4.0 2.6 Interest expense 40.2 38.0 118.2 114.3 INCOME BEFORE TAXES 294.0 250.2 457.5 357.1 INCOME TAX EXPENSE 40.9 26.4 64.7 37.0 NET INCOME $ 253.1 $ 223.8 $ 392.8 $ 320.1 Other comprehensive income, net of tax — — — — COMPREHENSIVE INCOME $ 253.1 $ 223.8 $ 392.8 $ 320.1
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
OPERATING REVENUES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues from contracts with customers |
| $ | 589.2 |
|
| $ | 791.0 |
|
| $ | 1,133.8 |
|
| $ | 1,369.1 |
|
Other revenues |
|
| 15.8 |
|
|
| 12.7 |
|
|
| 28.4 |
|
|
| 23.9 |
|
Operating revenues |
|
| 605.0 |
|
|
| 803.7 |
|
|
| 1,162.2 |
|
|
| 1,393.0 |
|
FUEL, PURCHASED POWER AND DIRECT TRANSMISSION EXPENSE |
|
| 181.8 |
|
|
| 393.3 |
|
|
| 382.4 |
|
|
| 649.0 |
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other operation and maintenance |
|
| 128.6 |
|
|
| 118.3 |
|
|
| 260.1 |
|
|
| 233.8 |
|
Depreciation and amortization |
|
| 124.1 |
|
|
| 111.6 |
|
|
| 245.3 |
|
|
| 219.0 |
|
Taxes other than income |
|
| 23.5 |
|
|
| 23.3 |
|
|
| 50.6 |
|
|
| 50.1 |
|
Operating expenses |
|
| 276.2 |
|
|
| 253.2 |
|
|
| 556.0 |
|
|
| 502.9 |
|
OPERATING INCOME |
|
| 147.0 |
|
|
| 157.2 |
|
|
| 223.8 |
|
|
| 241.1 |
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Allowance for equity funds used during construction |
|
| 5.1 |
|
|
| 0.9 |
|
|
| 9.6 |
|
|
| 2.2 |
|
Other net periodic benefit income (expense) |
|
| 1.6 |
|
|
| (1.8 | ) |
|
| 3.2 |
|
|
| (3.2 | ) |
Other income |
|
| 8.3 |
|
|
| 1.0 |
|
|
| 18.4 |
|
|
| 2.2 |
|
Other expense |
|
| (1.8 | ) |
|
| (0.4 | ) |
|
| (2.7 | ) |
|
| (0.8 | ) |
Net other income |
|
| 13.2 |
|
|
| (0.3 | ) |
|
| 28.5 |
|
|
| 0.4 |
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest on long-term debt |
|
| 51.6 |
|
|
| 38.6 |
|
|
| 98.1 |
|
|
| 77.1 |
|
Allowance for borrowed funds used during construction |
|
| (1.3 | ) |
|
| (0.9 | ) |
|
| (3.4 | ) |
|
| (2.1 | ) |
Interest on short-term debt and other interest charges |
|
| 1.8 |
|
|
| 2.1 |
|
|
| 3.1 |
|
|
| 3.0 |
|
Interest expense |
|
| 52.1 |
|
|
| 39.8 |
|
|
| 97.8 |
|
|
| 78.0 |
|
INCOME BEFORE TAXES |
|
| 108.1 |
|
|
| 117.1 |
|
|
| 154.5 |
|
|
| 163.5 |
|
INCOME TAX EXPENSE |
|
| 16.2 |
|
|
| 16.4 |
|
|
| 22.8 |
|
|
| 23.8 |
|
NET INCOME |
| $ | 91.9 |
|
| $ | 100.7 |
|
| $ | 131.7 |
|
| $ | 139.7 |
|
Other comprehensive income, net of tax |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
COMPREHENSIVE INCOME |
| $ | 91.9 |
|
| $ | 100.7 |
|
| $ | 131.7 |
|
| $ | 139.7 |
|
9
OKLAHOMA GAS AND ELECTRIC COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)Nine Months Ended September 30, (In millions) 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 392.8 $ 320.1 Adjustments to reconcile net income to net cash provided from (used in) operating activities: Depreciation and amortization 341.4 310.2 Deferred income taxes and other tax credits, net 203.0 32.1 Allowance for equity funds used during construction (4.6) (4.8) Stock-based compensation expense 2.3 1.6 Regulatory assets 702.1 (881.5) Regulatory liabilities (71.7) (50.0) Other assets 1.3 (0.9) Other liabilities (10.6) (38.2) Change in certain current assets and liabilities: Accounts receivable and accrued unbilled revenues, net (174.3) (100.8) Fuel, materials and supplies inventories (84.5) 8.7 Fuel recoveries (355.3) (126.8) Other current assets (29.9) (3.2) Accounts payable 12.4 (39.3) Income taxes payable - parent (136.2) 7.2 Other current liabilities 55.7 36.0 Net cash provided from (used in) operating activities 843.9 (529.6) CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (less allowance for equity funds used during construction) (690.8) (540.6) Net cash used in investing activities (690.8) (540.6) CASH FLOWS FROM FINANCING ACTIVITIES Changes in advances with parent (150.9) 87.0 Payment of long-term debt (0.1) (0.1) Proceeds from long-term debt — 499.8 Capital contribution from OGE Energy — 530.0 Dividends paid on common stock — (45.0) Net cash (used in) provided from financing activities (151.0) 1,071.7 NET CHANGE IN CASH AND CASH EQUIVALENTS 2.1 1.5 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD — — CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2.1 $ 1.5
|
| Six Months Ended June 30, |
| |||||
(In millions) |
| 2023 |
|
| 2022 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
| ||
Net income |
| $ | 131.7 |
|
| $ | 139.7 |
|
Adjustments to reconcile net income to net cash provided from operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 245.3 |
|
|
| 219.0 |
|
Deferred income taxes and other tax credits, net |
|
| (0.4 | ) |
|
| 182.2 |
|
Allowance for equity funds used during construction |
|
| (9.6 | ) |
|
| (2.2 | ) |
Stock-based compensation expense |
|
| 1.5 |
|
|
| 1.5 |
|
Regulatory assets |
|
| (65.9 | ) |
|
| (46.5 | ) |
Regulatory liabilities |
|
| (55.0 | ) |
|
| (43.2 | ) |
Other assets |
|
| (2.0 | ) |
|
| 1.3 |
|
Other liabilities |
|
| 4.3 |
|
|
| (1.1 | ) |
Change in certain current assets and liabilities: |
|
|
|
|
|
| ||
Accounts receivable and accrued unbilled revenues, net |
|
| (32.6 | ) |
|
| (101.7 | ) |
Fuel, materials and supplies inventories |
|
| (44.4 | ) |
|
| (53.0 | ) |
Fuel recoveries |
|
| 316.6 |
|
|
| (119.8 | ) |
Other current assets |
|
| 51.5 |
|
|
| (39.8 | ) |
Accounts payable |
|
| (97.4 | ) |
|
| 35.1 |
|
Income taxes payable - parent |
|
| 17.9 |
|
|
| (155.9 | ) |
Other current liabilities |
|
| 24.7 |
|
|
| 16.6 |
|
Net cash provided from operating activities |
|
| 486.2 |
|
|
| 32.2 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| ||
Capital expenditures (less allowance for equity funds used during construction) |
|
| (580.6 | ) |
|
| (450.8 | ) |
Net cash used in investing activities |
|
| (580.6 | ) |
|
| (450.8 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
| ||
Changes in advances with parent |
|
| 55.9 |
|
|
| 332.6 |
|
Proceeds from long-term debt |
|
| 788.8 |
|
|
| — |
|
Payment of long-term debt |
|
| (500.1 | ) |
|
| — |
|
Increase in short-term debt |
|
| — |
|
|
| 90.9 |
|
Dividends paid on common stock |
|
| (250.0 | ) |
|
| — |
|
Net cash provided from financing activities |
|
| 94.6 |
|
|
| 423.5 |
|
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
| 0.2 |
|
|
| 4.9 |
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
| — |
|
|
| — |
|
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
| $ | 0.2 |
|
| $ | 4.9 |
|
10
OKLAHOMA GAS AND ELECTRIC COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)September 30, December 31, (In millions) 2022 2021 ASSETS CURRENT ASSETS Cash and cash equivalents $ 2.1 $ — Accounts receivable, less reserve of $2.0 and $2.4, respectively 319.8 162.0 Accrued unbilled revenues 81.5 65.0 Advances to parent 200.0 — Fuel inventories 85.3 40.6 Materials and supplies, at average cost 157.7 117.9 Fuel clause under recoveries 507.2 151.9 Other 97.6 67.7 Total current assets 1,451.2 605.1 OTHER PROPERTY AND INVESTMENTS 4.4 3.9 PROPERTY, PLANT AND EQUIPMENT In service 14,432.3 13,893.7 Construction work in progress 345.7 252.0 Total property, plant and equipment 14,778.0 14,145.7 Less: accumulated depreciation 4,516.3 4,318.9 Net property, plant and equipment 10,261.7 9,826.8 DEFERRED CHARGES AND OTHER ASSETS Regulatory assets 493.9 1,230.8 Other 22.6 21.4 Total deferred charges and other assets 516.5 1,252.2 TOTAL ASSETS $ 12,233.8 $ 11,688.0
|
| June 30, |
|
| December 31, |
| ||
(In millions) |
| 2023 |
|
| 2022 |
| ||
ASSETS |
|
|
|
|
|
| ||
CURRENT ASSETS |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 0.2 |
|
| $ | — |
|
Accounts receivable, less reserve of $1.7 and $1.9, respectively |
|
| 262.1 |
|
|
| 249.4 |
|
Accrued unbilled revenues |
|
| 94.1 |
|
|
| 74.2 |
|
Advances to parent |
|
| 17.2 |
|
|
| 91.0 |
|
Fuel inventories |
|
| 117.7 |
|
|
| 108.8 |
|
Materials and supplies, at average cost |
|
| 216.0 |
|
|
| 180.5 |
|
Fuel clause under recoveries |
|
| 198.3 |
|
|
| 514.9 |
|
Other |
|
| 46.3 |
|
|
| 97.8 |
|
Total current assets |
|
| 951.9 |
|
|
| 1,316.6 |
|
OTHER PROPERTY AND INVESTMENTS |
|
| 4.6 |
|
|
| 4.4 |
|
PROPERTY, PLANT AND EQUIPMENT |
|
|
|
|
|
| ||
In service |
|
| 15,205.8 |
|
|
| 14,689.1 |
|
Construction work in progress |
|
| 416.1 |
|
|
| 436.1 |
|
Total property, plant and equipment |
|
| 15,621.9 |
|
|
| 15,125.2 |
|
Less: accumulated depreciation |
|
| 4,688.4 |
|
|
| 4,584.5 |
|
Net property, plant and equipment |
|
| 10,933.5 |
|
|
| 10,540.7 |
|
DEFERRED CHARGES AND OTHER ASSETS |
|
|
|
|
|
| ||
Regulatory assets |
|
| 574.5 |
|
|
| 524.3 |
|
Other |
|
| 28.4 |
|
|
| 24.5 |
|
Total deferred charges and other assets |
|
| 602.9 |
|
|
| 548.8 |
|
TOTAL ASSETS |
| $ | 12,492.9 |
|
| $ | 12,410.5 |
|
11
OKLAHOMA GAS AND ELECTRIC COMPANY
CONDENSED BALANCE SHEETS (Continued)
(Unaudited)September 30, December 31, (In millions) 2022 2021 LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES Accounts payable $ 262.3 $ 240.6 Advances from parent — 101.3 Customer deposits 86.4 81.1 Accrued taxes 71.4 50.8 Accrued interest 41.5 40.4 Accrued compensation 33.7 27.8 Long-term debt due within one year 499.9 — Other 56.6 33.8 Total current liabilities 1,051.8 575.8 LONG-TERM DEBT 3,498.4 3,996.5 DEFERRED CREDITS AND OTHER LIABILITIES Accrued benefit obligations 70.0 75.1 Deferred income taxes 1,244.0 1,000.4 Deferred investment tax credits 13.6 12.8 Regulatory liabilities 1,178.7 1,231.1 Other 179.4 193.5 Total deferred credits and other liabilities 2,685.7 2,512.9 Total liabilities 7,235.9 7,085.2 COMMITMENTS AND CONTINGENCIES (NOTE 13) STOCKHOLDER'S EQUITY Common stockholder's equity 1,574.0 1,571.7 Retained earnings 3,423.9 3,031.1 Total stockholder's equity 4,997.9 4,602.8 TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 12,233.8 $ 11,688.0
|
| June 30, |
|
| December 31, |
| ||
(In millions) |
| 2023 |
|
| 2022 |
| ||
LIABILITIES AND STOCKHOLDER'S EQUITY |
|
|
|
|
|
| ||
CURRENT LIABILITIES |
|
|
|
|
|
| ||
Accounts payable |
| $ | 299.0 |
|
| $ | 395.8 |
|
Customer deposits |
|
| 96.4 |
|
|
| 88.8 |
|
Accrued taxes |
|
| 45.6 |
|
|
| 46.5 |
|
Accrued interest |
|
| 57.3 |
|
|
| 40.8 |
|
Accrued compensation |
|
| 27.3 |
|
|
| 27.8 |
|
Long-term debt due within one year |
|
| — |
|
|
| 500.0 |
|
Other |
|
| 51.3 |
|
|
| 49.3 |
|
Total current liabilities |
|
| 576.9 |
|
|
| 1,149.0 |
|
LONG-TERM DEBT |
|
| 4,289.1 |
|
|
| 3,498.9 |
|
DEFERRED CREDITS AND OTHER LIABILITIES |
|
|
|
|
|
| ||
Accrued benefit obligations |
|
| 97.1 |
|
|
| 98.3 |
|
Deferred income taxes |
|
| 1,297.9 |
|
|
| 1,271.1 |
|
Deferred investment tax credits |
|
| 11.7 |
|
|
| 12.0 |
|
Regulatory liabilities |
|
| 1,100.0 |
|
|
| 1,147.1 |
|
Other |
|
| 191.8 |
|
|
| 188.9 |
|
Total deferred credits and other liabilities |
|
| 2,698.5 |
|
|
| 2,717.4 |
|
Total liabilities |
|
| 7,564.5 |
|
|
| 7,365.3 |
|
COMMITMENTS AND CONTINGENCIES (NOTE 12) |
|
|
|
|
|
| ||
STOCKHOLDER'S EQUITY |
|
|
|
|
|
| ||
Common stockholder's equity |
|
| 1,576.1 |
|
|
| 1,574.6 |
|
Retained earnings |
|
| 3,352.3 |
|
|
| 3,470.6 |
|
Total stockholder's equity |
|
| 4,928.4 |
|
|
| 5,045.2 |
|
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY |
| $ | 12,492.9 |
|
| $ | 12,410.5 |
|
12
OKLAHOMA GAS AND ELECTRIC COMPANY
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(Unaudited)(In millions) Shares Outstanding Common Stock Premium on Common Stock Retained Earnings Total Balance at December 31, 2021 40.4 $ 100.9 $ 1,470.8 $ 3,031.1 $ 4,602.8 Net income — — — 39.0 39.0 Stock-based compensation — — 0.8 — 0.8 Balance at March 31, 2022 40.4 $ 100.9 $ 1,471.6 $ 3,070.1 $ 4,642.6 Net income — — — 100.7 100.7 Stock-based compensation — — 0.7 — 0.7 Balance at June 30, 2022 40.4 $ 100.9 $ 1,472.3 $ 3,170.8 $ 4,744.0 Net income — — — 253.1 253.1 Stock-based compensation — — 0.8 — 0.8 Balance at September 30, 2022 40.4 $ 100.9 $ 1,473.1 $ 3,423.9 $ 4,997.9 Balance at December 31, 2020 40.4 $ 100.9 $ 938.6 $ 2,936.1 $ 3,975.6 Net income — — — 11.2 11.2 Capital contribution from OGE Energy — — 530.0 — 530.0 Stock-based compensation — — 0.5 — 0.5 Balance at March 31, 2021 40.4 $ 100.9 $ 1,469.1 $ 2,947.3 $ 4,517.3 Net income — — — 85.1 85.1 Dividends declared on common stock — — — (45.0) (45.0) Stock-based compensation — — 0.6 — 0.6 Balance at June 30, 2021 40.4 $ 100.9 $ 1,469.7 $ 2,987.4 $ 4,558.0 Net income — — — 223.8 223.8 Dividends declared on common stock — — — (220.0) (220.0) Stock-based compensation — — 0.6 — 0.6 Balance at September 30, 2021 40.4 $ 100.9 $ 1,470.3 $ 2,991.2 $ 4,562.4
|
| Common Stock |
|
|
|
|
|
|
|
|
|
| ||||||||
(In millions) |
| Shares |
|
| Value |
|
| Premium on Common Stock |
|
| Retained Earnings |
|
| Total |
| |||||
Balance at December 31, 2022 |
|
| 40.4 |
|
| $ | 100.9 |
|
| $ | 1,473.7 |
|
| $ | 3,470.6 |
|
| $ | 5,045.2 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 39.8 |
|
|
| 39.8 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 0.6 |
|
|
| — |
|
|
| 0.6 |
|
Balance at March 31, 2023 |
|
| 40.4 |
|
| $ | 100.9 |
|
| $ | 1,474.3 |
|
| $ | 3,510.4 |
|
| $ | 5,085.6 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 91.9 |
|
|
| 91.9 |
|
Dividends declared on common stock |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (250.0 | ) |
|
| (250.0 | ) |
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 0.9 |
|
|
| — |
|
|
| 0.9 |
|
Balance at June 30, 2023 |
|
| 40.4 |
|
| $ | 100.9 |
|
| $ | 1,475.2 |
|
| $ | 3,352.3 |
|
| $ | 4,928.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance at December 31, 2021 |
|
| 40.4 |
|
| $ | 100.9 |
|
| $ | 1,470.8 |
|
| $ | 3,031.1 |
|
| $ | 4,602.8 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 39.0 |
|
|
| 39.0 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 0.8 |
|
|
| — |
|
|
| 0.8 |
|
Balance at March 31, 2022 |
|
| 40.4 |
|
| $ | 100.9 |
|
| $ | 1,471.6 |
|
| $ | 3,070.1 |
|
| $ | 4,642.6 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 100.7 |
|
|
| 100.7 |
|
Stock-based compensation |
|
| — |
|
|
| — |
|
|
| 0.7 |
|
|
| — |
|
|
| 0.7 |
|
Balance at June 30, 2022 |
|
| 40.4 |
|
| $ | 100.9 |
|
| $ | 1,472.3 |
|
| $ | 3,170.8 |
|
| $ | 4,744.0 |
|
13
COMBINED NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Index of Combined Notes to Condensed Financial Statements
The Combined Notes to the Condensed Financial Statements are a combined presentation for OGE Energy and OG&E. The following table indicates the Registrant(s) to which each Note applies.
OGE Energy | OG&E | |||||||
X | X | |||||||
X | X | |||||||
X | X | |||||||
X | X | |||||||
X | X | |||||||
X | X | |||||||
X |
| |||||||
X | X | |||||||
X | X | |||||||
Note | X | X | ||||||
X | ||||||||
X | X | |||||||
X | X |
Organization
OGE Energy is a holding company with investments in energy and energy services providers offering physical delivery and related services forwhose primary investment provides electricity in Oklahoma and western Arkansas. PriorOGE Energy's electric company operations are conducted through its wholly-owned subsidiary, OG&E, which generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas and are reported through OGE Energy's electric company business segment. OG&E's rates are subject to September 30, 2022, OGE Energy also held investmentsregulation by the OCC, the APSC and the FERC. OG&E was incorporated in Enable1902 under the laws of the Oklahoma Territory and Energy Transfer, which offeredis the largest electric company in Oklahoma, with a franchised service territory that includes Fort Smith, Arkansas and the surrounding communities. OG&E sold its retail natural gas crude oilbusiness in 1928 and NGL services. OGE Energy reports these activities through two business segments: (i) electric utility and (ii)is no longer engaged in the natural gas midstream operations. distribution business.
The accounts of OGE Energy and its wholly-owned subsidiaries, including OG&E, are included in OGE Energy's condensed consolidated financial statements. All intercompany transactions and balances are eliminated in such consolidation. For periods prior to the December 2, 2021 closing of the Enable and Energy Transfer merger, OGE Energy accounted for its investment in Enable as an equity method investment and reported it within OGE Energy's natural gas midstream operations segment. For the period of December 2, 2021 through September 30,
During 2022, OGE Energy accounted for its investment in the Energy Transfer units it acquired in the merger as an investment in equity securities, as further discussed below.below, and reported the Energy Transfer investment, along with legacy Enable seconded employee pension and postretirement costs, through OGE Energy's natural gas midstream operations segment. As of the end of September 30, 2022, OGE Energy hashad sold all of its Energy Transfer limited partner units, becoming primarily an electric utility.
The condensed financial statements included herein have been prepared by the Registrants, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, the Registrants believe that the disclosures are adequate to prevent the information presented from being misleading.
In the opinion of management, all adjustments necessary to fairly present the financial position of the Registrants at SeptemberJune 30, 20222023 and December 31, 2021,2022, the results of the Registrants' operations for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 and the Registrants' cash flows for the ninethree and six months ended SeptemberJune 30, 20222023 and 20212022 have been included and are of a normal, recurring nature except as otherwise disclosed. Management also has evaluated the impact of events occurring after SeptemberJune 30, 2022 2023
14
up to the date of issuance of these condensed financial statements, and these statements contain all necessary adjustments and disclosures resulting from that evaluation.
Due to seasonal fluctuations and other factors, the Registrants' operating results for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the results that may be expected for the year ending December 31, 20222023 or for any future period. The condensed financial statements and notes thereto should be read in conjunction with the audited financial statements and notes thereto included in the Registrants' 20212022 Form 10-K.
The accounting records of OG&E are maintained in accordance with the Uniform System of Accounts prescribed by the FERC and adopted by the OCC and the APSC. Additionally, OG&E, as a regulated utility, is subject to accounting principles for certain types of rate-regulated activities, which provide that certain incurred costs that would otherwise be charged to expense can be deferred as regulatory assets, based on the expected recovery from customers in future rates. Likewise, certain actual or anticipated credits that would otherwise reduce expense can be deferred as regulatory liabilities, based on the expected flowback to customers in future rates. Management's expected recovery of deferred costs and flowback of deferred credits generally results from specific decisions by regulators granting such ratemaking treatment.
OG&E records certain incurred costs and obligations as regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is probable that the costs or obligations will be included in amounts allowable for recovery or refund in future rates.
15
September 30, | December 31, | |||||||
(In millions) | 2022 | 2021 | ||||||
REGULATORY ASSETS | ||||||||
Current: | ||||||||
Oklahoma fuel clause under recoveries | $ | 467.0 | $ | 140.4 | ||||
Arkansas fuel clause under recoveries | 40.2 | 11.5 | ||||||
SPP cost tracker under recovery (A) | 0.2 | 9.3 | ||||||
Oklahoma Energy Efficiency Rider under recoveries (A) | — | 11.7 | ||||||
Other (A) | 6.7 | 9.7 | ||||||
Total current regulatory assets | $ | 514.1 | $ | 182.6 | ||||
Non-current: | ||||||||
Oklahoma Winter Storm Uri costs | $ | — | $ | 747.9 | ||||
Oklahoma deferred storm expenses | 203.3 | 172.8 | ||||||
Benefit obligations regulatory asset | 99.1 | 109.2 | ||||||
Arkansas Winter Storm Uri costs | 80.6 | 88.9 | ||||||
Pension tracker | 47.6 | 42.9 | ||||||
Sooner Dry Scrubbers | 18.3 | 18.9 | ||||||
Arkansas deferred pension expenses | 11.8 | 12.1 | ||||||
Unamortized loss on reacquired debt | 8.3 | 8.9 | ||||||
COVID-19 impacts | 8.0 | 8.2 | ||||||
Frontier Plant deferred expenses | 5.6 | 6.7 | ||||||
Smart Grid | 0.3 | 3.9 | ||||||
Other | 11.0 | 10.4 | ||||||
Total non-current regulatory assets | $ | 493.9 | $ | 1,230.8 | ||||
REGULATORY LIABILITIES | ||||||||
Current: | ||||||||
Oklahoma investment tax credit rider under credit (B) | $ | 5.3 | $ | — | ||||
Oklahoma Energy Efficiency Rider over recoveries (B) | 5.2 | — | ||||||
Other (B) | 1.5 | 2.5 | ||||||
Total current regulatory liabilities | $ | 12.0 | $ | 2.5 | ||||
Non-current: | ||||||||
Income taxes refundable to customers, net | $ | 904.2 | $ | 930.7 | ||||
Accrued removal obligations, net | 272.5 | 296.8 | ||||||
Other | 2.0 | 3.6 | ||||||
Total non-current regulatory liabilities | $ | 1,178.7 | $ | 1,231.1 |
|
| June 30, |
|
| December 31, |
| ||
(In millions) |
| 2023 |
|
| 2022 |
| ||
REGULATORY ASSETS |
|
|
|
|
|
| ||
Current: |
|
|
|
|
|
| ||
Oklahoma fuel clause under recoveries |
| $ | 177.9 |
|
| $ | 474.3 |
|
Arkansas fuel clause under recoveries |
|
| 20.4 |
|
|
| 40.6 |
|
Oklahoma Energy Efficiency Rider under recoveries (A) |
|
| 3.1 |
|
|
| 7.7 |
|
Other (A) |
|
| 8.2 |
|
|
| 4.7 |
|
Total current regulatory assets |
| $ | 209.6 |
|
| $ | 527.3 |
|
Non-current: |
|
|
|
|
|
| ||
Oklahoma deferred storm expenses |
| $ | 254.5 |
|
| $ | 206.3 |
|
Benefit obligations regulatory asset |
|
| 98.1 |
|
|
| 119.7 |
|
Pension tracker |
|
| 81.9 |
|
|
| 57.2 |
|
Arkansas Winter Storm Uri costs |
|
| 74.9 |
|
|
| 78.2 |
|
Sooner Dry Scrubbers |
|
| 17.7 |
|
|
| 18.1 |
|
Arkansas deferred pension expenses |
|
| 13.2 |
|
|
| 12.3 |
|
Unamortized loss on reacquired debt |
|
| 7.6 |
|
|
| 8.0 |
|
COVID-19 impacts |
|
| 7.3 |
|
|
| 7.7 |
|
Frontier Plant deferred expenses |
|
| 4.4 |
|
|
| 5.2 |
|
Other |
|
| 14.9 |
|
|
| 11.6 |
|
Total non-current regulatory assets |
| $ | 574.5 |
|
| $ | 524.3 |
|
REGULATORY LIABILITIES |
|
|
|
|
|
| ||
Current: |
|
|
|
|
|
| ||
SPP cost tracker over recovery (B) |
| $ | 6.3 |
|
| $ | 3.0 |
|
Other (B) |
|
| 1.8 |
|
|
| 2.5 |
|
Total current regulatory liabilities |
| $ | 8.1 |
|
| $ | 5.5 |
|
Non-current: |
|
|
|
|
|
| ||
Income taxes refundable to customers, net |
| $ | 866.3 |
|
| $ | 894.7 |
|
Accrued removal obligations, net |
|
| 231.9 |
|
|
| 250.5 |
|
Other |
|
| 1.8 |
|
|
| 1.9 |
|
Total non-current regulatory liabilities |
| $ | 1,100.0 |
|
| $ | 1,147.1 |
|
Customer balances are generally written off if not collected within six months after the final billing date. The allowance for uncollectible accounts receivable for OG&E is generally calculated by multiplying the last six months of electric revenue by the provision rate, which is based on a 12-month historical average of actual balances written off and is adjusted for current conditions and supportable forecasts as necessary. To the extent the historical collection rates, when incorporating forecasted conditions, are not representative of future collections, there could be an effect on the amount of uncollectible expense recognized, such as in response to COVID-19 impacts.recognized. Also, a portion of the uncollectible provision related to fuel within the Oklahoma jurisdiction is being recovered through the fuel adjustment clause. The allowance for uncollectible accounts receivable is a reduction to Accounts Receivable in the condensed balance sheets and is included in Other Operation and Maintenance Expense in the condensed statements of income.
New business customers are required to provide a security deposit in the form of cash, bond or irrevocable letter of credit that is refunded when the account is closed. New residential customers whose outside credit scores indicate an elevated risk are required to provide a security deposit that is refunded based on customer protection rules defined by the OCC and the APSC. The payment
16
behavior of all existing customers is continuously monitored, and, if the payment behavior indicates sufficient risk within the meaning of the applicable utility regulation, customers will be required to provide a security deposit.
(In millions) | Three Months Ended | Nine Months Ended | ||||||
Enable net income | $ | 107.0 | $ | 341.0 | ||||
OGE Energy's percent ownership at period end | 25.5 | % | 25.5 | % | ||||
OGE Energy's portion of Enable net income | $ | 27.5 | $ | 87.0 | ||||
Amortization of basis difference and dilution recognition (A) | 13.7 | 40.9 | ||||||
Equity in earnings of unconsolidated affiliates | $ | 41.2 | $ | 127.9 |
(In millions) | Pension Plan and Restoration of Retirement Income Plan | Postretirement Benefit Plans | Total | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | (26.1) | $ | 1.3 | $ | (24.8) | ||||||||||||||||||||||||||||||||
Other comprehensive income (loss) before reclassifications | — | — | — | |||||||||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income | 1.0 | (0.1) | 0.9 | |||||||||||||||||||||||||||||||||||
Settlement cost | 9.5 | — | 9.5 | |||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | (15.6) | $ | 1.2 | $ | (14.4) |
(In millions) | Pension Plan and Restoration of Retirement Income Plan | Postretirement Benefit Plans | Other Comprehensive Gain (Loss) from Unconsolidated Affiliates | Total | ||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | (34.1) | $ | 3.3 | $ | (1.3) | $ | (32.1) | ||||||||||||||||||||||||
Other comprehensive income before reclassifications | — | — | 0.6 | 0.6 | ||||||||||||||||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) | 1.3 | (0.9) | — | 0.4 | ||||||||||||||||||||||||||||
Settlement cost | 4.8 | — | — | 4.8 | ||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | (28.0) | $ | 2.4 | $ | (0.7) | $ | (26.3) |
Details about Accumulated Other Comprehensive Income (Loss) Components | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line Item in OGE Energy's Statements of Income | |||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Amortization of Pension Plan and Restoration of Retirement Income Plan items: | |||||||||||||||||
Actuarial losses | $ | (0.4) | $ | (0.6) | $ | (1.2) | $ | (1.8) | (A) | ||||||||
Prior service cost | (0.1) | (0.1) | (0.2) | (0.1) | (A) | ||||||||||||
Settlement cost | (1.9) | (1.4) | (12.4) | (6.7) | (A) | ||||||||||||
(2.4) | (2.1) | (13.8) | (8.6) | Income Before Taxes | |||||||||||||
(0.6) | (0.5) | (3.3) | (2.5) | Income Tax Expense | |||||||||||||
$ | (1.8) | $ | (1.6) | $ | (10.5) | $ | (6.1) | Net Income | |||||||||
Amortization of postretirement benefit plans items: | |||||||||||||||||
Prior service credit | $ | 0.2 | $ | 0.4 | $ | 0.2 | $ | 1.3 | (A) | ||||||||
Actuarial losses | — | — | — | (0.1) | (A) | ||||||||||||
0.2 | 0.4 | 0.2 | 1.2 | Income Before Taxes | |||||||||||||
0.1 | 0.1 | 0.1 | 0.3 | Income Tax Expense | |||||||||||||
$ | 0.1 | $ | 0.3 | $ | 0.1 | $ | 0.9 | Net Income | |||||||||
Total reclassifications for the period, net of tax | $ | (1.7) | $ | (1.3) | $ | (10.4) | $ | (5.2) | Net Income |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||
Residential | $ | 512.3 | $ | 365.5 | $ | 1,028.4 | $ | 1,112.2 | |||||||||
Commercial | 305.5 | 203.4 | 627.0 | 619.2 | |||||||||||||
Industrial | 109.8 | 79.9 | 248.6 | 264.1 | |||||||||||||
Oilfield | 101.8 | 68.0 | 234.0 | 257.5 | |||||||||||||
Public authorities and street light | 109.8 | 75.0 | 228.9 | 235.1 | |||||||||||||
System sales revenues | 1,139.2 | 791.8 | 2,366.9 | 2,488.1 | |||||||||||||
Provision for tax refund | 0.9 | — | (1.8) | — | |||||||||||||
Integrated market | 69.8 | 17.2 | 135.6 | 447.6 | |||||||||||||
Transmission | 36.9 | 30.8 | 105.6 | 103.8 | |||||||||||||
Other | 3.8 | 8.4 | 13.4 | (5.8) | |||||||||||||
Revenues from contracts with customers (A) | $ | 1,250.6 | $ | 848.2 | $ | 2,619.7 | $ | 3,033.7 |
Related Party Transactions
OGE Energy charges operating costs to OG&E and prior to December 2, 2021, charged operating costs to Enable, based on several factors. Operatingfactors, and operating costs directly related to OG&E and/or Enable are assigned as such. Operating costs incurred for the benefit of OG&E are allocated either as overhead based primarily on labor costs or using the "Distrigas" method, which is a three-factor formula that uses an equal weighting of payroll, net operating revenues and gross property, plant and equipment.
OGE Energy charged operating costs to OG&E of $31.7$35.8 million and $32.2$33.2 million during the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and $97.8$73.4 million and $101.3$66.1 million during the ninesix months ended SeptemberJune 30, 2023 and 2022, and 2021, respectively.
Accumulated Other Comprehensive Income (Loss)
The following tables present changes in the components of accumulated other comprehensive income (loss) attributable to OGE Energy during the six months ended June 30, 2023 and Enable2022. All amounts below are presented net of tax.
(In millions) |
| Pension Plan and Restoration of Retirement Income Plan |
|
| Postretirement Benefit Plans |
|
| Total |
| |||
Balance at December 31, 2022 |
| $ | (18.5 | ) |
| $ | 6.6 |
|
| $ | (11.9 | ) |
Amounts reclassified from accumulated other comprehensive income (loss) |
|
| 0.6 |
|
|
| (0.1 | ) |
|
| 0.5 |
|
Settlement cost |
|
| 1.1 |
|
|
| — |
|
|
| 1.1 |
|
Balance at June 30, 2023 |
| $ | (16.8 | ) |
| $ | 6.5 |
|
| $ | (10.3 | ) |
(In millions) |
| Pension Plan and Restoration of Retirement Income Plan |
|
| Postretirement Benefit Plans |
|
| Total |
| |||
Balance at December 31, 2021 |
| $ | (26.1 | ) |
| $ | 1.3 |
|
| $ | (24.8 | ) |
Amounts reclassified from accumulated other comprehensive income |
|
| 0.6 |
|
|
| — |
|
|
| 0.6 |
|
Settlement cost |
|
| 8.1 |
|
|
| — |
|
|
| 8.1 |
|
Balance at June 30, 2022 |
| $ | (17.4 | ) |
| $ | 1.3 |
|
| $ | (16.1 | ) |
17
Details about Accumulated Other Comprehensive Income (Loss) Components |
| Amount Reclassified from Accumulated Other Comprehensive Income (Loss) |
|
| Affected Line Item in | |||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
|
|
| ||||||||||
|
| June 30, |
|
| June 30, |
|
|
| ||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
|
| ||||
Amortization of Pension Plan and Restoration of Retirement Income Plan items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Actuarial losses |
| $ | (0.3 | ) |
| $ | (0.4 | ) |
| $ | (0.6 | ) |
| $ | (0.8 | ) |
| (A) |
Prior service cost |
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
|
| (0.1 | ) |
| (A) |
Settlement cost |
|
| (0.3 | ) |
|
| (0.9 | ) |
|
| (1.4 | ) |
|
| (10.5 | ) |
| (A) |
|
|
| (0.6 | ) |
|
| (1.3 | ) |
|
| (2.1 | ) |
|
| (11.4 | ) |
| Income Before Taxes |
|
|
| (0.1 | ) |
|
| (0.4 | ) |
|
| (0.4 | ) |
|
| (2.7 | ) |
| Income Tax Expense |
|
| $ | (0.5 | ) |
| $ | (0.9 | ) |
| $ | (1.7 | ) |
| $ | (8.7 | ) |
| Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Amortization of postretirement benefit plans items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Actuarial gains |
| $ | — |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | — |
|
| (A) |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
| Income Before Taxes |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
| Income Tax Expense |
|
| $ | — |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | — |
|
| Net Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Total reclassifications for the period, net of tax |
| $ | (0.5 | ) |
| $ | (0.9 | ) |
| $ | (1.6 | ) |
| $ | (8.7 | ) |
| Net Income |
Investment in Equity Securities of Energy Transfer
As of the end of September 30, 2021, respectively.2022, OGE Energy had accounts receivablesold all of its Energy Transfer limited partner units. Prior to exiting this investment, OGE Energy accounted for its investment in Energy Transfer's equity securities as an equity investment with a readily determinable fair value under ASC 321, "Investments - Equity Securities." For the three and six months ended June 30, 2022, OGE Energy recognized a pre-tax unrealized loss of $46.3 million and a pre-tax unrealized gain of $67.0 million, respectively, related to its investment in Energy Transfer's equity securities, as detailed below.
(In millions) |
| Three Months |
|
| Six Months |
| ||
Gain (loss) on equity securities |
| $ | (39.6 | ) |
| $ | 242.7 |
|
Net gain recognized on equity securities sold |
| 6.7 |
|
| 175.7 |
| ||
Unrealized gain (loss) on equity securities sold |
| $ | (46.3 | ) |
| $ | 67.0 |
|
During the three and six months ended June 30, 2022, respectively, OGE Energy received distributions of $13.3 million and $30.0 million from Enable for amounts billed for support services of $0.3 million as of December 31, 2021,Energy Transfer, which is included in Accounts Receivableare presented within Other Income in OGE Energy's 20212022 condensed consolidated balance sheet.income statement.
In September 2022, the Financial Accounting Standards Board issued ASU 2022-04, "Liabilities - Supplier Finance Programs (Subtopic 405-50)." The amendments in this update require that granted Enablea buyer in a supplier finance program disclose in each annual reporting period: (i) the responsibility of delivering natural gas to OG&E's generating facilities and performing an imbalance service. With this imbalance service, in accordance with the cash-out provisionkey terms of the contract, OG&E compensated Enable when Enable's deliveries exceeded OG&E's pipeline nominations. Enable compensated OG&E when OG&E's pipeline nominations exceeded Enable's deliveries. Upon the
18
of guarantees provided for the committed payment to the finance provider and (ii) the amount outstanding that remains unpaid by Energy Transfer. the buyer as of year-end, a description of where those obligations are presented in the balance sheet and a rollforward of those obligations during the annual period. The standard was effective January 1, 2023, except for the amendment on rollforward information, which is effective January 1, 2024. The Registrants have adopted this standard, which did not result in a material impact on their financial statements and related disclosures.
The Registrants believe that other recently adopted and recently issued accounting standards that are not yet effective do not appear to have a material impact on the Registrants' financial position, results of operations or cash flows upon adoption.
The following table presents summarized related party transactions between OG&E's revenues from contracts with customers disaggregated by customer classification. OG&E's operating revenues disaggregated by customer classification can be found in "OG&E (Electric Company) Results of Operations" within "Item 2. Management's Discussion and Enable during the threeAnalysis of Financial Condition and nine months ended September 30, 2021.Results of Operations."
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Residential |
| $ | 216.3 |
|
| $ | 289.3 |
|
| $ | 421.8 |
|
| $ | 516.1 |
|
Commercial |
|
| 155.5 |
|
|
| 193.4 |
|
|
| 289.9 |
|
|
| 321.5 |
|
Industrial |
|
| 51.7 |
|
|
| 81.4 |
|
|
| 103.6 |
|
|
| 138.8 |
|
Oilfield |
|
| 46.6 |
|
|
| 79.0 |
|
|
| 94.0 |
|
|
| 132.2 |
|
Public authorities and street light |
|
| 52.5 |
|
|
| 71.1 |
|
|
| 97.6 |
|
|
| 119.1 |
|
System sales revenues |
|
| 522.6 |
|
|
| 714.2 |
|
|
| 1,006.9 |
|
|
| 1,227.7 |
|
Provision for tax refund |
|
| 0.6 |
|
|
| (2.1 | ) |
|
| 2.0 |
|
|
| (2.7 | ) |
Integrated market |
|
| 18.8 |
|
|
| 43.0 |
|
|
| 31.5 |
|
|
| 65.8 |
|
Transmission |
|
| 36.1 |
|
|
| 32.9 |
|
|
| 71.3 |
|
|
| 68.7 |
|
Other |
|
| 11.1 |
|
|
| 3.0 |
|
|
| 22.1 |
|
|
| 9.6 |
|
Revenues from contracts with customers |
| $ | 589.2 |
|
| $ | 791.0 |
|
| $ | 1,133.8 |
|
| $ | 1,369.1 |
|
(In millions) | Three Months Ended | Nine Months Ended | ||||||
Operating revenues: | ||||||||
Electricity to power electric compression assets | $ | 4.1 | $ | 10.0 | ||||
Fuel, purchased power and direct transmission expense: | ||||||||
Natural gas transportation services | $ | 9.4 | $ | 23.4 | ||||
Natural gas purchases (sales) | $ | (7.7) | $ | (28.3) |
The classification of the Registrants' fair value measurements requires judgment regarding the degree to which market data is observable or corroborated by observable market data. GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value based on observable and unobservable data. The hierarchy categorizes the inputs into three levels, with the highest priority given to quoted prices in active markets for identical unrestricted assets or liabilities (Level 1) and the lowest priority given to unobservable inputs (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels defined in the fair value hierarchy are as follows:
Level 1 inputs are quoted prices in active markets for identical unrestricted assets or liabilities that are accessible at the measurement date.
Level 2 inputs are inputs other than quoted prices in active markets included within Level 1 that are either directly or indirectly observable at the reporting date for the asset or liability for substantially the full term of the asset or liability. Level 2 inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3 inputs are prices or valuation techniques for the asset or liability that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).
19
The Registrants had no financial instruments measured at fair value on a recurring basis at SeptemberJune 30, 20222023 and December 31, 2021. 2022. The following table presents OGE Energy's previous financial instrument measured at fair value on a recurring basis and the carrying amount and fair value of the Registrants' current financial instruments at SeptemberJune 30, 20222023 and December 31, 2021,2022, as well as the classification level within the fair value hierarchy. As of September 30, 2022, OGE Energy had sold all of the Energy Transfer limited partner units it received as a result of the merger transaction between Enable and Energy Transfer in December 2021.
September 30, | December 31, | ||||||||||||||||
2022 | 2021 | ||||||||||||||||
(In millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | Classification | ||||||||||||
Financial instrument measured at fair value on a recurring basis: | |||||||||||||||||
OGE Energy investment in Energy Transfer's equity securities | $ | — | $ | — | $ | 785.1 | $ | 785.1 | Level 1 | ||||||||
Financial instruments for which fair value is only disclosed: | |||||||||||||||||
Long-term Debt (including Long-term Debt due within one year): | |||||||||||||||||
OGE Energy Senior Notes | $ | 500.0 | $ | 486.8 | $ | 499.9 | $ | 497.8 | Level 2 | ||||||||
OGE Energy Term Loan | $ | 49.8 | $ | 50.0 | $ | — | $ | — | Level 2 | ||||||||
OG&E Senior Notes | $ | 3,853.6 | $ | 3,449.4 | $ | 3,851.8 | $ | 4,460.2 | Level 2 | ||||||||
OG&E Industrial Authority Bonds | $ | 135.4 | $ | 135.4 | $ | 135.4 | $ | 135.4 | Level 2 | ||||||||
OG&E Tinker Debt | $ | 9.3 | $ | 7.1 | $ | 9.3 | $ | 10.0 | Level 3 | ||||||||
|
| June 30, |
|
| December 31, |
|
|
| ||||||||||
(In millions) |
| Carrying Amount |
|
| Fair |
|
| Carrying Amount |
|
| Fair |
|
| Classification | ||||
Long-term Debt (including Long-term Debt due within one year): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
OGE Energy Senior Notes |
| $ | — |
|
| $ | — |
|
| $ | 499.9 |
|
| $ | 491.2 |
|
| Level 2 |
OGE Energy Term Loan |
| $ | 49.9 |
|
| $ | 50.0 |
|
| $ | 49.8 |
|
| $ | 50.0 |
|
| Level 2 |
OG&E Senior Notes |
| $ | 4,144.5 |
|
| $ | 3,469.3 |
|
| $ | 3,854.2 |
|
| $ | 3,477.1 |
|
| Level 2 |
OG&E Industrial Authority Bonds |
| $ | 135.4 |
|
| $ | 135.4 |
|
| $ | 135.4 |
|
| $ | 135.4 |
|
| Level 2 |
OG&E Tinker Debt |
| $ | 9.2 |
|
| $ | 7.2 |
|
| $ | 9.3 |
|
| $ | 7.3 |
|
| Level 3 |
|
| OGE Energy |
|
| OG&E |
| ||||||||||||||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Performance units |
| $ | 2.3 |
|
| $ | 1.8 |
|
| $ | 4.5 |
|
| $ | 3.6 |
|
| $ | 0.6 |
|
| $ | 0.5 |
|
| $ | 1.1 |
|
| $ | 1.1 |
|
Restricted stock units |
|
| 1.0 |
|
|
| 0.5 |
|
|
| 1.8 |
|
|
| 1.0 |
|
|
| 0.3 |
|
|
| 0.2 |
|
|
| 0.4 |
|
|
| 0.4 |
|
Total compensation expense |
| $ | 3.3 |
|
| $ | 2.3 |
|
| $ | 6.3 |
|
| $ | 4.6 |
|
| $ | 0.9 |
|
| $ | 0.7 |
|
| $ | 1.5 |
|
| $ | 1.5 |
|
Income tax benefit |
| $ | 0.8 |
|
| $ | 0.6 |
|
| $ | 1.5 |
|
| $ | 1.2 |
|
| $ | 0.2 |
|
| $ | 0.2 |
|
| $ | 0.3 |
|
| $ | 0.4 |
|
OGE Energy | OG&E | ||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Performance units - total shareholder return | $ | 1.7 | $ | 1.9 | $ | 5.3 | $ | 5.8 | $ | 0.6 | $ | 0.5 | $ | 1.7 | $ | 1.4 | |||||||||||||
Restricted stock units | 0.6 | 0.4 | 1.6 | 1.3 | 0.2 | 0.1 | 0.6 | 0.2 | |||||||||||||||||||||
Total compensation expense | $ | 2.3 | $ | 2.3 | $ | 6.9 | $ | 7.1 | $ | 0.8 | $ | 0.6 | $ | 2.3 | $ | 1.6 | |||||||||||||
Income tax benefit | $ | 0.5 | $ | 0.6 | $ | 1.7 | $ | 1.8 | $ | 0.2 | $ | 0.1 | $ | 0.6 | $ | 0.4 |
During the six months ended June 30, 2023, OGE Energy granted 213,442 performance units (based on total shareholder return over a three-year period) and 114,926 restricted stock units (primarily a three-year cliff vesting period) to employees at $43.74 and $37.52 fair value per share, respectively. Of those performance units and restricted stock units granted, 65,069 and 35,034 were granted to OG&E employees, respectively, at $43.74 and $37.52 fair value per share, respectively.
OGE Energy files consolidated income tax returns in the U.S. federal jurisdiction and various state jurisdictions. OG&E is a part of the consolidated income tax return of OGE Energy. With few exceptions, the Registrants are no longer subject to U.S. federal tax or state and local examinations by tax authorities for years prior to 2018.2019. Income taxes are generally allocated to each company in the affiliated group, including OG&E, based on its stand-alone taxable income or loss. Federal investment tax credits previously claimed on electric utility property have been deferred and will be amortized to income over the life of the related property. Additionally, OG&E earned federal tax credits associated with production from its wind facilities through January 2022. Oklahoma production and investment state tax credits are also earned on investments inat electric and solar generating facilities which further reduce OG&E's effective tax rate.
Automatic Dividend Reinvestment and Stock Purchase Plan
OGE Energy issued no new shares of common stock under its Automatic Dividend Reinvestment and Stock Purchase Plan during the three and ninesix months ended SeptemberJune 30, 2022.
20
Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to OGE Energy by the weighted-average number of OGE Energy's common shares outstanding during the period. In the calculation of diluted earnings per share, weighted-average shares outstanding are increased for additional shares that would be outstanding if potentially dilutive securities were converted to common stock. Potentially dilutive securities for OGE Energy consist of performance units and restricted stock units.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions, except per share data) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net income |
| $ | 88.4 |
|
| $ | 73.1 |
|
| $ | 126.7 |
|
| $ | 352.6 |
|
Average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic average common shares outstanding |
|
| 200.3 |
|
|
| 200.2 |
|
|
| 200.3 |
|
|
| 200.2 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Contingently issuable shares (performance and restricted stock units) |
|
| 0.5 |
|
|
| 0.5 |
|
|
| 0.5 |
|
|
| 0.4 |
|
Diluted average common shares outstanding |
|
| 200.8 |
|
|
| 200.7 |
|
|
| 200.8 |
|
|
| 200.6 |
|
Basic earnings per average common share |
| $ | 0.44 |
|
| $ | 0.37 |
|
| $ | 0.63 |
|
| $ | 1.76 |
|
Diluted earnings per average common share |
| $ | 0.44 |
|
| $ | 0.36 |
|
| $ | 0.63 |
|
| $ | 1.76 |
|
Anti-dilutive shares excluded from earnings per share calculation |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
(In millions, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||
Net income | $ | 262.8 | $ | 252.5 | $ | 615.4 | $ | 418.1 | ||||||
Average common shares outstanding: | ||||||||||||||
Basic average common shares outstanding | 200.2 | 200.2 | 200.2 | 200.1 | ||||||||||
Effect of dilutive securities: | ||||||||||||||
Contingently issuable shares (performance and restricted stock units) | 0.7 | 0.2 | 0.5 | 0.2 | ||||||||||
Diluted average common shares outstanding | 200.9 | 200.4 | 200.7 | 200.3 | ||||||||||
Basic earnings per average common share | $ | 1.31 | $ | 1.26 | $ | 3.07 | $ | 2.09 | ||||||
Diluted earnings per average common share | $ | 1.31 | $ | 1.26 | $ | 3.07 | $ | 2.09 | ||||||
Anti-dilutive shares excluded from earnings per share calculation | — | — | — | — |
At SeptemberJune 30, 2022,2023, the Registrants were in compliance with all of their debt agreements.
In May 2022,2021, OGE Energy entered intoissued $500.0 million of 0.703 percent senior notes, and OG&E issued $500.0 million of 0.553 percent senior notes. The Registrants repaid each of the $500.0 million senior notes that matured on May 26, 2023.
In January 2023, OG&E issued $450.0 million of 5.40 percent Senior Notes due January 15, 2033, and in April 2023, OG&E issued $350.0 million of 5.60 percent Senior Notes due April 1, 2053. The proceeds from these issuances were added to OG&E's general funds to be used for general corporate purposes, including to help fund the repayment of its $500.0 million of 0.553 percent Senior Notes that matured on May 26, 2023 and the funding of its capital investment program and working capital needs.
OGE Energy has a $100.0$100.0 million floating rate unsecured three-year credit agreement, of which $50.0$50.0 million is considered a revolving loan and $50.0$50.0 million is considered a term loan,loan. During the three and borrowedsix months ended June 30, 2023, the full $50.0 million term loan, in order to preserve general financial flexibility within the company. Advances under this agreement were used to refinance existing indebtedness and for working capital and general corporate purposes of OGE Energy. The credit agreement, under certain circumstances, may be increased to a maximum commitment limit of $135.0 million and contains substantially the same covenants as OGE Energy's existing $550.0 million revolving credit agreement. The credit agreement is scheduled to terminate on May 24, 2025. At September 30, 2022, the weighted-average interest rate for the amount$50.0 million drawn on the term loan under this credit agreement was 3.23ranged from 5.875 percent during the quarter.
OG&E Industrial Authority Bonds
OG&E has tax-exempt pollution control bonds with optional redemption provisions that allow the holders to request repayment of the bonds on any business day. The following table presents information about these bonds, which can be tendered at the option of the holder during the next 12 months.
Series |
| Date Due |
| Amount |
| |||||
|
|
|
|
|
|
|
| (In millions) |
| |
1.85% |
| - |
| 4.45% |
| Garfield Industrial Authority, January 1, 2025 |
| $ | 47.0 |
|
1.85% |
| - |
| 4.30% |
| Muskogee Industrial Authority, January 1, 2025 |
|
| 32.4 |
|
1.85% |
| - |
| 4.45% |
| Muskogee Industrial Authority, June 1, 2027 |
|
| 56.0 |
|
Total (redeemable during next 12 months) |
| $ | 135.4 |
|
Series | Date Due | Amount | ||||||||||||
(In millions) | ||||||||||||||
0.11% | - | 2.65% | Garfield Industrial Authority, January 1, 2025 | $ | 47.0 | |||||||||
0.11% | - | 2.60% | Muskogee Industrial Authority, January 1, 2025 | 32.4 | ||||||||||
0.11% | - | 2.65% | Muskogee Industrial Authority, June 1, 2027 | 56.0 | ||||||||||
Total (redeemable during next 12 months) | $ | 135.4 |
21
to remarket any bonds tendered for purchase. This process occurs once per week. Since the original issuance of these series of bonds in 1995 and 1997, the remarketing agent has successfully remarketed all tendered bonds. If the remarketing agent is unable to remarket any such bonds, OG&E is obligated to repurchase such unremarketed bonds. As OG&E has both the intent and ability to refinance the bonds on a long-term basis and such ability is supported by an ability to consummate the refinancing, the bonds are classified as Long-Term Debt in the condensed balance sheets. OG&E believes that it has sufficient liquidity to meet these obligations.
The Registrants borrow on a short-term basis, as necessary, by the issuance of commercial paper and by borrowings under their revolving credit agreements. OGE Energy also borrows under term credit agreements maturing in one year or less, as necessary. OGE EnergyOG&E had no short-term debt at SeptemberJune 30, 2022 compared to $486.9 million of short-term debt at2023 and December 31, 2021.
Aggregate | Amount | Weighted-Average | ||||||||||||||||||
Entity | Commitment | Outstanding (A) | Interest Rate | Expiration | ||||||||||||||||
(In millions) | ||||||||||||||||||||
OGE Energy (B) | $ | 550.0 | $ | — | — | % | (F) | December 17, 2026 | ||||||||||||
OGE Energy (C) | 50.0 | — | — | % | (F) | May 24, 2025 | ||||||||||||||
OG&E (D)(E) | 550.0 | 0.4 | 1.15 | % | (F) | December 17, 2026 | ||||||||||||||
Total | $ | 1,150.0 | $ | 0.4 | 1.15 | % |
Entity |
| Aggregate |
|
| Amount |
|
| Weighted-Average |
|
|
|
| Expiration | |||
|
| (In millions) |
|
|
|
|
|
|
|
| ||||||
OGE Energy (B) |
| $ | 550.0 |
|
| $ | 418.1 |
|
|
| 5.49 | % |
| (F) |
| December 17, 2027 (G) |
OGE Energy (C) |
|
| 50.0 |
|
|
| — |
|
|
| — | % |
| (F) |
| May 24, 2025 |
OG&E (D)(E) |
|
| 550.0 |
|
|
| 0.4 |
|
|
| 1.15 | % |
| (F) |
| December 17, 2027 (G) |
Total |
| $ | 1,150.0 |
|
| $ | 418.5 |
|
|
| 5.48 | % |
|
|
|
|
The Registrants' ability to access the commercial paper market could be adversely impacted by a credit ratings downgrade or major market disruptions. Pricing grids associated with the Registrants' credit facilities could cause annual fees and borrowing rates to increase if an adverse rating impact occurs. The impact of any future downgrade could include an increase in the costs of the Registrants' short-term borrowings, but a reduction in the Registrants' credit ratings would not result in any defaults or accelerations. Any future downgrade could also lead to higher long-term borrowing costs and, if below investment grade, would require the Registrants to post collateral or letters of credit.
OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur up to $800.0 million$1.0 billion in short-term borrowings at any one time for the two-year period ending December 31, 2022. OG&E has requested approval from the FERC to incur up to $1.0 billion for thea two-year period beginning January 1, 2023 and ending December 31, 2024 and expects to receive approval prior to the expiration of its current authority.2024.
In accordance with ASC Topic 715, "Compensation - Retirement Benefits," a one-time settlement charge is required to be recorded by an organization when lump sum payments or other settlements that relieve the organization from the responsibility for the pension benefit obligation during the plan year exceed the service cost and interest cost components of the organization's net periodic pension cost. During the ninesix months ended SeptemberJune 30, 2022,2023, the Registrants experienced an increase in both the number of employees electing to retire and the amount of lump sum payments paid
22
to such employees upon retirement, which resulted in the Registrants recording pension plan settlement charges as presented in the Pension Plan net periodic benefit cost tables below. The pension settlement charges did not require a cash outlay by the Registrants and did not increase total pension expense over time, as the charge wascharges were an acceleration of costs that otherwise would be recognized as pension expense in future periods.
Pension Plan | Restoration of Retirement Income Plan | ||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
OGE Energy | September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Service cost | $ | 1.8 | $ | 2.8 | $ | 5.7 | $ | 8.4 | $ | 0.3 | $ | 0.3 | $ | 0.8 | $ | 0.6 | |||||||||||||
Interest cost | 4.1 | 3.1 | 11.8 | 10.0 | — | — | 0.1 | 0.1 | |||||||||||||||||||||
Expected return on plan assets | (6.0) | (8.5) | (19.0) | (25.6) | — | — | — | — | |||||||||||||||||||||
Amortization of net loss | 2.4 | 2.3 | 6.6 | 7.0 | — | — | 0.1 | 0.1 | |||||||||||||||||||||
Amortization of unrecognized prior service cost (A) | — | — | — | — | 0.1 | 0.1 | 0.2 | 0.1 | |||||||||||||||||||||
Settlement cost | 2.3 | 3.7 | 18.3 | 35.4 | — | 1.7 | 0.2 | 2.1 | |||||||||||||||||||||
Total net periodic benefit cost | 4.6 | 3.4 | 23.4 | 35.2 | 0.4 | 2.1 | 1.4 | 3.0 | |||||||||||||||||||||
Less: Amount paid by unconsolidated affiliates | — | (0.1) | — | (0.2) | — | — | — | — | |||||||||||||||||||||
Net periodic benefit cost | $ | 4.6 | $ | 3.5 | $ | 23.4 | $ | 35.4 | $ | 0.4 | $ | 2.1 | $ | 1.4 | $ | 3.0 |
|
| Pension Plan |
|
| Restoration of Retirement |
| ||||||||||||||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
OGE Energy |
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Service cost |
| $ | 1.3 |
|
| $ | 1.7 |
|
| $ | 2.7 |
|
| $ | 3.9 |
|
| $ | 0.2 |
|
| $ | 0.2 |
|
| $ | 0.5 |
|
| $ | 0.5 |
|
Interest cost |
|
| 3.9 |
|
|
| 4.3 |
|
|
| 7.9 |
|
|
| 7.7 |
|
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.1 |
|
Expected return on plan assets |
|
| (4.2 | ) |
|
| (6.2 | ) |
|
| (8.2 | ) |
|
| (13.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Amortization of net loss |
|
| 2.0 |
|
|
| 2.3 |
|
|
| 4.2 |
|
|
| 4.2 |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| 0.1 |
|
Amortization of unrecognized prior service cost (A) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
|
| — |
|
|
| 0.2 |
|
|
| 0.1 |
|
Settlement cost |
|
| 1.2 |
|
|
| 2.8 |
|
|
| 19.4 |
|
|
| 16.0 |
|
|
| — |
|
|
| 0.2 |
|
|
| — |
|
|
| 0.2 |
|
Net periodic benefit cost |
| $ | 4.2 |
|
| $ | 4.9 |
|
| $ | 26.0 |
|
| $ | 18.8 |
|
| $ | 0.4 |
|
| $ | 0.6 |
|
| $ | 0.8 |
|
| $ | 1.0 |
|
Pension Plan | Restoration of Retirement Income Plan | ||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
OG&E | September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Service cost | $ | 1.5 | $ | 2.0 | $ | 4.6 | $ | 5.8 | $ | — | $ | — | $ | — | $ | — | |||||||||||||
Interest cost | 3.1 | 2.3 | 9.0 | 7.3 | — | — | — | — | |||||||||||||||||||||
Expected return on plan assets | (4.7) | (6.2) | (14.7) | (18.5) | — | — | — | — | |||||||||||||||||||||
Amortization of net loss | 2.1 | 1.7 | 5.6 | 5.2 | — | — | — | 0.1 | |||||||||||||||||||||
Settlement cost | 0.4 | 2.6 | 6.1 | 29.2 | — | 1.3 | — | 1.6 | |||||||||||||||||||||
Total net periodic benefit cost | 2.4 | 2.4 | 10.6 | 29.0 | — | 1.3 | — | 1.7 | |||||||||||||||||||||
Plus: Amount allocated from OGE Energy | 0.4 | 0.7 | 2.6 | 5.3 | 0.4 | 0.8 | 1.1 | 1.3 | |||||||||||||||||||||
Net periodic benefit cost | $ | 2.8 | $ | 3.1 | $ | 13.2 | $ | 34.3 | $ | 0.4 | $ | 2.1 | $ | 1.1 | $ | 3.0 |
|
| Pension Plan |
|
| Restoration of Retirement |
| ||||||||||||||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
OG&E |
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Service cost |
| $ | 1.1 |
|
| $ | 1.4 |
|
| $ | 2.2 |
|
| $ | 3.1 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Interest cost |
|
| 3.2 |
|
|
| 3.3 |
|
|
| 6.3 |
|
|
| 5.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Expected return on plan assets |
|
| (3.3 | ) |
|
| (4.7 | ) |
|
| (6.5 | ) |
|
| (10.0 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Amortization of net loss |
|
| 1.7 |
|
|
| 1.9 |
|
|
| 3.6 |
|
|
| 3.5 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Settlement cost |
|
| 0.8 |
|
|
| 2.1 |
|
|
| 18.0 |
|
|
| 5.7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total net periodic benefit cost |
|
| 3.5 |
|
|
| 4.0 |
|
|
| 23.6 |
|
|
| 8.2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Plus: Amount allocated from OGE Energy |
|
| 0.4 |
|
|
| 0.4 |
|
|
| 2.0 |
|
|
| 2.2 |
|
|
| 0.3 |
|
|
| 0.3 |
|
|
| 0.7 |
|
|
| 0.7 |
|
Net periodic benefit cost |
| $ | 3.9 |
|
| $ | 4.4 |
|
| $ | 25.6 |
|
| $ | 10.4 |
|
| $ | 0.3 |
|
| $ | 0.3 |
|
| $ | 0.7 |
|
| $ | 0.7 |
|
23
In addition to the net periodic benefit cost amounts recognized, as presented in the tables above, for the Pension and Restoration of Retirement Income Plans forduring the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, the Registrants recognized the following:
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Change in regulatory asset related to pension expense to maintain allowed recoverable amount in Oklahoma jurisdiction (A) |
| $ | 3.9 |
|
| $ | 0.4 |
|
| $ | 24.1 |
|
| $ | 2.3 |
|
Deferral of pension expense related to pension settlement charges included in the above line item: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Oklahoma jurisdiction (A) |
| $ | 0.8 |
|
| $ | 2.0 |
|
| $ | 17.5 |
|
| $ | 6.7 |
|
Arkansas jurisdiction (A) |
| $ | 0.1 |
|
| $ | 0.2 |
|
| $ | 1.6 |
|
| $ | 0.6 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||
Increase of regulatory asset related to pension expense to maintain allowed recoverable amount in Oklahoma jurisdiction (A) | $ | 2.7 | $ | 0.5 | $ | 5.0 | $ | 22.2 | ||||||
Deferral of pension expense related to pension settlement charges: | ||||||||||||||
Oklahoma jurisdiction (A) | $ | 0.3 | $ | 4.4 | $ | 7.0 | $ | 33.3 | ||||||
Arkansas jurisdiction (A) | $ | 0.1 | $ | 0.4 | $ | 0.7 | $ | 3.1 |
OGE Energy | OG&E | ||||||||||||||||||||||||||||
Postretirement Benefit Plans | Postretirement Benefit Plans | ||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||||||||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Service cost | $ | — | $ | 0.1 | $ | 0.1 | $ | 0.2 | $ | — | $ | — | $ | 0.1 | $ | 0.1 | |||||||||||||
Interest cost | 0.9 | 0.9 | 2.7 | 2.6 | 0.7 | 0.6 | 2.0 | 1.9 | |||||||||||||||||||||
Expected return on plan assets | (0.5) | (0.4) | (1.4) | (1.4) | (0.4) | (0.4) | (1.2) | (1.3) | |||||||||||||||||||||
Amortization of net loss | 0.5 | 0.7 | 1.2 | 2.1 | 0.3 | 0.6 | 1.1 | 2.0 | |||||||||||||||||||||
Amortization of unrecognized prior service cost (A) | (1.0) | (1.8) | (2.9) | (5.2) | (0.9) | (1.2) | (2.7) | (3.7) | |||||||||||||||||||||
Total net periodic benefit cost | (0.1) | (0.5) | (0.3) | (1.7) | (0.3) | (0.4) | (0.7) | (1.0) | |||||||||||||||||||||
Less: Amount paid by unconsolidated affiliates (B) | — | (0.1) | — | (0.4) | |||||||||||||||||||||||||
Plus: Amount allocated from OGE Energy (B) | — | (0.1) | — | (0.3) | |||||||||||||||||||||||||
Net periodic benefit cost | $ | (0.1) | $ | (0.4) | $ | (0.3) | $ | (1.3) | $ | (0.3) | $ | (0.5) | $ | (0.7) | $ | (1.3) |
|
| OGE Energy |
|
| OG&E |
| ||||||||||||||||||||||||||
|
| Postretirement Benefit Plans |
|
| Postretirement Benefit Plans |
| ||||||||||||||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Service cost |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | — |
|
| $ | 0.1 |
|
Interest cost |
|
| 1.3 |
|
|
| 0.9 |
|
|
| 2.6 |
|
|
| 1.8 |
|
|
| 1.0 |
|
|
| 0.6 |
|
|
| 2.0 |
|
|
| 1.3 |
|
Expected return on plan assets |
|
| (0.4 | ) |
|
| (0.5 | ) |
|
| (0.8 | ) |
|
| (0.9 | ) |
|
| (0.4 | ) |
|
| (0.4 | ) |
|
| (0.8 | ) |
|
| (0.8 | ) |
Amortization of net (gain) loss |
|
| — |
|
|
| 0.2 |
|
|
| (0.1 | ) |
|
| 0.7 |
|
|
| — |
|
|
| 0.3 |
|
|
| — |
|
|
| 0.8 |
|
Amortization of unrecognized prior service cost (A) |
|
| — |
|
|
| (0.9 | ) |
|
| — |
|
|
| (1.9 | ) |
|
| — |
|
|
| (0.9 | ) |
|
| — |
|
|
| (1.8 | ) |
Total net periodic benefit cost |
|
| 0.9 |
|
|
| (0.3 | ) |
|
| 1.7 |
|
|
| (0.2 | ) |
|
| 0.6 |
|
|
| (0.3 | ) |
|
| 1.2 |
|
|
| (0.4 | ) |
Plus: Amount allocated from OGE Energy |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0.2 |
|
|
| — |
|
|
| 0.3 |
|
|
| — |
| ||||
Net periodic benefit cost (income) |
| $ | 0.9 |
|
| $ | (0.3 | ) |
| $ | 1.7 |
|
| $ | (0.2 | ) |
| $ | 0.8 |
|
| $ | (0.3 | ) |
| $ | 1.5 |
|
| $ | (0.4 | ) |
(B)"Amount paid by unconsolidated affiliates" is only applicable to OGE Energy. "Amount allocated from OGE Energy" is only applicable to OG&E.
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Change in regulatory asset or liability related to postretirement expense to maintain allowed recoverable amount in Oklahoma jurisdiction (A) |
| $ | 1.1 |
|
| $ | 0.1 |
|
| $ | 2.2 |
|
| $ | (0.2 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | ||||||||||
Increase (decrease) of regulatory liability related to postretirement expense to maintain allowed recoverable amount in Oklahoma jurisdiction (A) | $ | (0.2) | $ | 0.1 | $ | (0.4) | $ | 0.3 |
The following table presents the amount of net periodic benefit cost capitalized and attributable to each of the Registrants for OGE Energy's Pension Plan and postretirement benefit plans for the three and six months ended June 30, 2023 and 2022.
|
| OGE Energy |
|
| OG&E |
| ||||||||||||||||||||||||||
|
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||||||||||||
|
| June 30, |
|
| June 30, |
|
| June 30, |
|
| June 30, |
| ||||||||||||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Capitalized portion of net periodic pension benefit cost |
| $ | 0.5 |
|
| $ | 0.7 |
|
| $ | 1.1 |
|
| $ | 1.5 |
|
| $ | 0.5 |
|
| $ | 0.5 |
|
| $ | 1.0 |
|
| $ | 1.2 |
|
Capitalized portion of net periodic postretirement benefit cost |
| $ | 0.1 |
|
| $ | — |
|
| $ | 0.1 |
|
| $ | 0.1 |
|
| $ | 0.1 |
|
| $ | 0.1 |
|
| $ | 0.1 |
|
| $ | 0.1 |
|
24
OGE Energy | OG&E | ||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||||||||||||||||||
(In millions) | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||
Capitalized portion of net periodic pension benefit cost | $ | 0.7 | $ | 0.9 | $ | 2.2 | $ | 2.5 | $ | 0.7 | $ | 0.7 | $ | 1.9 | $ | 2.1 | |||||||||||||
Capitalized portion of net periodic postretirement benefit cost | $ | 0.1 | $ | 0.1 | $ | 0.2 | $ | 0.2 | $ | — | $ | — | $ | 0.1 | $ | 0.1 |
OGE Energy reports its operations in two business segments: (i) the electric utility primarily through a single segment, captioned "electric company," which is engaged in the generation, transmission, distribution and sale of electric energy and (ii) natural gas midstream operations segment. Prior to the Enable and Energy Transfer merger closing on December 2, 2021, OGE Energy's natural gas midstream operations segment included its equity method investment in Enable. Subsequent to December 2, 2021, OGE Energy's natural gas midstream operations segment includes its investment in Energy Transfer's equity securities and legacy Enable seconded employee pension and postretirement costs. Other operationsenergy. The "other operations" caption primarily includes the operations of the holding company and other energy-related investments. Intersegment revenues are recorded at prices comparable to those of unaffiliated customers and are affected by regulatory considerations. During 2022, OGE Energy held an investment in Energy Transfer's equity securities and reported the investment's activity, as well as Enable legacy pension and postretirement costs, through the natural gas midstream operations segment. As of the end of September 2022, OGE Energy had sold all of Energy Transfer's limited partner units; therefore, beginning in 2023, OGE Energy no longer has a natural gas midstream operations segment. The following tables present the results of OGE Energy's business segments for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021.
Three Months Ended June 30, 2023 |
| Electric Company |
|
| Other |
|
| Eliminations |
|
| Total |
| ||||
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating revenues |
| $ | 605.0 |
|
| $ | — |
|
| $ | — |
|
| $ | 605.0 |
|
Fuel, purchased power and direct transmission expense |
|
| 181.8 |
|
|
| — |
|
|
| — |
|
|
| 181.8 |
|
Other operation and maintenance |
|
| 128.6 |
|
|
| (0.3 | ) |
|
| — |
|
|
| 128.3 |
|
Depreciation and amortization |
|
| 124.1 |
|
|
| — |
|
|
| — |
|
|
| 124.1 |
|
Taxes other than income |
|
| 23.5 |
|
|
| 0.9 |
|
|
| — |
|
|
| 24.4 |
|
Operating income (loss) |
|
| 147.0 |
|
|
| (0.6 | ) |
|
| — |
|
|
| 146.4 |
|
Other income |
|
| 13.2 |
|
|
| 4.4 |
|
|
| (3.1 | ) |
|
| 14.5 |
|
Interest expense |
|
| 52.1 |
|
|
| 8.7 |
|
|
| (3.1 | ) |
|
| 57.7 |
|
Income tax expense (benefit) |
|
| 16.2 |
|
|
| (1.4 | ) |
|
| — |
|
|
| 14.8 |
|
Net income (loss) |
| $ | 91.9 |
|
| $ | (3.5 | ) |
| $ | — |
|
| $ | 88.4 |
|
Total assets |
| $ | 12,492.9 |
|
| $ | 686.8 |
|
| $ | (575.1 | ) |
| $ | 12,604.6 |
|
Three Months Ended September 30, 2022 | Electric Utility | Natural Gas Midstream Operations | Other Operations | Eliminations | Total | ||||||||||||
(In millions) | |||||||||||||||||
Operating revenues | $ | 1,270.8 | $ | — | $ | — | $ | — | $ | 1,270.8 | |||||||
Fuel, purchased power and direct transmission expense | 673.8 | — | — | — | 673.8 | ||||||||||||
Other operation and maintenance | 121.5 | 10.5 | (0.6) | — | 131.4 | ||||||||||||
Depreciation and amortization | 122.4 | — | — | — | 122.4 | ||||||||||||
Taxes other than income | 24.5 | 0.1 | 0.7 | — | 25.3 | ||||||||||||
Operating income (loss) | 328.6 | (10.6) | (0.1) | — | 317.9 | ||||||||||||
Gain on equity securities | — | 39.4 | — | — | 39.4 | ||||||||||||
Other income (expense) | 5.6 | (7.8) | 2.6 | (1.1) | (0.7) | ||||||||||||
Interest expense | 40.2 | — | 3.1 | (1.1) | 42.2 | ||||||||||||
Income tax expense | 40.9 | 4.9 | 5.8 | — | 51.6 | ||||||||||||
Net income (loss) | $ | 253.1 | $ | 16.1 | $ | (6.4) | $ | — | $ | 262.8 | |||||||
Total assets | $ | 12,233.8 | $ | 1.3 | $ | 933.9 | $ | (565.0) | $ | 12,604.0 |
Three Months Ended June 30, 2022 |
| Electric Company |
|
| Natural Gas Midstream Operations |
|
| Other |
|
| Eliminations |
|
| Total |
| |||||
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating revenues |
| $ | 803.7 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 803.7 |
|
Fuel, purchased power and direct transmission expense |
|
| 393.3 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 393.3 |
|
Other operation and maintenance |
|
| 118.3 |
|
|
| 0.5 |
|
|
| (0.7 | ) |
|
| — |
|
|
| 118.1 |
|
Depreciation and amortization |
|
| 111.6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 111.6 |
|
Taxes other than income |
|
| 23.3 |
|
|
| 0.1 |
|
|
| 0.7 |
|
|
| — |
|
|
| 24.1 |
|
Operating income (loss) |
|
| 157.2 |
|
|
| (0.6 | ) |
|
| — |
|
|
| — |
|
|
| 156.6 |
|
Loss on equity securities |
|
| — |
|
|
| (39.6 | ) |
|
| — |
|
|
| — |
|
|
| (39.6 | ) |
Other income (expense) |
|
| (0.3 | ) |
|
| 12.4 |
|
|
| — |
|
|
| (0.4 | ) |
|
| 11.7 |
|
Interest expense |
|
| 39.8 |
|
|
| — |
|
|
| 3.0 |
|
|
| (0.4 | ) |
|
| 42.4 |
|
Income tax expense (benefit) |
|
| 16.4 |
|
|
| (8.9 | ) |
|
| 5.7 |
|
|
| — |
|
|
| 13.2 |
|
Net income (loss) |
| $ | 100.7 |
|
| $ | (18.9 | ) |
| $ | (8.7 | ) |
| $ | — |
|
| $ | 73.1 |
|
Total assets |
| $ | 12,317.2 |
|
| $ | 401.7 |
|
| $ | 751.9 |
|
| $ | (632.8 | ) |
| $ | 12,838.0 |
|
25
Six Months Ended June 30, 2023 |
| Electric Company |
|
| Other |
|
| Eliminations |
|
| Total |
| ||||
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating revenues |
| $ | 1,162.2 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,162.2 |
|
Fuel, purchased power and direct transmission expense |
|
| 382.4 |
|
|
| — |
|
|
| — |
|
|
| 382.4 |
|
Other operation and maintenance |
|
| 260.1 |
|
|
| (1.4 | ) |
|
| — |
|
|
| 258.7 |
|
Depreciation and amortization |
|
| 245.3 |
|
|
| — |
|
|
| — |
|
|
| 245.3 |
|
Taxes other than income |
|
| 50.6 |
|
|
| 2.3 |
|
|
| — |
|
|
| 52.9 |
|
Operating income (loss) |
|
| 223.8 |
|
|
| (0.9 | ) |
|
| — |
|
|
| 222.9 |
|
Other income |
|
| 28.5 |
|
|
| 8.9 |
|
|
| (6.5 | ) |
|
| 30.9 |
|
Interest expense |
|
| 97.8 |
|
|
| 14.2 |
|
|
| (6.5 | ) |
|
| 105.5 |
|
Income tax expense (benefit) |
|
| 22.8 |
|
|
| (1.2 | ) |
|
| — |
|
|
| 21.6 |
|
Net income (loss) |
| $ | 131.7 |
|
| $ | (5.0 | ) |
| $ | — |
|
| $ | 126.7 |
|
Total assets |
| $ | 12,492.9 |
|
| $ | 686.8 |
|
| $ | (575.1 | ) |
| $ | 12,604.6 |
|
Six Months Ended June 30, 2022 |
| Electric Company |
|
| Natural Gas Midstream Operations |
|
| Other |
|
| Eliminations |
|
| Total |
| |||||
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Operating revenues |
| $ | 1,393.0 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 1,393.0 |
|
Fuel, purchased power and direct transmission expense |
|
| 649.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 649.0 |
|
Other operation and maintenance |
|
| 233.8 |
|
|
| 1.2 |
|
|
| (1.9 | ) |
|
| — |
|
|
| 233.1 |
|
Depreciation and amortization |
|
| 219.0 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 219.0 |
|
Taxes other than income |
|
| 50.1 |
|
|
| 0.1 |
|
|
| 2.0 |
|
|
| — |
|
|
| 52.2 |
|
Operating income (loss) |
|
| 241.1 |
|
|
| (1.3 | ) |
|
| (0.1 | ) |
|
| — |
|
|
| 239.7 |
|
Gain on equity securities |
|
| — |
|
|
| 242.7 |
|
|
| — |
|
|
| — |
|
|
| 242.7 |
|
Other income |
|
| 0.4 |
|
|
| 21.1 |
|
|
| — |
|
|
| (0.5 | ) |
|
| 21.0 |
|
Interest expense |
|
| 78.0 |
|
|
| — |
|
|
| 5.0 |
|
|
| (0.5 | ) |
|
| 82.5 |
|
Income tax expense (benefit) |
|
| 23.8 |
|
|
| 51.3 |
|
|
| (6.8 | ) |
|
| — |
|
|
| 68.3 |
|
Net income |
| $ | 139.7 |
|
| $ | 211.2 |
|
| $ | 1.7 |
|
| $ | — |
|
| $ | 352.6 |
|
Total assets |
| $ | 12,317.2 |
|
| $ | 401.7 |
|
| $ | 751.9 |
|
| $ | (632.8 | ) |
| $ | 12,838.0 |
|
Three Months Ended September 30, 2021 | Electric Utility | Natural Gas Midstream Operations | Other Operations | Eliminations | Total | ||||||||||||
(In millions) | |||||||||||||||||
Operating revenues | $ | 864.4 | $ | — | $ | — | $ | — | $ | 864.4 | |||||||
Fuel, purchased power and direct transmission expense | 330.1 | — | — | — | 330.1 | ||||||||||||
Other operation and maintenance | 115.8 | 0.3 | (0.7) | — | 115.4 | ||||||||||||
Depreciation and amortization | 108.6 | — | — | — | 108.6 | ||||||||||||
Taxes other than income | 24.6 | 0.1 | 0.8 | — | 25.5 | ||||||||||||
Operating income (loss) | 285.3 | (0.4) | (0.1) | — | 284.8 | ||||||||||||
Equity in earnings of unconsolidated affiliates | — | 41.2 | — | — | 41.2 | ||||||||||||
Other income (expense) | 2.9 | (0.5) | (0.2) | (0.1) | 2.1 | ||||||||||||
Interest expense | 38.0 | — | 1.6 | (0.1) | 39.5 | ||||||||||||
Income tax expense | 26.4 | 9.5 | 0.2 | — | 36.1 | ||||||||||||
Net income (loss) | $ | 223.8 | $ | 30.8 | $ | (2.1) | $ | — | $ | 252.5 | |||||||
Investment in unconsolidated affiliates | $ | — | $ | 449.5 | $ | — | $ | — | $ | 449.5 | |||||||
Total assets | $ | 11,597.9 | $ | 451.8 | $ | 293.3 | $ | (165.5) | $ | 12,177.5 |
Nine Months Ended September 30, 2022 | Electric Utility | Natural Gas Midstream Operations | Other Operations | Eliminations | Total | ||||||||||||
(In millions) | |||||||||||||||||
Operating revenues | $ | 2,663.8 | $ | — | $ | — | $ | — | $ | 2,663.8 | |||||||
Fuel, purchased power and direct transmission expense | 1,322.8 | — | — | — | 1,322.8 | ||||||||||||
Other operation and maintenance | 355.3 | 11.7 | (2.5) | — | 364.5 | ||||||||||||
Depreciation and amortization | 341.4 | — | — | — | 341.4 | ||||||||||||
Taxes other than income | 74.6 | 0.2 | 2.7 | — | 77.5 | ||||||||||||
Operating income (loss) | 569.7 | (11.9) | (0.2) | — | 557.6 | ||||||||||||
Gain on equity securities | — | 282.1 | — | — | 282.1 | ||||||||||||
Other income | 6.0 | 13.3 | 2.6 | (1.6) | 20.3 | ||||||||||||
Interest expense | 118.2 | — | 8.1 | (1.6) | 124.7 | ||||||||||||
Income tax expense (benefit) | 64.7 | 56.2 | (1.0) | — | 119.9 | ||||||||||||
Net income (loss) | $ | 392.8 | $ | 227.3 | $ | (4.7) | $ | — | $ | 615.4 | |||||||
Total assets | $ | 12,233.8 | $ | 1.3 | $ | 933.9 | $ | (565.0) | $ | 12,604.0 |
Nine Months Ended September 30, 2021 | Electric Utility | Natural Gas Midstream Operations | Other Operations | Eliminations | Total | ||||||||||||
(In millions) | |||||||||||||||||
Operating revenues | $ | 3,072.4 | $ | — | $ | — | $ | — | $ | 3,072.4 | |||||||
Fuel, purchased power and direct transmission expense | 1,876.9 | — | — | — | 1,876.9 | ||||||||||||
Other operation and maintenance | 344.4 | 2.3 | (2.8) | — | 343.9 | ||||||||||||
Depreciation and amortization | 310.2 | — | — | — | 310.2 | ||||||||||||
Taxes other than income | 75.3 | 0.3 | 2.9 | — | 78.5 | ||||||||||||
Operating income (loss) | 465.6 | (2.6) | (0.1) | — | 462.9 | ||||||||||||
Equity in earnings of unconsolidated affiliates | — | 127.9 | — | — | 127.9 | ||||||||||||
Other income (expense) | 5.8 | (1.2) | (0.8) | (0.9) | 2.9 | ||||||||||||
Interest expense | 114.3 | — | 5.4 | (0.9) | 118.8 | ||||||||||||
Income tax expense (benefit) | 37.0 | 23.2 | (3.4) | — | 56.8 | ||||||||||||
Net income (loss) | $ | 320.1 | $ | 100.9 | $ | (2.9) | $ | — | $ | 418.1 | |||||||
Investment in unconsolidated affiliates | $ | — | $ | 449.5 | $ | — | $ | — | $ | 449.5 | |||||||
Total assets | $ | 11,597.9 | $ | 451.8 | $ | 293.3 | $ | (165.5) | $ | 12,177.5 |
Except as set forth below, in Note 1413 and under "Environmental Laws and Regulations" in Item 2 of Part I and in Item 1 of Part II of this Form 10-Q, the circumstances set forth in Notes 1513 and 1614 to the financial statements included in the Registrants' 20212022 Form 10-K appropriately represent, in all material respects, the current status of the Registrants' material commitments and contingent liabilities.
Environmental Laws and Regulations
The activities of the RegistrantsOG&E are subject to numerous stringent and complex federal, state and local laws and regulations governing environmental protection. These laws and regulations can change, restrict or otherwise impact the Registrants' business activities in many ways, including the handling or disposal of waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Management believes that all of the Registrants'OG&E's operations are in substantial compliance with current federal, state and local environmental standards.
Environmental regulation can increase the cost of planning, design, initial installation and operation of OG&E's facilities. Management continues to evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a competitive market.
26
Other
In the normal course of business, the Registrants are 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 experts to assess the claim. If, in management's opinion, the Registrants have 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 condensed financial statements. If the assessment indicates that a potential loss is not probable but reasonably possible, the nature of the contingent matter, together with an estimate of the range of possible loss if determinable and material, would be disclosed. At the present time, based on currently available information, except as disclosed below, the Registrants believe 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 their condensed financial statements and would not have a material adverse effect on their financial position, results of operations or cash flows.
In July 2023, OG&E was named, along with its contractor, as a defendant in a lawsuit filed by an apartment owner and its insurance companies seeking in excess of $60.0 million in damages related to a fire at an apartment building under construction in Oklahoma City. OG&E disputes the claims in the lawsuit and intends to vigorously defend this action. If OG&E was ultimately deemed liable for damages in connection with this incident, OG&E believes its existing insurance policies will cover its costs, in excess of a required retention (the amount of which is not material), to satisfy any liability it may have. Due to the uncertain and preliminary nature of this litigation, the outcome cannot be predicted, and OG&E is unable to provide a range of possible loss in this matter.
Except as set forth below, the circumstances set forth in Note 1614 to the financial statements included in the Registrants' 20212022 Form 10-K appropriately represent, in all material respects, the current status of the Registrants' regulatory matters.
Completed Regulatory Matters
APSC Proceedings
Arkansas 20212022 Formula Rate Plan Filing
In October 2021,2022, OG&E filed its fourthfifth evaluation report under its Formula Rate Plan, and on February 1, 2022,2023, OG&E and the APSC General Staff and the Office of the Arkansas Attorney General filed a non-unanimous joint settlement agreement, which included an annual electric revenue increase of $4.2$9.6 million. The only non-signatory toArkansas Attorney General and the settlement agreementArkansas Valley Electric Consumers agreed not to oppose the settlement. On March 4, 2022,2, 2023, the APSC issued a final order approving the non-unanimous settlement agreement, and new rates became effective April 1, 2022.
OCC Proceedings
On July 1, 2022, OG&E implemented an annual interim rate increase of $30.0 million, subject to refund for amounts in excessthe OCC Public Utility Division Staff filed their application initiating the review of the rates approved by the OCC.
27
SPP Proceedings
Planning Reserve Margin and Performance Based Accreditation
On July 26, 2022, the SPP Board of projects included in the 2024 annual investment plan or no later than July 1, 2025;
Pending Regulatory Matters
APSC Proceedings
Horseshoe Lake Modernization Plan
On July 12, 2023, OG&E filed an application at the APSC seeking authorization to commence construction of two hydrogen-capable combustion turbines totaling 448 megawatts at its existing Horseshoe Lake generating facility. The Horseshoe Lake project is expected to cost approximately $331 million, excluding financing costs and property taxes, and the new generating units are expected to be placed into service in late 2026. Arkansas law requires a public utility to seek approval from the APSC to commence construction of a power-generating facility located outside the boundaries of the state of Arkansas.
FERC Proceedings
Order for Sponsored Transmission Upgrades within SPP
Under Attachment Z2 of the SPP Open Access Transmission Tariff, costs of participant-funded, or "sponsored," transmission upgrades may be recovered from other SPP customers whose transmission service depends on capacity enabled by the upgrade. The SPP Open Access Transmission Tariff required the SPP to charge for these upgrades beginning in 2008, but the SPP haddid not beenbegin charging its customers for these upgrades until 2016 due to information system limitations. However,At that time, the SPP had informed participantssought a waiver of a time limitation in its tariff that otherwise would have prevented it from waiting until 2016 to bill for the market that these charges would be forthcoming. In July 2016, the2008 through 2015 period. The FERC granted the SPP's request to recoverwaiver, and the charges not billed since 2008. The SPP subsequentlythen billed OG&E as a user for these Z2 charges and creditedwhile simultaneously crediting OG&E related toas a sponsor of Z2 transmission upgrades, that OG&E had sponsored, which resultedresulting in OG&E being a net receiverrecipient of sponsored upgrade credits. The majority of these net credits were refunded to customers through OG&E's various rate riders that include SPP activity with the remaining amounts retained by OG&E.
Several companies that were net payers of Z2 charges sought rehearing of the FERC's July 2016 order; however, in November 2017,order approving the waiver and then appealed it. While that appeal was pending, the FERC denied the rehearing requests. In January 2018, one of the impacted companies appealed the FERC's decision to the U.S. Court of Appeals for the District of Columbia Circuit. In July 2018, that court grantedobtained a motion requested by the FERC that the case be remanded back to the FERC for further examinationremand and proceedings. In February 2019, the FERCthen reversed its July 2016 orderitself and November 2017 rehearing denial, ruled that the SPP violated its tariff to charge for the 2008 through 2015 period in 2016, held that the SPP tariff provision that prohibited thosethe 2008 through 2015 charges could not be waived andwaived. It ordered the SPP to develop a plan to refund the payments but not to implement the refunds until further ordered to do so. In response, in April 2019, OG&E filed a request for rehearing withat the FERC, and in May 2019, OG&EFERC. The next month, it also filed a Complaint at the FERC 206 complaint against the SPP alleging that the SPP's forced unwinding of the revenue credit payments to OG&E would violate the provisions of the Sponsored Upgrade Agreement and of the applicable tariff. OG&E's filing requested that the FERC rulecontending that the SPP isand not entitled to seek refunds or in any other way seek to unwind the revenue credit payments it had paid to OG&E pursuant to the Sponsored Upgrade Agreement. The SPP's response to OG&E's filing agreed that OG&E should be entitled to keepbear the cost of any refunds resulting from the SPP's tariff violation and that SPP’s actions also violated its Z2 payments and argued that the SPP should not be held responsible for those payments if refunds are ordered. Further, the SPP has requested the FERC to negotiate a global settlementcontracts with all impacted parties, including other project sponsors who, like OG&E, have also filed complaints at FERC contending that the payments they have received cannot properly be unwound.
If the FERC proceeds to order refunds in full, OG&E estimates it would be required to refund $13.0$13.0 million, which is net of amounts paid to other utilities for upgrades and would be subject to interest at the FERC-approved rate. The SPP has stated in filings it made with the FERC whileboth before and after the appeal was pendingcourt of appeals decision that there are considerable complexities in implementing the refunds that will have to be resolved before they can be paid. Payment of refunds would shift recovery of these upgrade credits to future periods. The SPP filed an updatea report on January 4, 2022 confirming that administering refunds would be complex and could take years unless the
28
SPP is allowed to make certain simplifying assumptions. ItThe SPP also urged that all pending complaint proceedings, including fourOG&E's complaint and three similar complaints against the SPP, be resolved before theany refund process is ordered to begin. OG&E and other parties filed responses to the SPP report, and the matter remains pending at the FERC. Of the $13.0$13.0 million, the Registrants would be impacted by $5.0$5.0 million in expense that initially benefited the Registrants in 2016, and OG&E customers would incur a net impact of $8.0$8.0 million in expense through rider mechanisms or the FERC formula rate. As of SeptemberJune 30, 2022,2023, the Registrants have reserved $13.0$13.0 million plus estimated interest for a potential refund.
In JanuaryNovember 2022, the FERC issued an order denying OG&E's complaint against the SPP. It also issued orders granting the other three complaints against the SPP in part but awarded no relief. All four complainants timely sought rehearing of these orders. The FERC denied the rehearing petitions on June 27, 2023, and OG&E and the other complainants have filed appeals from the rehearing denials and the original denials. The U.S. Court of Appeals for the Eighth Circuit has set a briefing schedule for the consolidated appeals. The FERC will likely seek an extension of that schedule, and briefing will likely be completed in any case by the end of 2023.
In June 2020, the FERC acted onapproved, effective July 1, 2020, an SPP proposal to eliminate Attachment Z2 revenue crediting and replace it with a different rate mechanism that would provide project sponsors, such as OG&E, the same level of recovery, and rejected the proposal to the extent it would limit recovery to the amountrecovery. This elimination of the upgrade sponsor's directly assigned upgrade costs with interest. The SPP resubmitted a proposal in April 2020 without this limited recovery, and with the alternative rate mechanism, and the FERC approved it in June 2020, effective July 1, 2020. No party sought rehearing of the order, and it is now final. This orderAttachment Z2 revenue crediting would only prospectively impact OG&E and its recovery of any future upgrade costs that it may incur as a project sponsor subsequent to July 2020. All of the existing projects that are eligible to receive revenue credits under Attachment Z2 will remain eligible, which includes the $13.0$13.0 million that is at issue in the remand from OG&E's appeal as discussed above, will continue to do so.
Oklahoma Retail Electric Supplier Certified Territory Act Causes
As previously disclosed, several rural electric cooperative electricity suppliers have filed complaints with the OCC alleging that OG&E, hasbecause it was providing service to large loads in another supplier's territory, had violated the Oklahoma Retail Electric Supplier Certified Territory Act. OG&E believes it is lawfully serving customers specifically exempted fromunder specific exemptions under this act and has presented evidence and testimonythat allow it to the OCC supporting its position.serve customers having a load of one megawatt or greater. There have beenwere five complaint cases initiated at the OCC, and the OCC has issued decisions on each of them. The OCC ruled in favor of the electric cooperatives in three of those cases under statutory interpretation and ruled in favor of OG&E in two of those cases.cases under injunctive theory. All five of those cases have beenwere appealed to the Oklahoma Supreme Court.
On April 4, 2023, the Oklahoma Supreme Court where they have been made companionissued its opinion which vacated the OCC's injunctions with respect to four of the cases but will be individually briefed and have individual final decisions.
Horseshoe Lake Modernization Plan - OCC Approval Filing
On May 31, 2023, OG&E filed an application at the OCC calculatesseeking approval for the revenue requirement but could range fromcost associated with the purchase and installation of two hydrogen-capable combustion turbines totaling 448 megawatts at its existing Horseshoe Lake generating facility. The Horseshoe Lake project is expected to cost approximately $17.4$331 million, excluding financing costs and property taxes, and the new generating units are expected to $58.0 million for all five cases, of which $4.1 millionbe placed into service in late 2026. A hearing on the merits is expected to $7.0 million would apply to the three cases where the OCC ruledbe held in favor of the electric cooperatives.October 2023.
On July 1, 2022,June 29, 2023, the Public Utility Division Staff filed their application initiating the review of the 20212022 fuel adjustment clause and prudence review. OG&E filedexpects to file its Minimum Filing Requirements and Supporting Testimony onby August 30, 2022, and responsive testimony is due January 6,29, 2023.
29
SPP Proceedings
Planning Reserve Margin and Performance Based Accreditation
In July 26, 2022, the SPP Board of Directors approved a planning reserve margin increase from 12 percent to 15 percent that each load serving entity, such as OG&E, must maintain. This change will be effective for the summer of 2023. At the same time, the SPP Board of Directors also approved a new unit accreditation methodology for conventional generation which begins a phased implementation starting inrequires submittal to and approval from the summer of 2024.FERC prior to becoming effective. As a result, OG&E is currently evaluating its plan to fill the incremental capacity needs brought about by thesethis policy changes.change.
30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following combined discussion is separately filed by OGE Energy and OG&E. However, OG&E does not make any representations as to information related solely to OGE Energy or the subsidiaries of OGE Energy other than itself.
Introduction
OGE Energy is a holding company with investments in energy and energy services providers offering physical delivery and related services forwhose primary investment provides electricity in Oklahoma and western Arkansas. PriorOGE Energy's electric company operations are conducted through its wholly-owned subsidiary, OG&E, which generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas and are reported through OGE Energy's electric company business segment. OG&E's rates are subject to September 30, 2022, OGE Energy also held investmentsregulation by the OCC, the APSC and the FERC. OG&E was incorporated in Enable1902 under the laws of the Oklahoma Territory and Energy Transfer, which offeredis the largest electric company in Oklahoma, with a franchised service territory that includes Fort Smith, Arkansas and the surrounding communities. OG&E sold its retail natural gas crude oilbusiness in 1928 and NGL services. OGE Energy reports these activities through two business segments: (i) electric utility and (ii)is no longer engaged in the natural gas midstream operations. distribution business.
The accounts of OGE Energy and its wholly-owned subsidiaries, including OG&E, are included in OGE Energy's condensed consolidated financial statements. All intercompany transactions and balances are eliminated in such consolidation. For periods prior to the December 2, 2021 closing of the Enable and Energy Transfer merger, OGE Energy accounted for its investment in Enable as an equity method investment and reported it within OGE Energy's natural gas midstream operations segment. For the period of December 2, 2021 through September 30,
During 2022, OGE Energy accounted for its investment in the Energy Transfer units it acquired in the merger as an investment in equity securities.securities and reported the Energy Transfer investment, along with legacy Enable seconded employee pension and postretirement costs, through OGE Energy's natural gas midstream operations segment. As of the end of September 30, 2022, OGE Energy hashad sold all of its Energy Transfer limited partner units, becoming primarily an electric utility.
OGE Energy's purpose is to energize life, providing life-sustaining and life-enhancing products and services that enrich its communities and encourage growth and a higher quality of life. OGE Energy's purpose comes with a balanced approach to multifaceted stewardship: keeping its employees (internally referred to as "members") safe, reducing its environmental impact, strengthening its diverse communities and ensuring its effective corporate governance. OGE Energy's business model is centered around growth and sustainability for members, communities and customers and the owners of OGE Energy, its shareholders. OGE Energy's vision for a more sustainable future includes protecting the environment through innovative solutions, serving the needs of customers by adopting cleaner energy, minimizing OGE Energy's reliance on freshwater resources and preserving the biodiversity of OGE Energy's region to reduce its environmental footprint.
Geopolitical events, including the ongoing global COVID-19 pandemic, and related governmental and business responses continue to have an impact on the Registrants' operations, supply chains and end-user customers. The Registrants have experienced, and are pursuing mitigation strategies for, raw material inflation, logistical challenges and certain component shortages. Supply chain disruption, including the Anti-Dumping and Countervailing Duty review by the U.S. Department of Commerce,disruptions related to utility-scale solar components, may result in delays in construction activities and equipment deliveries related to OGE Energy's capital projects. Rising interest rates have increased the cost of debt that OG&E has incurred during 2023 in order to help fund its capital investment program. The timing and extent of the financial impact from these events have not been material to the Registrants' operations at this time but are still uncertain, and the Registrants cannot predict the magnitude of the impact to the results of their business and results of operations.
31
OG&E's Regulatory Matters
Completed regulatory matters affecting current period results are discussed in Note 1413 within "Item 1. Financial Statements."
Summary of OGE Energy Operating Results
Three Months Ended SeptemberJune 30, 20222023 as compared to the Three Months Ended SeptemberJune 30, 2021
OGE Energy's net income was $262.8$88.4 million, or $1.31$0.44 per diluted share, during the three months ended SeptemberJune 30, 20222023 as compared to $252.5$73.1 million, or $1.26$0.36 per diluted share, during the same period in 2021.2022. The increase in net income of $10.3$15.3 million, or $0.05$0.08 per diluted share, is further discussed below.
Six Months Ended June 30, 2023 as compared to the Six Months Ended June 30, 2022
OGE Energy's equitynet income was $126.7 million, or $0.63 per diluted share, during the six months ended June 30, 2023 as compared to $352.6 million, or $1.76 per diluted share, during the same period in earnings2022. The decrease in net income of Enable in 2022, which was driven by the merger of Enable and Energy Transfer closing in December 2021, and higher income tax expense.$225.9 million, or $1.13 per diluted share, is further discussed below.
32
2023 Outlook The following discussion and analysis presents factors that affected the Registrants' results of operations for the three and Three Months Ended Six Months Ended OGE Energy June 30, June 30, (In millions, except per share data) 2023 2022 2023 2022 Net income $ 88.4 $ 73.1 $ 126.7 $ 352.6 Basic average common shares outstanding 200.3 200.2 200.3 200.2 Diluted average common shares outstanding 200.8 200.7 200.8 200.6 Basic earnings per average common share $ 0.44 $ 0.37 $ 0.63 $ 1.76 Diluted earnings per average common share $ 0.44 $ 0.36 $ 0.63 $ 1.76 Dividends declared per common share $ 0.4141 $ 0.4100 $ 0.8282 $ 0.8200 Results by Business SegmentOG&EOGE Energy's 2023 earnings guidance is reaffirmed and is projected to earn approximately $417.0be between $387 million to $425.0$416 million, or $2.08$1.93 to $2.12$2.07 per average diluted share, with a midpoint of $421.0$402 million, or $2.10$2.00 per average diluted share. OG&E is projected to earn approximately $400 million to $421 million, or $1.99 to $2.09 per average diluted share, in 2022.with a midpoint of $411 million, or $2.04 per average diluted share. A loss of $5 million to $13 million, or $0.02 to $0.06 per average diluted share, is projected for other operations (primarily the holding company) with a midpoint of a loss of $9 million, or $0.04 per average diluted share. The guidance assumes, among other things, approximately 201 million average diluted shares outstanding and normal weather for the year. OG&E has significant seasonality in its earnings due to weather on a year over year basis. As indicated inSee OGE Energy's 2022 Form 10-K for other key factors and assumptions underlying its 2023 guidance., OGE Energy did not issue guidance for its natural gas midstream operations segment and therefore did not issue 2022 consolidated earnings guidance. OGE Energy expects a loss of $2.0 million to $6.0 million, or $0.01 to $0.03 per average diluted share, at the holding company in 2022.37ninesix months ended SeptemberJune 30, 20222023 as compared to the same periods in 20212022 and the Registrants' financial position at SeptemberJune 30, 2022.2023. Due to seasonal fluctuations and other factors, the Registrants' operating results for the three and ninesix months ended SeptemberJune 30, 20222023 are not necessarily indicative of the results that may be expected for the year ending December 31, 20222023 or for any future period. The following information should be read in conjunction with the condensed financial statements and notes thereto. Known trends and contingencies of a material nature are discussed to the extent considered relevant.Three Months Ended Nine Months Ended OGE Energy September 30, September 30, (In millions, except per share data) 2022 2021 2022 2021 Net income $ 262.8 $ 252.5 $ 615.4 $ 418.1 Basic average common shares outstanding 200.2 200.2 200.2 200.1 Diluted average common shares outstanding 200.9 200.4 200.7 200.3 Basic earnings per average common share $ 1.31 $ 1.26 $ 3.07 $ 2.09 Diluted earnings per average common share $ 1.31 $ 1.26 $ 3.07 $ 2.09 Dividends declared per common share $ 0.41410 $ 0.41000 $ 1.23410 $ 1.21500 Three Months Ended Nine Months Ended September 30, September 30, (In millions) 2022 2021 2022 2021 Net income (loss): OG&E (Electric Utility) $ 253.1 $ 223.8 $ 392.8 $ 320.1 OGE Holdings (Natural Gas Midstream Operations) 16.1 30.8 227.3 100.9 Other operations (A) (6.4) (2.1) (4.7) (2.9) OGE Energy net income $ 262.8 $ 252.5 $ 615.4 $ 418.1
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(In millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
OG&E (Electric Company) |
| $ | 91.9 |
|
| $ | 100.7 |
|
| $ | 131.7 |
|
| $ | 139.7 |
|
Other operations (A) |
|
| (3.5 | ) |
|
| (8.7 | ) |
|
| (5.0 | ) |
|
| 1.7 |
|
OGE Holdings (Natural Gas Midstream Operations) (B) |
|
| — |
|
|
| (18.9 | ) |
|
| — |
|
|
| 211.2 |
|
OGE Energy net income |
| $ | 88.4 |
|
| $ | 73.1 |
|
| $ | 126.7 |
|
| $ | 352.6 |
|
The following discussion of results of operations by business segment includes intercompany transactions that are eliminated in OGE Energy's condensed consolidated financial statements.
33
OG&E (Electric Utility)Company)Three Months Ended Nine Months Ended September 30, September 30, (Dollars in millions) 2022 2021 2022 2021 Operating revenues $ 1,270.8 $ 864.4 $ 2,663.8 $ 3,072.4 Fuel, purchased power and direct transmission expense 673.8 330.1 1,322.8 1,876.9 Other operation and maintenance 121.5 115.8 355.3 344.4 Depreciation and amortization 122.4 108.6 341.4 310.2 Taxes other than income 24.5 24.6 74.6 75.3 Operating income 328.6 285.3 569.7 465.6 Allowance for equity funds used during construction 2.4 1.9 4.6 4.8 Other net periodic benefit income (expense) 2.2 (1.1) (1.0) (3.2) Other income 2.1 2.4 4.3 5.2 Other expense 1.1 0.3 1.9 1.0 Interest expense 40.2 38.0 118.2 114.3 Income tax expense 40.9 26.4 64.7 37.0 Net income $ 253.1 $ 223.8 $ 392.8 $ 320.1 Operating revenues by classification: Residential $ 523.1 $ 374.0 $ 1,049.4 $ 1,131.5 Commercial 311.6 207.7 640.8 629.6 Industrial 110.9 81.1 252.1 267.5 Oilfield 102.2 68.7 235.1 259.6 Public authorities and street light 111.6 76.5 233.6 238.6 System sales revenues 1,159.4 808.0 2,411.0 2,526.8 Provision for tax refund 0.9 — (1.8) — Integrated market 69.8 17.2 135.6 447.6 Transmission 36.9 30.8 105.6 103.8 Other 3.8 8.4 13.4 (5.8) Total operating revenues $ 1,270.8 $ 864.4 $ 2,663.8 $ 3,072.4 Residential 3.4 3.2 8.2 7.7 Commercial 2.4 2.0 5.9 5.2 Industrial 1.1 1.2 3.3 3.2 Oilfield 1.1 1.1 3.3 3.1 Public authorities and street light 1.0 0.9 2.4 2.3 System sales 9.0 8.4 23.1 21.5 Integrated market 0.4 0.5 0.9 1.2 Total sales 9.4 8.9 24.0 22.7 Number of customers 886,915 876,739 886,915 876,739 Natural gas (A) 7.528 4.160 7.249 12.902 Coal 3.544 1.974 3.209 1.901 Total fuel (A) 6.150 3.094 5.569 7.652 Total fuel and purchased power (A) 6.834 3.541 5.254 7.824 Degree days (B) Heating - Actual — — 2,220 2,357 Heating - Normal 19 19 2,155 2,039 Cooling - Actual 1,566 1,337 2,305 1,803 Cooling - Normal 1,268 1,268 1,831 1,850
|
| Three Months Ended |
|
| Six Months Ended |
| ||||||||||
|
| June 30, |
|
| June 30, |
| ||||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Operating revenues |
| $ | 605.0 |
|
| $ | 803.7 |
|
| $ | 1,162.2 |
|
| $ | 1,393.0 |
|
Fuel, purchased power and direct transmission expense |
|
| 181.8 |
|
|
| 393.3 |
|
|
| 382.4 |
|
|
| 649.0 |
|
Other operation and maintenance |
|
| 128.6 |
|
|
| 118.3 |
|
|
| 260.1 |
|
|
| 233.8 |
|
Depreciation and amortization |
|
| 124.1 |
|
|
| 111.6 |
|
|
| 245.3 |
|
|
| 219.0 |
|
Taxes other than income |
|
| 23.5 |
|
|
| 23.3 |
|
|
| 50.6 |
|
|
| 50.1 |
|
Operating income |
|
| 147.0 |
|
|
| 157.2 |
|
|
| 223.8 |
|
|
| 241.1 |
|
Allowance for equity funds used during construction |
|
| 5.1 |
|
|
| 0.9 |
|
|
| 9.6 |
|
|
| 2.2 |
|
Other net periodic benefit income (expense) |
|
| 1.6 |
|
|
| (1.8 | ) |
|
| 3.2 |
|
|
| (3.2 | ) |
Other income |
|
| 8.3 |
|
|
| 1.0 |
|
|
| 18.4 |
|
|
| 2.2 |
|
Other expense |
|
| 1.8 |
|
|
| 0.4 |
|
|
| 2.7 |
|
|
| 0.8 |
|
Interest expense |
|
| 52.1 |
|
|
| 39.8 |
|
|
| 97.8 |
|
|
| 78.0 |
|
Income tax expense |
|
| 16.2 |
|
|
| 16.4 |
|
|
| 22.8 |
|
|
| 23.8 |
|
Net income |
| $ | 91.9 |
|
| $ | 100.7 |
|
| $ | 131.7 |
|
| $ | 139.7 |
|
Operating revenues by classification: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Residential |
| $ | 223.1 |
|
| $ | 294.6 |
|
| $ | 434.8 |
|
| $ | 526.3 |
|
Commercial |
|
| 161.0 |
|
|
| 197.7 |
|
|
| 299.4 |
|
|
| 329.2 |
|
Industrial |
|
| 53.1 |
|
|
| 82.5 |
|
|
| 106.0 |
|
|
| 141.2 |
|
Oilfield |
|
| 47.2 |
|
|
| 79.5 |
|
|
| 94.9 |
|
|
| 132.9 |
|
Public authorities and street light |
|
| 54.0 |
|
|
| 72.6 |
|
|
| 100.2 |
|
|
| 122.0 |
|
System sales revenues |
|
| 538.4 |
|
|
| 726.9 |
|
|
| 1,035.3 |
|
|
| 1,251.6 |
|
Provision for tax refund |
|
| 0.6 |
|
|
| (2.1 | ) |
|
| 2.0 |
|
|
| (2.7 | ) |
Integrated market |
|
| 18.8 |
|
|
| 43.0 |
|
|
| 31.5 |
|
|
| 65.8 |
|
Transmission |
|
| 36.1 |
|
|
| 32.9 |
|
|
| 71.3 |
|
|
| 68.7 |
|
Other |
|
| 11.1 |
|
|
| 3.0 |
|
|
| 22.1 |
|
|
| 9.6 |
|
Total operating revenues |
| $ | 605.0 |
|
| $ | 803.7 |
|
| $ | 1,162.2 |
|
| $ | 1,393.0 |
|
MWh sales by classification (In millions) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Residential |
|
| 2.1 |
|
|
| 2.3 |
|
|
| 4.3 |
|
|
| 4.8 |
|
Commercial |
|
| 2.1 |
|
|
| 1.9 |
|
|
| 4.0 |
|
|
| 3.5 |
|
Industrial |
|
| 1.0 |
|
|
| 1.2 |
|
|
| 2.0 |
|
|
| 2.2 |
|
Oilfield |
|
| 1.1 |
|
|
| 1.2 |
|
|
| 2.2 |
|
|
| 2.2 |
|
Public authorities and street light |
|
| 0.7 |
|
|
| 0.7 |
|
|
| 1.4 |
|
|
| 1.4 |
|
System sales |
|
| 7.0 |
|
|
| 7.3 |
|
|
| 13.9 |
|
|
| 14.1 |
|
Integrated market |
|
| 0.3 |
|
|
| 0.2 |
|
|
| 0.4 |
|
|
| 0.5 |
|
Total sales |
|
| 7.3 |
|
|
| 7.5 |
|
|
| 14.3 |
|
|
| 14.6 |
|
Number of customers |
|
| 891,755 |
|
|
| 884,397 |
|
|
| 891,755 |
|
|
| 884,397 |
|
Weighted-average cost of energy per kilowatt-hour (In cents) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Natural gas |
|
| 2.619 |
|
|
| 7.613 |
|
|
| 3.187 |
|
|
| 6.928 |
|
Coal |
|
| 3.500 |
|
|
| 3.302 |
|
|
| 3.450 |
|
|
| 2.968 |
|
Total fuel |
|
| 2.663 |
|
|
| 5.821 |
|
|
| 3.082 |
|
|
| 5.008 |
|
Total fuel and purchased power |
|
| 2.360 |
|
|
| 4.995 |
|
|
| 2.536 |
|
|
| 4.237 |
|
Degree days (A) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Heating - Actual |
|
| 234 |
|
|
| 210 |
|
|
| 1,926 |
|
|
| 2,220 |
|
Heating - Normal |
|
| 249 |
|
|
| 249 |
|
|
| 2,136 |
|
|
| 2,136 |
|
Cooling - Actual |
|
| 571 |
|
|
| 736 |
|
|
| 577 |
|
|
| 739 |
|
Cooling - Normal |
|
| 553 |
|
|
| 553 |
|
|
| 563 |
|
|
| 563 |
|
34
OG&E's net income increased $29.3decreased $8.8 million, or 13.18.7 percent, and $72.7$8.0 million, or 22.75.7 percent, during the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, as compared to the same periods in 2021.2022. The following section discusses the primary drivers for the increasesdecreases in net income during the three and ninesix months ended SeptemberJune 30, 2022,2023, as compared to the same periods in 2021.
Operating revenues increased $406.4decreased $198.7 million, or 47.024.7 percent, and decreased $408.6$230.8 million, or 13.316.6 percent, during the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, primarily driven by the below factors.
$ Change | ||||||||
(In millions) | Three Months Ended | Nine Months Ended | ||||||
Fuel, purchased power and direct transmission expense (A) | $ | 343.7 | $ | (554.1) | ||||
Price variance (B) | 26.1 | 59.3 | ||||||
Quantity impacts (includes weather) (C) | 24.8 | 45.9 | ||||||
New customer growth | 5.7 | 10.3 | ||||||
Wholesale transmission revenue (D) | 5.4 | 0.4 | ||||||
Non-residential demand and related revenues | 3.7 | 6.1 | ||||||
Industrial and oilfield sales | 1.7 | 4.5 | ||||||
Other | 1.4 | 3.8 | ||||||
Guaranteed Flat Bill Program (E) | (6.1) | 15.2 | ||||||
Change in operating revenues | $ | 406.4 | $ | (408.6) |
|
| $ Change |
| |||||
(In millions) |
| Three Months Ended |
|
| Six Months Ended |
| ||
Fuel, purchased power and direct transmission expense (A) |
| $ | (211.5 | ) |
| $ | (266.6 | ) |
Quantity impacts (includes weather) (B) |
|
| (7.5 | ) |
|
| (9.6 | ) |
Industrial and oilfield sales |
|
| (0.1 | ) |
|
| 0.4 |
|
Other |
|
| 0.6 |
|
|
| (0.4 | ) |
Non-residential demand and related revenues |
|
| 0.8 |
|
|
| 3.8 |
|
New customer growth |
|
| 1.9 |
|
|
| 4.7 |
|
Wholesale transmission revenue |
|
| 3.3 |
|
|
| 2.5 |
|
Price variance (C) |
|
| 6.1 |
|
|
| 21.4 |
|
Guaranteed Flat Bill program (D) |
|
| 7.7 |
|
|
| 13.0 |
|
Change in operating revenues |
| $ | (198.7 | ) |
| $ | (230.8 | ) |
Fuel, purchased power and direct transmission expense for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. As described above, the actual cost of fuel used in electric generation and certain purchased power costs are generally recoverable from OG&E's customers through fuel adjustment clauses. The fuel adjustment clauses are subject to periodic review by the OCC and the APSC. OG&E's fuel, purchased power and direct transmission expense increased $343.7 million and decreased $554.1$211.5 million, or 29.553.8 percent, and $266.6 million, or 41.1 percent, during the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, primarily driven by the below factors.
$ Change | % Change | ||||||||||||||||
(In millions) | Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||
Fuel expense (A) | $ | 142.9 | $ | (385.4) | 76.3 | % | (38.8) | % | |||||||||
Purchased power costs: | |||||||||||||||||
Purchases from SPP (B) | 198.1 | (173.0) | * | (22.3) | % | ||||||||||||
Wind | 0.1 | 4.7 | 0.8 | % | 11.9 | % | |||||||||||
Other | 2.5 | (0.3) | 48.0 | % | (3.0) | % | |||||||||||
Transmission expense | 0.1 | (0.1) | 0.7 | % | (0.1) | % | |||||||||||
Change in fuel, purchased power and direct transmission expense | $ | 343.7 | $ | (554.1) |
| $ Change |
| ||||
(In millions) | Three Months Ended |
| Six Months Ended |
| ||
Fuel expense (A) | $ | (68.0 | ) | $ | (110.2 | ) |
Purchased power costs: |
|
|
|
| ||
Purchases from SPP (B) |
| (136.1 | ) |
| (147.1 | ) |
Wind |
| (7.3 | ) |
| (6.7 | ) |
Other |
| 3.2 |
|
| 3.2 |
|
Transmission expense |
| (3.3 | ) |
| (5.8 | ) |
Change in fuel, purchased power and direct transmission expense | $ | (211.5 | ) | $ | (266.6 | ) |
35
Other operation and maintenance expense increased $5.7$10.3 million, or 4.98.7 percent, and $10.9$26.3 million, or 3.211.2 percent, during the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, primarily driven by the below factors.
$ Change | % Change | ||||||||||||||||
(In millions) | Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | |||||||||||||
Payroll and benefits | $ | 10.4 | $ | 19.2 | 16.4 | % | 10.3 | % | |||||||||
Other | 1.1 | 3.7 | 1.5 | % | 1.7 | % | |||||||||||
Fleet transportation | 1.0 | 2.9 | 41.6 | % | 50.0 | % | |||||||||||
Materials and supplies | 0.9 | 2.8 | 12.5 | % | 13.9 | % | |||||||||||
Capitalized labor | (7.7) | (17.7) | 24.3 | % | 19.0 | % | |||||||||||
Change in other operation and maintenance expense | $ | 5.7 | $ | 10.9 |
| $ Change |
| |||||
(In millions) | Three Months Ended |
|
| Six Months Ended |
| ||
Payroll and benefits, net of capitalized labor | $ | 4.0 |
|
| $ | 6.1 |
|
Contract technical and construction services |
| 3.4 |
|
|
| 5.7 |
|
Corporate overheads and allocations |
| 2.8 |
|
|
| 7.7 |
|
Other |
| 2.5 |
|
|
| 2.9 |
|
Vegetation management |
| (2.4 | ) |
|
| 3.9 |
|
Change in other operation and maintenance expense | $ | 10.3 |
|
| $ | 26.3 |
|
Depreciation and amortization expense increased $13.8$12.5 million, or 12.711.2 percent, and $31.2$26.3 million, or 10.112.0 percent, during the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, primarily due to an increase in depreciation rates effective as of July 1, 2022 resulting from the most recent Oklahoma general rate review order received in September 2022,and additional assets being placed into serviceservice.
Net other income increased $13.5 million and $28.1 million during the three and six months ended June 30, 2023, respectively, primarily due to the carrying charge for the increased amortization of the regulatory asset related to storms.
Interest expense increased $14.5$12.3 million, or 54.930.9 percent, and $27.7$19.8 million, or 74.925.4 percent, during the three and ninesix months ended SeptemberJune 30, 2022,2023, respectively, primarily due to interest on long-term debt driven by the $450.0 million and $350.0 million senior notes issuance in January 2023 and in April 2023, respectively.
Income tax expense decreased $0.2 million, or 1.2 percent, and $1.0 million, or 4.2 percent, during the three and six months ended June 30, 2023, respectively, reflecting additionallower income taxestax expense primarily related to higher pre-taxlower pretax income and decreased federal and state tax credit generation, partially offset byadditional amortization of unfunded deferred taxes.
OGE Holdings (Natural Gas Midstream Operations)
OGE Energy's former natural gas midstream operations reporting segment included its equity method investment in Enable, and subsequent to December 2, 2021, this segment includes OGE Energy's investment in Energy Transfer's equity securities and legacy Enable seconded employee pension and postretirement costs. Therefore, resultsAs of operations for the end of September 2022, OGE Energy had sold all of its Energy Transfer limited partner units; therefore, beginning in 2023, OGE Energy no longer has a natural gas midstream operations segment are not comparable for the three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021.reporting segment. See "Investment in Equity Securities of Energy Transfer" in Note 1 within "Item 1. Financial Statements" for further discussion of the net proceeds from salesactivity of
for further discussion of the primary drivers for Enable's operating results for the three and nine months ended September 30, 2021.
36
Liquidity and Capital Resources
Cash Flows
OGE Energy
Nine Months Ended | ||||||||||||||
September 30, | 2022 vs. 2021 | |||||||||||||
(Dollars in millions) | 2022 | 2021 | $ Change | % Change | ||||||||||
Net cash provided from (used in) operating activities (A) | $ | 767.8 | $ | (494.1) | $ | 1,261.9 | * | |||||||
Net cash provided from (used in) investing activities (B) | $ | 372.9 | $ | (546.9) | $ | 919.8 | * | |||||||
Net cash (used in) provided from financing activities (C) | $ | (684.5) | $ | 1,041.4 | $ | (1,725.9) | * |
|
| Six Months Ended |
|
|
|
|
|
| ||||||
|
| June 30, |
|
| 2023 vs. 2022 | |||||||||
(Dollars in millions) |
| 2023 |
|
| 2022 |
|
| $ Change |
|
| % Change | |||
Net cash provided from operating activities (A) |
| $ | 456.9 |
|
| $ | 8.1 |
|
| $ | 448.8 |
|
| * |
Net cash (used in) provided from investing activities (B) |
| $ | (582.7 | ) |
| $ | 173.7 |
|
| $ | (756.4 | ) |
| * |
Net cash provided from (used in) financing activities (C) |
| $ | 38.0 |
|
| $ | (176.9 | ) |
| $ | 214.9 |
|
| * |
* Change is greater than 100 percent.
Working capital is defined as the difference in current assets and current liabilities. OGE Energy's working capital requirements are driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to and the timing of collections from OG&E's customers, the level and timing of spending for maintenance and expansion activity, inventory levels and fuel recoveries. The following discussion addresses changes in OGE Energy's working capital balances at SeptemberJune 30, 20222023 compared to December 31, 2021.
Cash and Cash Equivalents increased $456.2decreased $87.8 million, or 99.7 percent, primarily due to proceeds received from OGE Energy's salesthe use of Energy Transfer limited partner units and OG&E's receipt of securitization funds fromcash to help fund the ODFA, which OGE Energy intends to utilize for repayment of the$1.0 billion in senior notes duethat matured in May 2023.
Accounts Receivable and Accrued Unbilled Revenues increased $174.9$32.0 million, or 76.99.9 percent, primarily due to an increase in billings to OG&E's retail customers reflecting higher seasonal usage in September 2022June 2023 as compared to December 2021.
Fuel Clause Under Recoveries increased $355.3decreased $316.6 million, or 61.5 percent, primarily due to lowerhigher recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power. In October 2022, OG&Epower driven by updated fuel factors implemented updated fuel
Other Current Assets increased $30.8decreased $47.8 million, or 42.046.2 percent, primarily due to an increase in SPP deposits, partially offset by a decrease in under recovered riders.
Short-Term Debt decreased $486.9increased $418.1 million, primarily due to increased borrowings to help fund the repayment of short-term borrowings used forthe senior notes that matured in May 2023 coupled with general operating needs. OGE Energy borrowsThe Registrants borrow on a short-term basis, as necessary, bythrough the issuance of commercial paper and borrowings under itstheir revolving credit agreements and term credit agreements.
Accounts Payable decreased $111.2 million, or 24.8 percent, primarily due to increased tax accruals resulting from the gain on saletiming of Energy Transfer limited partner units during 2022 coupled with thevendor payments and a decrease in fuel and purchased power payables.
Accrued Taxes decreased $6.4 million, or 11.9 percent, primarily due to payments made for state income taxes and timing of ad valorem tax payments.
Accrued CompensationInterest increased $6.3$16.2 million, or 16.739.4 percent, primarily due to increased labor accrualsOG&E's $450.0 million and $350.0 million senior note issuances in January 2023 and April 2023, respectively, as a resultwell as the timing of pay period timing differences.
37
Long-Term Debt Due Withindue within One Year increaseddecreased $999.9 million, primarily due to the reclassificationrepayment of long-term debtthe $1.0 billion senior notes that will maturematured in May 2023.
OGE Energy's primary, material cash requirements are related to acquiring or constructing new facilities and replacing or expanding existing facilities at OG&E. Other working capital requirements are expected to be primarily related to maturing debt, operating lease obligations, fuel clause under and over recoveries and other general corporate purposes. Further, working capital requirements can be seasonal. OGE Energy generally meets its cash needs through a combination of cash generated from operations, short-term borrowings (through a combination of bank borrowings and commercial paper) and permanent financings.
Capital Expenditures
OGE Energy's estimates of capital expenditures for the years 20222023 through 20262027 are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 20212022 Form 10-K, and OGE Energy's current estimates have not changed significantly at this time.are trending higher than those outlined in the 2023 forecast. The capital investments are customer-focused and targeted to maintain and improve the safety, resiliency and reliability of OG&E's distribution and transmission grid and generation fleet, enhance the ability of OG&E's system to perform during extreme weather events and to serve OG&E's growing customer base. Additional capital expenditures beyond those identified in the Registrants' 20212022 Form 10-K, including additional incremental growth opportunities, will be evaluated based upon the requirements of OG&E's power supply, transmission and distribution operational teams and the expected resultant customer benefits. OGE Energy is evaluating infrastructureThe investments incremental to the amounts identified in the Registrants' 20212022 Form 10-K do not include amounts related to new generation capacity needs as outlined in OG&E's October 2021 IRP and recent changes to the SPP's planning reserve margin and resource capacity accreditation. As discussed in Note 13 within "Item 1. Financial Statements", OG&E has filed applications with the OCC and APSC for approval of its plan to construct 448 megawatts of hydrogen-capable combustion turbines at its existing Horseshoe Lake generating facility. OG&E intends to file for approval of the remaining generation capacity investments and would expect to update its capital plan based on final orders received by state regulators. The annual level of investments in the transmission and distribution system could also vary depending on the amount and timing of incremental generation capacity investments. Supply chain disruption may increase the risk of delays in construction activities and equipment deliveries related to OGE Energy's capital projects.
Financing Activities and Future Sources of Financing
Management expects that cash generated from operations, proceeds from the issuance of long- and short-term debt, proceeds from the sales of common stock to the public through OGE Energy's Automatic Dividend Reinvestment and Stock Purchase Plan or other offerings will be adequate over the short-term and the long-term to meet anticipated cash needs and to fund future growth opportunities. OGE Energy utilizes short-term borrowings (through a combination of bank borrowings and commercial paper) to satisfy temporary working capital needs and as an interim source of financing capital expenditures until permanent financing is arranged.
OGE Energy borrows on a short-term basis, as necessary, by issuance of commercial paper and borrowings under its revolving credit agreements and term credit agreements maturing in one year or less.
OGE Energy has unsecured five-year revolving credit facilities totaling $1.1 billion ($550.0 million for OGE Energy and $550.0 million for OG&E), which can also be used as letter of credit facilities. As further discussed below, in May 2022, OGE Energy entered intoalso has a $100.0 million floating rate unsecured three-year credit agreement, of which $50.0 million is considered a revolving loan. The following table presents information about OGE Energy's revolving credit agreements at SeptemberJune 30, 2022.
2023.
38
| ||||||||||||||||||||||||||||||||||||||
(Dollars in millions) | Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | ||||||
Average balance of short-term debt | $ | 103.8 | $ | 450.9 | ||||
Weighted-average interest rate of average balance of short-term debt | 2.06 | % | 0.97 | % | ||||
Maximum month-end balance of short-term debt | $ | — | $ | 731.5 |
(Dollars in millions) |
| Three Months Ended June 30, 2023 |
|
| Six Months Ended June 30, 2023 |
| ||
Average balance of short-term debt |
| $ | 232.9 |
|
| $ | 117.1 |
|
Weighted-average interest rate of average balance of short-term debt |
|
| 5.45 | % |
|
| 5.45 | % |
Maximum month-end balance of short-term debt |
| $ | 459.1 |
|
| $ | 459.1 |
|
OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur up to $800.0 million$1.0 billion in short-term borrowings at any one time for the two-year period ending December 31, 2022. OG&E has requested approval from the FERC to incur up to $1.0 billion for thea two-year period beginning January 1, 2023 and ending December 31, 20242024.
Long-Term Debt
In January 2023, OG&E issued $450.0 million of 5.40 percent Senior Notes due January 15, 2033, and expectsin April 2023, OG&E issued $350.0 million of 5.60 percent Senior Notes due April 1, 2053. The proceeds from these issuances were added to receive approval priorOG&E's general funds to the expiration of its current authority.
Security Ratings
Access to reasonably priced capital is dependent in part on credit and security ratings. Generally, lower ratings lead to higher financing costs. Pricing grids associated with OGE Energy's credit facilities could cause annual fees and borrowing rates to increase if an adverse rating impact occurs. The impact of any future downgrade could include an increase in the costs of
The condensed financial statements and notes thereto contain information that is pertinent to Management's Discussion and Analysis. In preparing the condensed financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Changes to these assumptions and estimates could have a material effect on the condensed financial statements. The Registrants believe they have taken reasonable positions where assumptions and estimates are used in order to minimize the negative financial impact to the Registrants that could result if actual results vary from the assumptions and estimates.
In management's opinion, the areas where the most significant judgment is exercised for the Registrants include the determination of Pension Planpension and postretirement plan assumptions, income taxes, contingency reserves, asset retirement obligations, regulatory assets and liabilities, unbilled revenues and the allowance for uncollectible accounts receivable. The selection, application and disclosure of the critical accounting estimates have been discussed with the Audit Committee of OGE Energy's Board of Directors and are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 20212022 Form 10-K.
Commitments and Contingencies
In the normal course of business, the Registrants are 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 experts to assess the claim. If, in management's opinion, the Registrants have 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 condensed
39
financial statements. If the assessment indicates that a potential loss is not probable but reasonably possible, the nature of the contingent matter, together with an estimate of the range of possible loss if determinable and material, would be disclosed.At the present time, based on available information, except as disclosed in Note 12 within "Item 1. Financial Statements," the Registrants believe 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 their condensed financial statements and would not have a material adverse effect on their financial position, results of operations or cash flows. See Notes 1312 and 1413 within "Item 1. Financial Statements" for further discussion of the Registrants' commitments and contingencies.
The activities of OG&E are subject to numerous stringent and complex federal, state and local laws and regulations governing environmental protection. These laws and regulations can change, restrict or otherwise impact OG&E'sthe Registrants' business activities in many ways, including the handling or disposal of waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Management believes that all of the Registrants'OG&E's operations are in substantial compliance with current federal, state and local environmental standards.
President Biden's Administration has taken a number of actions that adopt policies and affect environmental regulations, including issuance of executive orders that instruct the EPA and other executive agencies to review certain rules that affect OG&E with a view to achieving nationwide reductions in greenhouse gas emissions. OG&E isThe Registrants are monitoring these actions which are in various stages of being implemented. At this point in time, the impacts of these actions on the Registrants' results of operations, if any, cannot be determined with any certainty.
Environmental regulation can increase the cost of planning, design, initial installation and operation of OG&E's facilities. Management continues to evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a competitive market.
Air
OG&E's operations are subject to the Federal Clean Air Act of 1970, as amended, and comparable state laws and regulations. These laws and regulations regulate emissions of air pollutants from various industrial sources, including electric generating units and also impose various monitoring and reporting requirements. Such laws and regulations may require that OG&E obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in the increase of existing air emissions, obtain and strictly comply with air permits containing various emissions and operational limitations or install emission control equipment. OG&E likely will be required to incur certain capital expenditures in the future for air pollution control equipment and technology in connection with obtaining and maintaining operating permits and approvals for air emissions.
Cross State Air Pollution Rule
The EPA revised the National Ambient Air Quality StandardNAAQS for ozone in 2015. Although Oklahoma complies with the revised standard, the Federal Clean Air Act of 1970, as amended, requires states to submit to the EPA for approval a SIP to prohibit in-state sources from contributing significantly to nonattainment of the National Ambient Air Quality StandardNAAQS in another state. On October 28, 2018, Oklahoma submitted its SIP to the EPA related to these "Good Neighbor" requirements. On January 31, 2023, the EPA disapproved the SIPs of 19 states, including Oklahoma. On March 2, 2023, the Oklahoma Attorney General and the ODEQ jointly filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On March 16, 2023, OG&E filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On June 6, 2023, OG&E, together with the Oklahoma Attorney General, the ODEQ, Tulsa Cement LLC and Western Farmers Electric Cooperative, jointly filed a motion with the Tenth Circuit requesting a stay of the EPA’s disapproval of the Oklahoma SIP. On July 27, 2023, the Tenth Circuit granted a stay of the EPA's disapproval of the Oklahoma SIP. The court indicated that the stay will remain in place until the disposition on the merits of the petition for review or further order of the court.
In response to litigation,a separate but related matter, on April 6, 2022, the EPA also published a proposed federal implementation plan underFIP related to the Cross State Air Pollution Rule"Good Neighbor" requirements intended to reduce interstate NOx emissions contributions. OG&E filed comments to the proposed FIP with the EPA on
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June 21, 2022. On June 5, 2023, the EPA published a final FIP for 23 states, including Oklahoma. The issuance of the FIP resulted from the EPA's aforementioned SIP disapprovals. Among other changes, the EPA finalized a revision of the current Oklahoma NOx emissions contributions. The federal implementation plan, which includes Oklahoma among 24 other states, proposes to limit the current emissions budgets over four yearsbudget for certainelectric generating units, including ten of OG&E's units, beginning in 2023. Under the terms of the FIP, the emissions budget will decline over time based on the level of reductions that the EPA has determined is achievable through particular emissions controls. OG&E’s preliminary analysis indicates that Oklahoma’s state budget for 2026 will be reduced by 34.5 percent from 2023 levels and that for 2027 it will be reduced by 50 percent from 2021 levels. As long as the stay of the EPA's disapproval of the Oklahoma SIP discussed above remains in place, the EPA may not enforce the Good Neighbor FIP.
In light of the issuance of the FIP, OG&E filed commentshas been evaluating various control strategies to reduce emissions at its generating units, which can range from some combination of purchase of emission allowances, installation of selective catalytic reduction controls, conversion of coal-fired units to gas-fired units or retirement and replacement of capacity. Due to the uncertainty relating to the disapproval of the SIP and implementation of the FIP, OG&E cannot determine the cost to comply with certainty, as such costs are dependent upon the timing and outcome of the litigation discussed above, the particular control strategies ultimately selected for each unit, the terms and timing of regulatory approvals required from the OCC and the time period necessary to complete the projects. However, OG&E preliminarily estimates that the cost of compliance with the FIP as issued could be up to approximately $2.7 billion in total, including $100 million to $300 million over the 12 to 18 month period following effectiveness of the FIP. OG&E expects that it would seek recovery of any necessary environmental expenditures to handle state and federally mandated environmental upgrades, but there is no guarantee that all of such expenditures will be approved for recovery or will be approved for recovery on a timely basis.
Particulate Matter NAAQS
On January 27, 2023, the EPA on June 21, 2022published a proposed rule in the Federal Register to reconsider the primary (health-based) and secondary (welfare-based) NAAQS for PM. The EPA is proposing to lower the primary annual PM2.5 to a level ranging from approximately 17 percent to 25 percent below the current standard and is closely monitoring this issue;proposing to retain the other PM NAAQS at their current levels. PM is not a single pollutant but rather is a mixture of chemicals, solids and aerosols composed of small droplets of liquid, dry solid fragments and solid cores with liquid coatings. PM varies widely in size, shape and chemical composition and is defined by diameter for air quality regulatory purposes: PM10 and PM2.5. The EPA expects to issue a final decision on the PM standards in 2024. The EPA will determine which areas of the country meet the standards, such as making initial attainment/nonattainment designations, no later than two years after new standards are issued. States must develop and submit attainment plans no later than 18 months after the EPA finalizes nonattainment designations. This proposed rule could impact regional air quality goals and emission limits for emission sources; however, it is unknown at this time what, if any, potential material impacts to OG&E individual operating permit emission limits will result from the EPA action.actions.
Regional Haze
In July 2020, the ODEQ notified OG&E that the Horseshoe Lake generating units would be included in Oklahoma's second Regional Haze implementation period evaluation of visibility impairment impacts to the Wichita Mountains. OG&E submitted an analysis of all potential control measures for NOxon these units to the ODEQ. The ODEQ submitted a revised SIP to the EPA on August 12, 2022. It is unknown at this time what the outcome, or any potential material impacts, if any, will be from the evaluations by OG&E, the ODEQ and the EPA.
OG&E continues to monitor these processesMercury and their possible impact on its operations. Future rules could adopt additional reductionsAir Toxics Standards
On April 24, 2023, the EPA published in the emissions budgetFederal Register a proposed rule, National Emission Standards for Oklahoma orHazardous Air Pollutants: Coal- and Oil-Fired Electric Utility Steam Generating Units - Review of the areas whereResidual Risk and Technology Review. The proposal contains the results of the EPA’s review of the May 2020 risk and technology review for the Mercury and Air Toxics Standards and proposes changes to certain emission standards and compliance measures. OG&E's facilities are located. In particular, &E participated with trade associations to provide comments to the EPA on June 23, 2023. It is unknown what potential material impacts, if any, will be from the final action by the EPA.
Greenhouse Gas
OG&E monitors possible changes in legal standards for emissions of greenhouse gases, including CO2, sulfur hexafluoride and methane, including thePresident Biden Administration's target of a 50 to 52 percent reduction in economy-wide net greenhouse gas emissions from 2005 levels by 2030 with full decarbonization of the electric power industry fully by 2035.2035 and the September 2022 EPA non-rulemaking docket for public input related to the EPA's efforts to reduce emissions of greenhouse gases from new and existing fossil
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fuel-fired electric generating units under Clean Air Act Section 111. If legislation or
OG&E has reduced carbon dioxide emissions by over 40 percent compared to 2005 levels, and during the same period, emissions of ozone-forming NOx have been reduced by approximately 7080 percent and emissions of SO2 have been reduced by approximately 8590 percent. OG&E expects to further reduce carbon dioxide emissions to 50 percent of 2005 levels by 2030. To comply with the EPA rules, OG&E converted two coal-fired generating units at the Muskogee Station to natural gas, among other measures. OG&E's deployment of Smart Grid technology helpsSmartHours and Load Reduction Program involve active engagement with customers to reduce the amount of generation required to serve peak load demand. OG&E is also deployingplanning to deploy more renewable energy sources that do not emit greenhouse gases.
In October 2021, OG&E issued its most recent IRP to the OCC and APSC that proposes to expand its renewable generation fleet, including the potential development of additional solar resources. OG&E has leveraged its geographic position to develop renewable energy resources and completed transmission investments to deliver the renewable energy. The SPP has authorized the construction of transmission lines capable of bringing renewable energy out of the wind resource areas in western Oklahoma, the Texas Panhandle and western Kansas to load centers by planning for more transmission to be built in the area. In addition to increasing overall system reliability, these new transmission resources should provide greater access to additional wind resources that are currently constrained due to existing transmission delivery limitations.
Endangered Species
Certain federal laws, including the Bald and Golden Eagle Protection Act, the Migratory Bird Treaty Act and the Endangered Species Act, provide special protection to certain designated species. These laws and any state equivalents provide for significant civil and criminal penalties for unpermitted activities that result in harm to or harassment of certain protected animals and plants, including damage to their habitats. If such species are located in an area in which OG&E conducts operations, or if additional species in those areas become subject to protection, OG&E's operations and development projects, particularly transmission, wind or pipeline projects, could be restricted or delayed, or OG&E could be required to implement expensive mitigation measures.
Waste
OG&E's operations generate wastes that are subject to the Federal Resource Conservation and Recovery Act of 1976 as well as comparable state laws which impose detailed requirements for the handling, storage, treatment and disposal of waste.
OG&E has sought and will continue to seek pollution prevention opportunities and to evaluate the effectiveness of its waste reduction, reuse and recycling efforts. OG&E obtains refunds from the recycling of scrap metal, salvaged transformers and used transformer oil. Additional savings are expected to be gained through the reduction and/or avoidance of disposal costs and the reduction in material purchases due to the reuse of existing materials.
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Water
OG&E's operations are subject to the Federal Clean Water Act and comparable state laws and regulations. These laws and regulations impose detailed requirements and strict controls regarding the discharge of pollutants into state and federal waters.
In 2015, the EPA issued a final rule addressing the effluent limitation guidelines for power plants under the Federal Clean Water Act. The final rule establishes technology- and performance-based standards that may apply to discharges of six waste streams including bottom ash transport water. Compliance with this rule will occur by 2023; however, on April 12, 2017, the EPA granted a Petition for Reconsideration of the 2015 Rule. On October 13, 2020, the EPA published a final rule to revise the technology-based effluent limitations for flue gas desulfurization waste water and bottom ash transport water. On August 3, 2021, the EPA published notice in the Federal Register that it will undertake a supplemental rulemaking to revise the effluent limitation guidelines rule after completing its review of the October 2020 rule. The existing effluent limitation guidelines will remain in effect while the EPA undertakes this new rulemaking.rulemaking, with a compliance date of no later than December 31, 2025. On March 29, 2023, the EPA published a proposed rule to revise the effluent limitation guidelines for flue gas desulfurization wastewater, bottom ash transport water and combustion residual leachate. The proposed rule would prohibit any discharge from bottom ash transport water systems and has a compliance date of December 31, 2029. OG&E is evaluating what, if any, compliance actions are needed but is not ableplanning to quantify with any certainty what costs may be incurred. OG&E expects to be able to provide a reasonable estimate of any material costs associatedinstall dry bottom ash handling technology that will comply with the rule's implementation following issuance of the permit requirements from the State of Oklahoma.
Since the purchase of the Redbud facility in 2008, OG&E made investments in the infrastructure that have led to OG&E's average use of approximately 2.5 billion gallons per year of treated municipal effluent for all of the needed cooling water at Redbud and McClain is approximately 2.5 billion gallons per year.McClain. This use of treated municipal effluent offsets the need for fresh water as cooling water, making fresh water available for other beneficial uses like drinking water, irrigation and recreation.
Site Remediation
The Comprehensive Environmental Response, Compensation and Liability Act of 1980 and comparable state laws impose liability, without regard to the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. Because OG&E utilizes various products and generates wastes that are considered hazardous substances for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, OG&E could be subject to liability for the costs of cleaning up and restoring sites where those substances have been released to the environment. At this time, it is not anticipated that any associated liability will cause a significant impact to OG&E.
There have been no significant changes in the market risks affecting the Registrants from those discussed in the Registrants' 20212022 Form 10-K.
Item 4. Controls and Procedures.
The Registrants maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Registrants in reports that they file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the chief executive officer and chief financial officer, allowing timely decisions regarding required disclosure. As of the end of the period covered by this report, based on an evaluation carried out under the supervision and with the participation of the Registrants' management, including the chief executive officer and chief financial officer, of the effectiveness of the Registrants' disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934), the chief executive officer and chief financial officer have concluded that the Registrants' disclosure controls and procedures are effective.
No change in the Registrants' internal control over financial reporting has occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrants' internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Item 3 of Part I of the Registrants' 20212022 Form 10-K for a description of certain legal proceedings presently pending. Except as described in Note 1413 within "Part I - Item 1. Financial Statements," there are no new significant cases to report against the Registrants, and there have been no material changes in the previously reported proceedings.
Item 1A. Risk Factors.
There have been no significant changes in the Registrants' risk factors from those discussed in the Registrants' 20212022 Form 10-K, which are incorporated herein by reference.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 5. Other Information.
During the three months ended June 30, 2023, no director or officer of the Registrants adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits.
| Description | OGE Energy | OG&E | |||||||||
4.01 |
| X | X | |||||||||
31.01+ | X | |||||||||||
31.02+ | X | |||||||||||
32.01+ | X | |||||||||||
32.02+ | X | |||||||||||
99.01+ | X | |||||||||||
101.INS | Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | X | X | |||||||||
101.SCH | Inline XBRL Taxonomy Schema Document. | X | X | |||||||||
101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document. | X | X | |||||||||
101.LAB | Inline XBRL Taxonomy Label Linkbase Document. | X | X | |||||||||
101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document. | X | X | |||||||||
101.DEF | Inline XBRL Definition Linkbase Document. | X | X | |||||||||
104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101). | X | X | |||||||||
+ Represents exhibits filed herewith. All exhibits not so designated are incorporated by reference to a prior filing, as indicated. | ||||||||||||
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized.
OGE ENERGY CORP. | |||||
OKLAHOMA GAS AND ELECTRIC COMPANY | |||||
(Registrant) | |||||
By: | /s/ Sarah R. Stafford | ||||
Sarah R. Stafford | |||||
Controller and Chief Accounting Officer | |||||
(On behalf of the Registrants and in her capacity as Chief Accounting Officer) |
August 8, 2023
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