Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2013 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Summary of Significant Accounting Policies | ' |
Summary of Significant Accounting Policies |
Organization |
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The Company is an energy and energy services provider offering physical delivery and related services for both electricity and natural gas primarily in the south central United States. The Company conducts these activities through two business segments: (i) electric utility and (ii) natural gas midstream operations. For a discussion of the change in the Company’s business segments due to the formation of Enable Midstream Partners, see Note 12. For periods prior to May 1, 2013, the Company consolidated Enogex Holdings in its Condensed Consolidated Financial Statements. All significant intercompany transactions have been eliminated in consolidation. |
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Effective May 1, 2013, OGE Energy, the ArcLight group and CenterPoint Energy, Inc., formed Enable Midstream Partners to own and operate the midstream businesses of OGE Energy and CenterPoint. In the formation transaction, OGE Energy and ArcLight contributed Enogex LLC to Enable Midstream Partners and the Company deconsolidated its previously held investment in Enogex Holdings and acquired an equity interest in Enable Midstream Partners. The Company determined that its contribution of Enogex LLC to Enable Midstream Partners met the requirements of being in substance real estate and was recorded at historical cost. The general partner of Enable Midstream Partners is equally controlled by CenterPoint and OGE Energy, who each have 50 percent of the management rights. Based on the 50/50 management ownership, with neither company having control, effective May 1, 2013, OGE Energy began accounting for its interest in Enable Midstream Partners using the equity method of accounting. |
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The electric utility segment generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas. Its operations are conducted through OG&E and are subject to regulation by the OCC, the APSC and the FERC. OG&E was incorporated in 1902 under the laws of the Oklahoma Territory. OG&E is the largest electric utility in Oklahoma and its franchised service territory includes the Fort Smith, Arkansas area. OG&E sold its retail natural gas business in 1928 and is no longer engaged in the natural gas distribution business. |
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As discussed below, the Company completed a 2-for-1 stock split of the Company's common stock effective July 1, 2013. All share and per share amounts within this Form 10-Q have been retroactively adjusted to reflect the effects of the stock split for all periods presented. |
Basis of Presentation |
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The Condensed Consolidated Financial Statements included herein have been prepared by the Company, 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 Company believes that the disclosures are adequate to prevent the information presented from being misleading. |
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In the opinion of management, all adjustments necessary to fairly present the consolidated financial position of the Company at September 30, 2013 and December 31, 2012, the results of its operations for the three and nine months ended September 30, 2013 and 2012 and the results of its cash flows for the nine months ended September 30, 2013 and 2012, have been included and are of a normal recurring nature except as otherwise disclosed. |
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Due to seasonal fluctuations and other factors, the Company's operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013 or for any future period. The Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in the Company's 2012 Form 10-K. |
Accounting Records |
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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 actual or anticipated 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. |
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OG&E records certain actual or anticipated costs and obligations as regulatory assets or liabilities if it is probable, based on regulatory orders or other available evidence, that the cost or obligation will be included in amounts allowable for recovery or refund in future rates. |
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The following table is a summary of OG&E's regulatory assets and liabilities at: |
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(In millions) | September 30, 2013 | December 31, 2012 | | | | | | | | | | | | | | | | | | | |
Regulatory Assets | | | | | | | | | | | | | | | | | | | | | |
Current | | | | | | | | | | | | | | | | | | | | | |
Oklahoma demand program rider under recovery (A) | $ | 9.5 | | $ | 9.2 | | | | | | | | | | | | | | | | | | | | |
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Crossroads wind farm rider under recovery (A) | 7.2 | | 14.9 | | | | | | | | | | | | | | | | | | | | |
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Other (A) | 6.8 | | 2.9 | | | | | | | | | | | | | | | | | | | | |
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Total Current Regulatory Assets | $ | 23.5 | | $ | 27 | | | | | | | | | | | | | | | | | | | | |
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Non-Current | | | | | | | | | | | | | | | | | | | | | | | |
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Benefit obligations regulatory asset | $ | 350.1 | | $ | 370.6 | | | | | | | | | | | | | | | | | | | | |
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Income taxes recoverable from customers, net | 55.7 | | 54.7 | | | | | | | | | | | | | | | | | | | | |
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Smart Grid | 43.4 | | 42.8 | | | | | | | | | | | | | | | | | | | | |
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Deferred storm expenses | 18.3 | | 12.7 | | | | | | | | | | | | | | | | | | | | |
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Unamortized loss on reacquired debt | 12.1 | | 13 | | | | | | | | | | | | | | | | | | | | |
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Deferred pension expenses | 1.9 | | 4.5 | | | | | | | | | | | | | | | | | | | | |
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Other | 14.7 | | 12.3 | | | | | | | | | | | | | | | | | | | | |
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Total Non-Current Regulatory Assets | $ | 496.2 | | $ | 510.6 | | | | | | | | | | | | | | | | | | | | |
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Regulatory Liabilities | | | | | | | | | | | | | | | | | | | | | | | |
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Current | | | | | | | | | | | | | | | | | | | | | | | |
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Fuel clause over recoveries | $ | 12 | | $ | 109.2 | | | | | | | | | | | | | | | | | | | | |
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Smart Grid rider over recovery (B) | 19.1 | | 24.1 | | | | | | | | | | | | | | | | | | | | |
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Other (B) | 2.6 | | 7.8 | | | | | | | | | | | | | | | | | | | | |
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Total Current Regulatory Liabilities | $ | 33.7 | | $ | 141.1 | | | | | | | | | | | | | | | | | | | | |
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Non-Current | | | | | | | | | | | | | | | | | | | | | | | |
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Accrued removal obligations, net | $ | 219.2 | | $ | 218.2 | | | | | | | | | | | | | | | | | | | | |
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Pension tracker | 14.2 | | 9.2 | | | | | | | | | | | | | | | | | | | | |
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Deferred pension credits | 9.3 | | 17.7 | | | | | | | | | | | | | | | | | | | | |
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Total Non-Current Regulatory Liabilities | $ | 242.7 | | $ | 245.1 | | | | | | | | | | | | | | | | | | | | |
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(A) | Included in Other Current Assets on the Condensed Consolidated Balance Sheets. | | | | | | | | | | | | | | | | | | | | | | | | |
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(B) | Included in Other Current Liabilities on the Condensed Consolidated Balance Sheets. | | | | | | | | | | | | | | | | | | | | | | | | |
Management continuously monitors the future recoverability of regulatory assets. When in management's judgment future recovery becomes impaired, the amount of the regulatory asset is adjusted, as appropriate. If OG&E were required to discontinue the application of accounting principles for certain types of rate-regulated activities for some or all of its operations, it could result in writing off the related regulatory assets, which could have significant financial effects. |
Use of Estimates |
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In preparing the Condensed Consolidated 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 Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Changes to these assumptions and estimates could have a material effect on the Company's Condensed Consolidated Financial Statements. However, the Company believes it has taken reasonable, but conservative, positions where assumptions and estimates are used in order to minimize the negative financial impact to the Company that could result if actual results vary from the assumptions and estimates. In management's opinion, the areas of the Company where the most significant judgment is exercised for all Company segments includes the determination of Pension Plan assumptions, impairment estimates of long-lived assets (including intangible assets), income taxes, contingency reserves, asset retirement obligations and the allowance for uncollectible accounts receivable. For the electric utility segment, the most significant judgment is also exercised in the valuation of regulatory assets and liabilities and unbilled revenues. For the natural gas midstream operations segment, the most significant judgment is also exercised in the valuation of operating revenues, natural gas purchases, purchase and sale contracts, assets and depreciable lives of property, plant and equipment, amortization methodologies related to intangible assets and impairment assessments of goodwill and equity method investments. |
Investment in Unconsolidated Affiliate |
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OGE Energy's investment in Enable Midstream Partners is considered to be a variable interest entity because the owners of the equity at risk in this entity have disproportionate voting rights in relation to their obligations to absorb the entity's expected losses or to receive its expected residual returns. However, OGE Energy is not considered the primary beneficiary of Enable Midstream Partners since it does not have the power to direct the activities of Enable Midstream Partners that are considered most significant to the economic performance of Enable Midstream Partners. As discussed above, OGE Energy accounts for the investment in Enable Midstream Partners using the equity method of accounting. Under the equity method, the investment will be adjusted each period for contributions made, distributions received and the Company's share of the investee's comprehensive income. OGE Energy's maximum exposure to loss related to Enable Midstream Partners is limited to OGE Energy's equity investment in Enable Midstream Partners as presented on the Company's Condensed Consolidated Balance Sheet at September 30, 2013. The Company evaluates its equity method investments for impairment when events or changes in circumstances indicate there is a loss in value of the investment that is other than a temporary decline. |
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The Company considers distributions received from its unconsolidated affiliates which do not exceed cumulative equity in earnings subsequent to the date of investment to be a return on investment which are classified as operating activities in the Condensed Consolidated Statements of Cash Flows. The Company considers distributions received from its unconsolidated affiliates in excess of cumulative equity in earnings subsequent to the date of investment to be a return of investment which are classified as investing activities in the Condensed Consolidated Statements of Cash Flows. |
Asset Retirement Obligation |
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The following table summarizes changes to the Company's asset retirement obligations during the nine months ended September 30, 2013 and 2012. |
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| Nine Months Ended | | | | | | | | | | | | | | | | | | | |
| September 30, | | | | | | | | | | | | | | | | | | | |
(In millions) | 2013 | 2012 | | | | | | | | | | | | | | | | | | | |
Balance at January 1 | $ | 54 | | $ | 24.8 | | | | | | | | | | | | | | | | | | | | |
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Liabilities settled (A) | (0.4 | ) | 0.3 | | | | | | | | | | | | | | | | | | | | |
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Accretion expense | 1.7 | | 1.6 | | | | | | | | | | | | | | | | | | | | |
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Revisions in estimated cash flows (B) | (0.7 | ) | 26.7 | | | | | | | | | | | | | | | | | | | | |
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Balance at September 30 | $ | 54.6 | | $ | 53.4 | | | | | | | | | | | | | | | | | | | | |
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(A) | As a result of the formation of Enable Midstream Partners on May 1, 2013, the Company has no obligations at September 30, 2013 under OGE Holdings' asset retirement obligations previously disclosed in the Company's 2012 10-K. | | | | | | | | | | | | | | | | | | | | | | | | |
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(B) | Due to changes to OG&E's asset retirement obligations related to its wind farms as a result of changes in the assumption related to the timing of removal used in the valuation of the asset retirement obligations. | | | | | | | | | | | | | | | | | | | | | | | | |
Accumulated Other Comprehensive Income (Loss) |
The following table summarizes changes in the components of accumulated other comprehensive loss attributable to OGE Energy during the nine months ended September 30, 2013. All amounts below are presented net of tax and noncontrolling interest. |
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| Pension Plan and Restoration of Retirement Income Plan | | Postretirement Benefit Plans | | | | |
| Net loss | Prior service cost | | Net loss | Prior service cost | Deferred commodity contracts hedging gains | Deferred interest rate swap hedging losses | Less: Noncontrolling interest | Total |
Balance at December 31, 2012 | $ | (49.3 | ) | $ | 0.1 | | | $ | (15.7 | ) | $ | 7.2 | | $ | 0.1 | | $ | (0.5 | ) | $ | (9.0 | ) | $ | (49.1 | ) |
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Amounts reclassified from accumulated other comprehensive income (loss) | 2.8 | | — | | | 1.6 | | (1.4 | ) | 0.2 | | 0.2 | | 0.1 | | 3.3 | |
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Deconsolidation of Enogex Holdings | 2.8 | | — | | | 1 | | (0.3 | ) | (0.7 | ) | — | | 8.9 | | (6.1 | ) |
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Net current period other comprehensive income (loss) | 5.6 | | — | | | 2.6 | | (1.7 | ) | (0.5 | ) | 0.2 | | 9 | | (2.8 | ) |
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Balance at September 30, 2013 | $ | (43.7 | ) | $ | 0.1 | | | $ | (13.1 | ) | $ | 5.5 | | $ | (0.4 | ) | $ | (0.3 | ) | $ | — | | $ | (51.9 | ) |
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The following table summarizes significant amounts reclassified out of accumulated other comprehensive loss by the respective line items in net income during the three and nine months ended September 30, 2013. |
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Details about Accumulated Other Comprehensive Loss Components | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | Affected Line Item in the Statement Where Net Income is Presented | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Nine Months Ended | | | | | | | | | | | | | | | | | | | |
| September 30, 2013 | September 30, 2013 | | | | | | | | | | | | | | | | | | | |
Gains (losses) on cash flow hedges | | | | | | | | | | | | | | | | | | | | | |
Commodity contracts | $ | (0.6 | ) | $ | (0.4 | ) | Cost of goods sold | | | | | | | | | | | | | | | | | | |
Interest rate swap | (0.1 | ) | (0.3 | ) | Interest expense | | | | | | | | | | | | | | | | | | |
| (0.7 | ) | (0.7 | ) | Total before tax | | | | | | | | | | | | | | | | | | |
| (0.3 | ) | (0.3 | ) | Tax benefit | | | | | | | | | | | | | | | | | | |
| $ | (0.4 | ) | $ | (0.4 | ) | Net of tax | | | | | | | | | | | | | | | | | | |
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Amortization of defined benefit pension items | | | | | | | | | | | | | | | | | | | | | |
Actuarial gains (losses) | $ | (1.5 | ) | $ | (4.6 | ) | (A) | | | | | | | | | | | | | | | | | | |
Prior service cost | — | | — | | (A) | | | | | | | | | | | | | | | | | | |
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| (1.5 | ) | (4.6 | ) | Total before tax | | | | | | | | | | | | | | | | | | |
| (0.6 | ) | (1.8 | ) | Tax benefit | | | | | | | | | | | | | | | | | | |
| (0.9 | ) | (2.8 | ) | Net of tax | | | | | | | | | | | | | | | | | | |
| — | | (0.1 | ) | Noncontrolling interest | | | | | | | | | | | | | | | | | | |
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| $ | (0.9 | ) | $ | (2.7 | ) | Net of tax and noncontrolling interest | | | | | | | | | | | | | | | | | | |
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Amortization of postretirement benefit plan items | | | | | | | | | | | | | | | | | | | | | |
Actuarial gains (losses) | $ | (0.9 | ) | $ | (2.5 | ) | (A) | | | | | | | | | | | | | | | | | | |
Prior service cost | 0.8 | | 2.2 | | (A) | | | | | | | | | | | | | | | | | | |
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| (0.1 | ) | (0.3 | ) | Total before tax | | | | | | | | | | | | | | | | | | |
| — | | (0.1 | ) | Tax benefit | | | | | | | | | | | | | | | | | | |
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| $ | (0.1 | ) | $ | (0.2 | ) | Net of tax | | | | | | | | | | | | | | | | | | |
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Total reclassifications for the period | $ | (1.4 | ) | $ | (3.3 | ) | Net of tax and noncontrolling interest | | | | | | | | | | | | | | | | | | |
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(A) | These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (see Note 11 for additional information). | | | | | | | | | | | | | | | | | | | | | | | | |
Forward Stock Split |
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On May 16, 2013, the Company's Board of Directors approved a 2-for-1 forward stock split of the Company's common stock, effective July 1, 2013, which entitled each shareholder of record to receive two shares for every one share of Company stock owned by the shareholder. In connection with the stock split, an amendment to the Company's Articles of Incorporation was approved on May 16, 2013 which increased the number of authorized shares of common stock from 225 million to 450 million. All share and per share amounts within this Form 10-Q have been retroactively adjusted to reflect the effects of the stock split for all periods presented. |
Reclassifications |
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As discussed in Note 12, the former natural gas transportation and storage segment and natural gas gathering and processing segment have been combined into the natural gas midstream operations segment and have been restated for all prior periods presented. Effective May 1, 2013, the Company deconsolidated its previously held investment in Enogex Holdings and acquired an equity interest in Enable Midstream Partners. |