Edgar Filing: OGE ENERGY CORP.

Q3 2013 OGE Energy 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

o 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: 1-12579

OGE ENERGY CORP.

(Exact name of registrant as specified in its charter)



Oklahoma		73-1481638
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

321 North Harvey

P.O. Box 321

Oklahoma City, Oklahoma 73101-0321

(Address of principal executive offices)

(Zip Code)

405-553-3000

(Registrant's telephone number, including area code)

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. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer þ	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

At September 30, 2013, there were 198,453,261 shares of common stock, par value $0.01 per share, outstanding.

OGE ENERGY CORP.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2013

TABLE OF CONTENTS



	Page
GLOSSARY OF TERMS	2
FORWARD-LOOKING STATEMENTS	1

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income	3
Condensed Consolidated Statements of Comprehensive Income	4
Condensed Consolidated Statements of Cash Flows	5
Condensed Consolidated Balance Sheets	6
Condensed Consolidated Statements of Changes in Stockholders' Equity	8
Notes to Condensed Consolidated Financial Statements	9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3. Quantitative and Qualitative Disclosures About Market Risk	52

Item 4. Controls and Procedures	52

Part II - OTHER INFORMATION
Item 1. Legal Proceedings	52

Item 1A. Risk Factors	52

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 5. Other Information	53

Item 6. Exhibits	54

Signature	55

FORWARD-LOOKING STATEMENTS

Except for the historical statements contained herein, the matters discussed in this Form 10-Q, including those matters discussed in "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", "intend", "objective", "plan", "possible", "potential", "project" and similar expressions. Actual results may vary materially from those expressed in forward-looking statements. In addition to the specific risk factors discussed in "Item 1A. Risk Factors" in the Company's 2012 Form 10-K and "Item 1A. Risk Factors" and "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:


•	general economic conditions, including the availability of credit, access to existing lines of credit, access to the commercial paper markets, actions of rating agencies and their impact on capital expenditures;


•	the ability of the Company and its subsidiaries to access the capital markets and obtain financing on favorable terms as well as inflation rates and monetary fluctuations;


•	prices and availability of electricity, coal, natural gas and NGLs;

•

the timing and extent of changes in commodity prices, particularly natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions Enable Midstream Partners serves, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable Midstream Partners' interstate pipelines;


•	the timing and extent of changes in the supply of natural gas, particularly supplies available for gathering by Enable Midstream Partners' gathering and processing business and transporting by Enable Midstream Partners' interstate pipelines, including the impact of natural gas and NGLs prices on the level of drilling and production activities in the regions Enable Midstream Partners serves;


•	business conditions in the energy and natural gas midstream industries;


•	competitive factors including the extent and timing of the entry of additional competition in the markets served by the Company;


•	unusual weather;


•	availability and prices of raw materials for current and future construction projects;


•	Federal or state legislation and regulatory decisions and initiatives that affect cost and investment recovery, have an impact on rate structures or affect the speed and degree to which competition enters the Company's markets;


•	environmental laws and regulations that may impact the Company's operations;


•	changes in accounting standards, rules or guidelines;


•	the discontinuance of accounting principles for certain types of rate-regulated activities;


•	the cost of protecting assets against, or damage due to, terrorism or cyber-attacks and other catastrophic events;


•	advances in technology;


•	creditworthiness of suppliers, customers and other contractual parties;


•	difficulty in making accurate assumptions and projections regarding future revenues and costs associated with the Company's equity investment in Enable Midstream Partners that the Company does not control;


•	the risk that Enable Midstream Partners may not be able to successfully integrate the operations of Enogex LLC and the businesses contributed by CenterPoint as discussed in Note 3; and


•	other risk factors listed in the reports filed by the Company with the Securities and Exchange Commission including those listed in "Item 1A. Risk Factors" and in Exhibit 99.01 to the Company's 2012 Form 10-K.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

GLOSSARY OF TERMS

The following is a glossary of frequently used abbreviations that are found throughout this Form 10-Q.



Abbreviation	Definition
2012 Form 10-K	Annual Report on Form 10-K for the year ended December 31, 2012
APSC	Arkansas Public Service Commission
ArcLight group	Bronco Midstream Holdings, LLC, Bronco Midstream Holdings II, LLC, collectively
ASC	Financial Accounting Standards Board Accounting Standards Codification
BART	Best available retrofit technology
CenterPoint	CenterPoint Energy Resources Corp., wholly-owned subsidiary of CenterPoint Energy, Inc.
Company	OGE Energy, collectively with its subsidiaries
DOJ	U.S. Department of Justice
Dry Scrubbers	Dry flue gas desulfurization units with spray dryer absorber
Enable Midstream Partners	Enable Midstream Partners, LP, partnership between OGE Energy, the ArcLight group and CenterPoint Energy, Inc. formed to own and operate the midstream businesses of OGE Energy and CenterPoint
Enogex Holdings	Enogex Holdings LLC, the parent company of Enogex LLC and a majority-owned subsidiary of OGE Holdings, LLC (prior to May 1, 2013)
Enogex LLC	Enogex LLC, collectively with its subsidiaries (effective July 30, 2013, the name was changed to Enable Oklahoma Intrastate Transmission, LLC)
EPA	U.S. Environmental Protection Agency
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FIP	Federal implementation plan
GAAP	Accounting principles generally accepted in the United States
MATS	Mercury and Air Toxics Standards
MRT	CenterPoint Energy - Mississippi River Transmission, LLC, a Delaware limited liability company
NGLs	Natural gas liquids
NOX	Nitrogen oxide
NYMEX	New York Mercantile Exchange
OCC	Oklahoma Corporation Commission
Off-system sales	Sales to other utilities and power marketers
OG&E	Oklahoma Gas and Electric Company, wholly-owned subsidiary of OGE Energy
OGE Holdings	OGE Enogex Holdings, LLC, wholly-owned subsidiary of OGE Energy, parent company of Enogex Holdings (prior to May 1, 2013) and 28.5 percent owner of Enable Midstream Partners
Pension Plan	Qualified defined benefit retirement plan
PRM	Price risk management
PSO	Public Service Company of Oklahoma
PUD Staff	Public Utility Division Staff of the Oklahoma Corporation Commission
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
TBtu/d	Trillion British thermal units per day

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions except per share data)	2013			2012			2013			2012
OPERATING REVENUES
Electric Utility operating revenues	$	723.2		$	721.0		$	1,753.3		$	1,675.7
Natural Gas Midstream Operations operating revenues (Note 1)	—			392.4			605.5			1,133.4
Total operating revenues	723.2			1,113.4			2,358.8			2,809.1
COST OF GOODS SOLD (exclusive of depreciation and amortization shown below)
Electric Utility cost of goods sold	273.0			259.8			715.2			636.1
Natural Gas Midstream Operations cost of goods sold (Note 1)	—			279.8			481.4			798.1
Total cost of goods sold	273.0			539.6			1,196.6			1,434.2
Gross margin on revenues	450.2			573.8			1,162.2			1,374.9
OPERATING EXPENSES
Other operation and maintenance	102.2			147.1			372.2			447.7
Depreciation and amortization	65.4			93.0			231.7			270.1
Impairment of assets	—			—			—			0.3
Gain on insurance proceeds	—			—			—			(7.5		)
Taxes other than income	21.7			29.7			78.1			84.7
Total operating expenses	189.3			269.8			682.0			795.3
OPERATING INCOME	260.9			304.0			480.2			579.6
OTHER INCOME (EXPENSE)
Equity in earnings of unconsolidated affiliates (Note 1)	46.0			—			64.5			—
Allowance for equity funds used during construction	1.7			1.3			4.4			4.9
Other income	6.2			2.6			25.4			12.8
Other expense	(5.2		)	(5.6		)	(15.9		)	(11.1		)
Net other income (expense)	48.7			(1.7		)	78.4			6.6
INTEREST EXPENSE
Interest on long-term debt	35.0			40.2			110.7			118.3
Allowance for borrowed funds used during construction	(0.9		)	(0.8		)	(2.3		)	(2.8		)
Interest on short-term debt and other interest charges	(0.4		)	2.2			3.8			6.6
Interest expense	33.7			41.6			112.2			122.1
INCOME BEFORE TAXES	275.9			260.7			446.4			464.1
INCOME TAX EXPENSE	60.7			68.3			110.2			122.6
NET INCOME	215.2			192.4			336.2			341.5
Less: Net income attributable to noncontrolling interests	—			6.9			6.2			25.0
NET INCOME ATTRIBUTABLE TO OGE ENERGY	$	215.2		$	185.5		$	330.0		$	316.5
BASIC AVERAGE COMMON SHARES OUTSTANDING	198.4			197.4			198.1			197.0
DILUTED AVERAGE COMMON SHARES OUTSTANDING	199.7			198.3			199.3			197.9
BASIC EARNINGS PER AVERAGE COMMON SHARE ATTRIBUTABLE TO OGE ENERGY COMMON SHAREHOLDERS	$	1.08		$	0.94		$	1.67		$	1.61
DILUTED EARNINGS PER AVERAGE COMMON SHARES ATTRIBUTABLE TO OGE ENERGY COMMON SHAREHOLDERS	$	1.08		$	0.94		$	1.66		$	1.60
DIVIDENDS DECLARED PER COMMON SHARE	$	0.20875		$	0.19625		$	0.62625		$	0.58875

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2013			2012			2013			2012
Net income	$	215.2		$	192.4		$	336.2		$	341.5
Other comprehensive income (loss), net of tax
Pension Plan and Restoration of Retirement Income Plan:
Amortization of deferred net loss, net of tax of $0.6, $0.4, $1.8 and $1.3, respectively	0.9			0.8			2.8			2.3
Amortization of prior service cost, net of tax of $0, $0, $0 and $0.1, respectively	—			—			—			0.1
Postretirement Benefit Plans:
Amortization of deferred net loss, net of tax of $0.3, $0.2, $0.9 and $0.8, respectively	0.6			0.5			1.6			1.5
Amortization of deferred net transition obligation, net of tax of $0, $0.1, $0 and $0.1, respectively	—			0.1			—			0.1
Amortization of prior service cost, net of tax of $(0.3), ($0.3), $(0.8) and ($0.8), respectively	(0.5		)	(0.5		)	(1.4		)	(1.4		)
Deferred commodity contracts hedging gains reclassified in net income, net of tax of $0.3, $0, $0.2 and ($1.6), respectively	0.3			—			0.2			(3.6		)
Deferred commodity contracts hedging losses, net of tax of $0, ($0.3), $0 and ($0.5), respectively	—			(0.5		)	—			(0.5		)
Amortization of deferred interest rate swap hedging losses, net of tax of $0, $0, $0.1 and $0.1, respectively	0.1			0.1			0.2			0.2
Other comprehensive income (loss), net of tax	1.4			0.5			3.4			(1.3		)
Comprehensive income (loss)	216.6			192.9			339.6			340.2
Less: Comprehensive income attributable to noncontrolling interests	—			6.9			6.3			24.1
Less: Deconsolidation of Enogex Holdings	—			—			6.1			—
Total comprehensive income attributable to OGE Energy	$	216.6		$	186.0		$	327.2		$	316.1

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended
	September 30,
(In millions)	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	336.2		$	341.5
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	233.0			273.0
Impairment of assets	—			0.3
Deferred income taxes and investment tax credits, net	106.5			130.9
Equity in earnings of unconsolidated affiliates	(64.5		)	—
Allowance for equity funds used during construction	(4.4		)	(4.9		)
(Gain) loss on disposition and abandonment of assets	(8.7		)	1.8
Gain on insurance proceeds	—			(7.5		)
Stock-based compensation	(4.9		)	(7.1		)
Distributions from unconsolidated affiliates	17.4			—
Regulatory assets	7.4			17.5
Regulatory liabilities	(16.9		)	(12.8		)
Other assets	(9.2		)	(3.1		)
Other liabilities	(18.5		)	(22.4		)
Change in certain current assets and liabilities
Accounts receivable, net	(111.8		)	(68.2		)
Accrued unbilled revenues	(13.3		)	(3.2		)
Income taxes receivable	1.6			1.0
Fuel, materials and supplies inventories	5.2			13.7
Fuel clause under recoveries	—			1.0
Other current assets	(0.2		)	(11.7		)
Accounts payable	(15.3		)	(81.5		)
Accounts payable - unconsolidated affiliates	4.9			—
Fuel clause over recoveries	(97.2		)	99.4
Other current liabilities	3.9			20.3
Net Cash Provided from Operating Activities	351.2			678.0
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (less allowance for equity funds used during construction)	(772.9		)	(792.8		)
Investment in unconsolidated affiliates	(2.7		)	—
Acquisition of gathering assets	—			(80.5		)
Proceeds from insurance	—			7.6
Reimbursement of capital expenditures	—			28.2
Proceeds from sale of assets	36.2			0.9
Net Cash Used in Investing Activities	(739.4		)	(836.6		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt	247.4			250.0
Changes in advances with unconsolidated affiliates	131.8			—
Contributions from noncontrolling interest partners	107.0			1.0
Increase in short-term debt	16.1			178.5
Issuance of common stock	10.8			10.9
Repayment of line of credit	—			(150.0		)
Payment of long-term debt	(0.2		)	—
Distributions to noncontrolling interest partners	(2.5		)	(10.3		)
Dividends paid on common stock	(124.0		)	(115.9		)
Net Cash Provided from Financing Activities	386.4			164.2
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(1.8		)	5.6
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	1.8			4.6
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	10.2

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS



(In millions)	September 30, 2013 (Unaudited)		December 31, 2012
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—	$	1.8
Accounts receivable, less reserve of $2.0 and $2.6, respectively	257.2		295.3
Accounts receivable - unconsolidated affiliates	9.0		—
Accrued unbilled revenues	70.7		57.4
Income taxes receivable	5.6		7.2
Fuel inventories	75.5		93.3
Materials and supplies, at average cost	79.5		80.9
Deferred income taxes	230.2		187.7
Assets held for sale	—		25.5
Other	30.3		45.1
Total current assets	758.0		794.2
OTHER PROPERTY AND INVESTMENTS
Investment in unconsolidated affiliates	1,295.8		—
Other	56.2		52.2
Total other property and investments	1,352.0		52.2
PROPERTY, PLANT AND EQUIPMENT
In service	8,929.5		11,504.4
Construction work in progress	501.1		387.5
Total property, plant and equipment	9,430.6		11,891.9
Less accumulated depreciation	2,935.0		3,547.1
Net property, plant and equipment	6,495.6		8,344.8
DEFERRED CHARGES AND OTHER ASSETS
Regulatory assets	496.2		510.6
Intangible assets, net	—		127.4
Goodwill	—		39.4
Other	42.4		53.6
Total deferred charges and other assets	538.6		731.0
TOTAL ASSETS	$	9,144.2	$	9,922.2

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)



(In millions)	September 30, 2013 (Unaudited)			December 31, 2012
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt	$	447.0		$	430.9
Accounts payable	171.1			396.7
Dividends payable	41.4			41.2
Customer deposits	69.5			70.3
Accrued taxes	57.2			48.1
Accrued interest	33.6			55.0
Accrued compensation	53.3			55.2
Fuel clause over recoveries	12.0			109.2
Other	56.4			69.8
Total current liabilities	941.5			1,276.4
LONG-TERM DEBT	2,400.0			2,848.6
DEFERRED CREDITS AND OTHER LIABILITIES
Accrued benefit obligations	367.7			399.8
Deferred income taxes	2,105.3			1,948.8
Deferred investment tax credits	2.4			3.9
Regulatory liabilities	242.7			245.1
Deferred revenues	0.3			37.7
Other	89.7			89.5
Total deferred credits and other liabilities	2,808.1			2,724.8
Total liabilities	6,149.6			6,849.8
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDERS' EQUITY
Common stockholders' equity	1,067.8			1,047.4
Retained earnings	1,978.7			1,772.4
Accumulated other comprehensive loss, net of tax	(51.9		)	(49.1		)
Treasury stock, at cost	—			(3.5		)
Total OGE Energy stockholders' equity	2,994.6			2,767.2
Noncontrolling interests	—			305.2
Total stockholders' equity	2,994.6			3,072.4
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,144.2		$	9,922.2

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)



(In millions)	Common Stock		Premium on Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Noncontrolling Interest			Treasury Stock			Total
Balance at December 31, 2012	$	1.0	$	1,046.4		$	1,772.4		$	(49.1	)	$	305.2		$	(3.5	)	$	3,072.4
Net income	—		—			330.0			—			6.2			—			336.2
Other comprehensive income (loss), net of tax	—		—			—			3.3			0.1			—			3.4
Dividends declared on common stock	—		—			(124.2		)	—			—			—			(124.2		)
Issuance of common stock	—		10.8			—			—			—			—			10.8
Stock-based compensation and other	—		(4.2		)	—			—			(0.8		)	3.5			(1.5		)
Contributions from noncontrolling interest partners	—		22.5			—			—			84.5			—			107.0
Distributions to noncontrolling interest partners	—		—			—			—			(2.5		)	—			(2.5		)
Deconsolidation of Enogex Holdings	—		—			0.5			(6.1		)	(392.7		)	—			(398.3		)
Deferred income taxes attributable to contributions from noncontrolling interest partners	—		(8.7		)	—			—			—			—			(8.7		)
2-for-1 forward stock split	1.0		(1.0		)	—			—			—			—			—
Balance at September 30, 2013	$	2.0	$	1,065.8		$	1,978.7		$	(51.9	)	$	—		$	—		$	2,994.6

Balance at December 31, 2011	$	1.0	$	1,034.3		$	1,574.8		$	(40.6	)	$	256.0		$	(6.2	)	$	2,819.3
Net income	—		—			316.5			—			25.0			—			341.5
Other comprehensive income (loss), net of tax	—		—			—			(0.4		)	(0.9		)	—			(1.3		)
Dividends declared on common stock	—		—			(116.2		)	—			—			—			(116.2		)
Issuance of common stock	—		10.9			—			—			—			—			10.9
Stock-based compensation and other	—		(11.6		)	—			—			(2.9		)	6.1			(8.4		)
Contributions from noncontrolling interest partners	—		—			—			—			1.0			—			1.0
Distributions to noncontrolling interest partners	—		—			—			—			(10.3		)	—			(10.3		)
Balance at September 30, 2012	$	1.0	$	1,033.6		$	1,775.1		$	(41.0	)	$	267.9		$	(0.1	)	$	3,036.5

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


1.	Summary of Significant Accounting Policies

Organization

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.

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.

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.

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

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.

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.

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

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.

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.

The following table is a summary of OG&E's regulatory assets and liabilities at:



(In millions)	September 30, 2013		December 31, 2012
Regulatory Assets
Current
Oklahoma demand program rider under recovery (A)	$	9.5	$	9.2
Crossroads wind farm rider under recovery (A)	7.2		14.9
Other (A)	6.8		2.9
Total Current Regulatory Assets	$	23.5	$	27.0
Non-Current
Benefit obligations regulatory asset	$	350.1	$	370.6
Income taxes recoverable from customers, net	55.7		54.7
Smart Grid	43.4		42.8
Deferred storm expenses	18.3		12.7
Unamortized loss on reacquired debt	12.1		13.0
Deferred pension expenses	1.9		4.5
Other	14.7		12.3
Total Non-Current Regulatory Assets	$	496.2	$	510.6
Regulatory Liabilities
Current
Fuel clause over recoveries	$	12.0	$	109.2
Smart Grid rider over recovery (B)	19.1		24.1
Other (B)	2.6		7.8
Total Current Regulatory Liabilities	$	33.7	$	141.1
Non-Current
Accrued removal obligations, net	$	219.2	$	218.2
Pension tracker	14.2		9.2
Deferred pension credits	9.3		17.7
Total Non-Current Regulatory Liabilities	$	242.7	$	245.1


(A)	Included in Other Current Assets on the Condensed Consolidated Balance Sheets.


(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

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

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.

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

The following table summarizes changes to the Company's asset retirement obligations during the nine months ended September 30, 2013 and 2012.



	Nine Months Ended
	September 30,
(In millions)	2013			2012
Balance at January 1	$	54.0		$	24.8
Liabilities settled (A)	(0.4		)	0.3
Accretion expense	1.7			1.6
Revisions in estimated cash flows (B)	(0.7		)	26.7
Balance at September 30	$	54.6		$	53.4


(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.


(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.



	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	)
Amounts reclassified from accumulated other comprehensive income (loss)	2.8			—		1.6			(1.4		)	0.2			0.2			0.1			3.3
Deconsolidation of Enogex Holdings	2.8			—		1.0			(0.3		)	(0.7		)	—			8.9			(6.1		)
Net current period other comprehensive income (loss)	5.6			—		2.6			(1.7		)	(0.5		)	0.2			9.0			(2.8		)
Balance at September 30, 2013	$	(43.7	)	$	0.1	$	(13.1	)	$	5.5		$	(0.4	)	$	(0.3	)	$	—		$	(51.9	)

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.



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

Amortization of defined benefit pension items
Actuarial gains (losses)	$	(1.5	)	$	(4.6	)	(A)
Prior service cost	—			—			(A)
	(1.5		)	(4.6		)	Total before tax
	(0.6		)	(1.8		)	Tax benefit
	(0.9		)	(2.8		)	Net of tax
	—			(0.1		)	Noncontrolling interest
	$	(0.9	)	$	(2.7	)	Net of tax and noncontrolling interest

Amortization of postretirement benefit plan items
Actuarial gains (losses)	$	(0.9	)	$	(2.5	)	(A)
Prior service cost	0.8			2.2			(A)
	(0.1		)	(0.3		)	Total before tax
	—			(0.1		)	Tax benefit
	$	(0.1	)	$	(0.2	)	Net of tax

Total reclassifications for the period	$	(1.4	)	$	(3.3	)	Net of tax and noncontrolling interest


(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

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

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.


2.	Accounting Pronouncement

In July 2013, the Emerging Issues Task Force issued "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward or Tax Credit Carryforward Exists." The new standard requires entities to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, except as follows. To the extent that a net operating loss carryforward or tax credit carryforward at the reporting date is not available under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position, the unrecognized tax benefit would be presented in the statement of financial position as a liability. The new standard is applicable for all entities that have unrecognized tax benefits when a net operating loss carryforward or a tax credit carryforward exists. The new standard is effective for interim and annual reporting periods beginning after December 15, 2013 and does not require any new financial statement disclosures. This new standard may be applied retrospectively or prospectively with early adoption permitted. The Company retrospectively adopted this new standard effective January 1, 2013.


3.	Investment in Unconsolidated Affiliates and Related Party Transactions

On March 14, 2013, OGE Energy entered into a Master Formation Agreement with the ArcLight group and CenterPoint Energy, Inc., pursuant to which OGE Energy, the ArcLight Group and CenterPoint Energy, Inc., agreed to form Enable Midstream Partners to own and operate the midstream businesses of OGE Energy and CenterPoint that will initially be structured as a private limited partnership. This transaction closed on May 1, 2013.

Pursuant to the Master Formation Agreement, OGE Energy and the ArcLight group indirectly contributed 100 percent of the equity interests in Enogex LLC to 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. Enogex LLC is a provider of integrated natural gas midstream services. Enogex LLC is engaged in the business of gathering, processing, transporting and storing natural gas. Most of Enogex LLC's natural gas gathering, processing, transportation and storage assets are strategically located in the Arkoma and Anadarko basins of Oklahoma and the Texas Panhandle. CenterPoint Energy Field Services, LLC, a Delaware limited liability company and, prior to the closing of the transaction on May 1, 2013, a wholly owned subsidiary of CenterPoint, that provides natural gas gathering and processing services for certain natural gas fields in the Mid-continent region of the United States, was converted into a Delaware limited partnership that became Enable Midstream Partners. CenterPoint contributed to Enable Midstream Partners its equity interests in each of (i) CenterPoint Energy Gas Transmission Company, LLC, a Delaware limited liability company that is an interstate pipeline that provides natural gas transportation, storage and pipeline services to customers principally in Arkansas, Louisiana, Oklahoma and Texas, (ii) MRT, a Delaware limited liability company that is an interstate pipeline that provides natural gas transportation, storage and pipeline services to customers principally in Arkansas, Illinois and Missouri and (iii) certain of its other midstream subsidiaries and caused its subsidiary CenterPoint Energy Southeastern Pipelines Holding, LLC to contribute a 24.95 percent interest in Southeast Supply Header, LLC, a Delaware limited liability company. CenterPoint indirectly owned a 50 percent interest in Southeast Supply Header, LLC, which owns a 1.0 billion cubic feet per day, 274-mile interstate pipeline that runs from the Perryville Hub in Louisiana to Coden, Alabama.

Immediately prior to closing, on May 1, 2013, the ArcLight group contributed $107.0 million and OGE Energy contributed $9.1 million to Enogex LLC in order to pay down short-term debt. At September 30, 2013, OGE Energy, through its wholly owned subsidiary OGE Holdings, holds 28.5 percent of the limited partners interests in Enable Midstream Partners.

CenterPoint has certain put rights, and Enable Midstream Partners has certain call rights, exercisable with respect to any interest in Southeast Supply Header, LLC retained by CenterPoint following the formation of Enable Midstream Partners, under which CenterPoint would contribute to Enable Midstream Partners CenterPoint's retained interest in Southeast Supply Header, LLC at a price equal to the fair market value of such interest at the time the put right or call right is exercised. If CenterPoint were to exercise such put right or Enable Midstream Partners were to exercise such call right, CenterPoint's retained interest in Southeast Supply Header, LLC would be contributed to Enable Midstream Partners in exchange for consideration consisting of a specified number of limited partnership units and, subject to certain restrictions, a cash payment, payable either from CenterPoint to Enable Midstream Partners or from Enable Midstream Partners to CenterPoint, in an amount such that the total consideration exchanged is equal in value to the fair market value of the contributed interest in Southeast Supply Header, LLC.

The general partner of Enable Midstream Partners is equally controlled by CenterPoint and OGE Energy, who each have 50 percent of the management rights. CenterPoint and OGE Energy also own a 40 percent and 60 percent interest, respectively, in any incentive distribution rights to be held by the general partner of Enable Midstream Partners following an initial public

offering of Enable Midstream Partners. In addition, for a period of time, the ArcLight group will have certain protective rights and approval rights over certain material activities of Enable Midstream Partners, including material increases in capital expenditures and certain equity issuances, entering into transactions with related parties and acquiring, pledging or disposing of certain material assets. The general partner of Enable Midstream Partners will initially be governed by a board made up of an equal number of representatives designated by each of CenterPoint Energy, Inc. and OGE Energy. Based on the 50/50 management ownership, with neither company having control, effective May 1, 2013, OGE Energy deconsolidated its interest in Enogex Holdings LLC and began accounting for its interest in Enable Midstream Partners using the equity method of accounting.

Pursuant to a Registration Rights Agreement dated as of May 1, 2013, OGE Energy and CenterPoint Energy, Inc. agreed to initiate the process for the sale of an equity interest in Enable Midstream Partners in an initial public offering. Enable Midstream Partners has agreed to file a registration statement for the initial public offering no later than May 1, 2014 and, subject to limited exceptions, consummate the initial public offering within 180 days of the filing of the registration statement. The Company currently expects that Enable Midstream Partners will file a registration statement during the fourth quarter of 2013. The initial public offering is subject to market conditions and OGE Energy can give no assurances that the initial public offering will be consummated.

Effective May 1, 2013, Enable Midstream Partners entered into a $1.4 billion, five-year senior unsecured revolving credit facility in accordance with the terms of the Master Formation Agreement and Enogex LLC's $400 million revolving credit facility was terminated.

Subject to the exceptions provided below, pursuant to the terms of an Omnibus Agreement dated as of May 1, 2013 among OGE Energy, the ArcLight group and CenterPoint Energy, Inc., each of OGE Energy and CenterPoint Energy, Inc. will be required to hold or otherwise conduct all of its respective Midstream Operations (as defined below) located within the United States in Enable Midstream Partners. This restriction will cease to apply to both OGE Energy and CenterPoint Energy, Inc. as soon as either OGE Energy or CenterPoint Energy, Inc. ceases to hold (i) any interest in the general partner of Enable Midstream Partners or (ii) at least 20 percent of the limited partner interests of Enable Midstream Partners. "Midstream Operations" generally means, subject to certain exceptions, the gathering, compression, treatment, processing, blending, transportation, storage, isomerization and fractionation of crude oil and natural gas, its associated production water and enhanced recovery materials such as carbon dioxide, and its respective constituents and the following products: methane, NGLs (Y-grade, ethane, propane, normal butane, isobutane and natural gasoline), condensate, and refined products and distillates (gasoline, refined product blendstocks, olefins, naphtha, aviation fuels, diesel, heating oil, kerosene, jet fuels, fuel oil, residual fuel oil, heavy oil, bunker fuel, cokes, and asphalts), to the extent such activities are located within the United States.

In addition, if OGE Energy or CenterPoint Energy, Inc. acquires any assets or equity of any person engaged in Midstream Operations with a value in excess of $50 million (or $100 million in the aggregate with such party's other acquired Midstream Operations that have not been offered to Enable Midstream Partners), the acquiring party will be required to offer Enable Midstream Partners the opportunity to acquire such assets or equity for such value; provided, that the acquiring party will not be obligated to offer any such assets or equity to Enable Midstream Partners if the acquiring party intends to cease using them in Midstream Operations within 12 months. If Enable Midstream Partners does not exercise its option, then the acquiring party will be free to retain and operate such Midstream Operations; provided, however, that if the fair market value of such Midstream Operations is greater than 66 2/3 percent of the fair market value of all of the assets being acquired in such transaction, then the acquiring party will be required to dispose of such Midstream Operations within 24 months.

As long as the ArcLight group has certain protective rights, the ArcLight group will be prohibited from pursuing any transaction independently from Enable Midstream Partners (i) if the ArcLight group's consent is required for Enable Midstream Partners to pursue such transaction and (ii) the ArcLight group affirmatively votes not to consent to such transaction.

On May 1, 2013, OGE Energy, OGE Holdings and Enable Midstream Partners entered into a Seconding Agreement. During the term of the Seconding Agreement, OGE Holdings' employees will continue to perform services for Enable Midstream Partners and its subsidiaries.

Distributions received from Enable Midstream Partners were $17.4 million during the three and nine months ended September 30, 2013.

Related Party Transactions

As OGE Energy's interest in Enogex Holdings was deconsolidated on May 1, 2013, operating costs charged and related party transactions between the Company and its affiliate, Enable Midstream Partners, after May 1, 2013, which were previously eliminated in consolidation, are discussed below.

OGE Energy charged operating costs to Enogex Holdings/Enable Midstream Partners of $6.6 million and $10.9 million during the three and five months ended September 30, 2013, respectively. OGE Energy charges operating costs to its subsidiaries and unconsolidated affiliates based on several factors. Operating costs directly related to specific subsidiaries and unconsolidated affiliates are assigned to those subsidiaries and unconsolidated affiliates. Where more than one subsidiary or unconsolidated affiliate benefits from certain expenditures, the costs are shared between those subsidiaries and unconsolidated affiliates receiving the benefits. Operating costs incurred for the benefit of all subsidiaries and unconsolidated affiliates are allocated among the subsidiaries and unconsolidated affiliates, either as overhead based primarily on labor costs or using the "Distrigas" method. The Distrigas method is a three-factor formula that uses an equal weighting of payroll, net operating revenues and gross property, plant and equipment. OGE Energy adopted the Distrigas method in January 1996 as a result of a recommendation by the OCC Staff. OGE Energy believes this method provides a reasonable basis for allocating common expenses.

Related Party Transactions with Enable Midstream Partners



	Three Months Ended		Five Months Ended
	September 30,		September 30,
(In millions)	2013		2013
Operating Revenues:
Electricity to power electric compression assets	$	3.9	$	5.2
Cost of Goods Sold:
Natural gas transportation services	$	8.7	$	14.5
Natural gas storage services	3.1		5.4
Natural gas purchases (A)	9.4		11.9


(A)	At September 30, 2013, there was $1.4 million of natural gas purchases recorded for these activities.

Summarized Financial Information of Enable Midstream Partners

As Enable Midstream Partners began operations on May 1, 2013, summarized unaudited financial information for 100 percent of Enable Midstream Partners is presented below at September 30, 2013 and for the three and five months ended September 30, 2013.



Balance Sheet	September 30, 2013
	(In millions)
Current assets	$	427.5
Non-current assets	10,537.1
Current liabilities	622.1
Non-current liabilities	2,140.4



	Three Months Ended		Five Months Ended
Income Statement	September 30, 2013		September 30, 2013
	(In millions)
Operating revenues	$	796.4	$	1,298.4
Gross margin	337.1		544.5
Operating income	132.0		206.7
Net income	123.3		188.4

Enable Midstream Partners concluded that the formation of Enable Midstream Partners was considered a business combination, and CenterPoint Midstream was the acquirer of Enogex Holdings for accounting purposes. Under this method, the fair value of the consideration paid by CenterPoint Midstream for Enogex Holdings is allocated to the assets acquired and liabilities assumed on May 1, 2013 based on their fair value. Enogex Holdings' assets, liabilities and equity have accordingly been adjusted to estimated fair value as of May 1, 2013, resulting in an increase to equity of $2.2 billion. Determining the fair value of certain

assets and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. Enable Midstream Partners utilized appraisers to assist in the determination of fair value of certain assets.

OGE Energy recorded equity in earnings of unconsolidated affiliates of $46.0 million, and $64.5 million for the three and five months ended September 30, 2013, respectively. Equity in earnings of unconsolidated affiliates includes OGE Energy's 28.5 percent share of Enable Midstream Partners earnings adjusted for the amortization of the basis difference of OGE Energy's original investment in Enogex and its underlying equity in net assets of Enable Midstream, based on historical cost as of May 1, 2013. The basis difference is being amortized over approximately 30 years, the average life of the assets to which the basis difference is attributed. Equity in earnings of unconsolidated affiliates is also adjusted for the elimination of the Enogex Holdings fair value adjustments described above.



	Three Months Ended		Five Months Ended
Reconciliation of Equity in Earnings of Unconsolidated Affiliates	September 30, 2013		September 30, 2013
	(In millions)
OGE's 28.5% share of Enable Net Income	$	35.1	$	53.6
Amortization of basis difference	5.9		5.9
Elimination of Enogex Holdings fair value adjustments	5.0		5.0
OGE's Equity in earnings of unconsolidated affiliates	$	46.0	$	64.5


4.	Fair Value Measurements

The classification of the Company's 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 and examples of each 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. Instruments classified as Level 1 include natural gas futures, swaps and options transactions for contracts traded on the NYMEX and settled through a NYMEX clearing broker.

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. Instruments classified as Level 2 include over-the-counter NYMEX natural gas swaps, natural gas basis swaps and natural gas purchase and sales transactions in markets such that the pricing is closely related to the NYMEX pricing.

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).

The Company utilizes the market approach in determining the fair value of its derivative positions by using either NYMEX published market prices, independent broker pricing data or broker/dealer valuations. The valuations of derivatives with pricing based on NYMEX published market prices may be considered Level 1 if they are settled through a NYMEX clearing broker account with daily margining. Over-the-counter derivatives with NYMEX based prices are considered Level 2 due to the impact of counterparty credit risk. Valuations based on independent broker pricing or broker/dealer valuations may be classified as Level 2 only to the extent they may be validated by an additional source of independent market data for an identical or closely related active market. In certain less liquid markets or for longer-term contracts, forward prices are not as readily available. In these circumstances, contracts are valued using internally developed methodologies that consider historical relationships among various quoted prices in active markets that result in management's best estimate of fair value. These contracts are classified as Level 3.

The impact to the fair value of derivatives due to credit risk is calculated using the probability of default based on Standard & Poor's Ratings Services and/or internally generated ratings. The fair value of derivative assets is adjusted for credit risk. The fair value of derivative liabilities is adjusted for credit risk only if the impact is deemed material.

Contracts with Master Netting Arrangements

Fair value amounts recognized for forward, interest rate swap, option and other conditional or exchange contracts executed with the same counterparty under a master netting arrangement may be offset. The reporting entity's choice to offset or not must be applied consistently. A master netting arrangement exists if the reporting entity has multiple contracts, whether for the same type of conditional or exchange contract or for different types of contracts, with a single counterparty that are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract. Offsetting the fair values recognized for forward, interest rate swap, option and other conditional or exchange contracts outstanding with a single counterparty results in the net fair value of the transactions being reported as an asset or a liability in the Condensed Consolidated Balance Sheets. The Company has presented the fair values of its derivative contracts under master netting agreements using a net fair value presentation.

The Company had no material financial instruments measured at fair value on a recurring basis at September 30, 2013. The following table summarizes the Company's assets and liabilities that are measured at fair value on a recurring basis at December 31, 2012 as well as presents the Company's commodity contracts fair value included in the Company's Condensed Consolidated Balance Sheet at December 31, 2012. The Company adopted the FASB's accounting guidance requiring additional disclosures for balance sheet offsetting of assets and liabilities effective January 1, 2013. The Company posted $0.2 million of collateral at December 31, 2012 which has been included within netting adjustments in the table below. The Company held no collateral at December 31, 2012. The Company has offset all amounts subject to master netting agreements in the Company's Condensed Consolidated Balance Sheet at December 31, 2012. The Company held no Level 3 investments at December 31, 2012.



December 31, 2012
(In millions)	Commodity Contracts						Gas Imbalances (A)
	Assets			Liabilities			Assets (B)		Liabilities (C)
Quoted market prices in active market for identical assets (Level 1)	$	5.0		$	5.0		$	—	$	—
Significant other observable inputs (Level 2)	0.5			0.5			3.1		3.8
Total fair value	5.5			5.5			3.1		3.8
Netting adjustments	(5.0		)	(5.2		)	—		—
Total	$	0.5		$	0.3		$	3.1	$	3.8


(A)	The Company uses the market approach to fair value its gas imbalance assets and liabilities, using an average of the Inside FERC Gas Market Report for Panhandle Eastern Pipe Line Co. (Texas, Oklahoma Mainline), ONEOK (Oklahoma) and ANR Pipeline (Oklahoma) indices.


(B)	Gas imbalance assets exclude fuel reserves for under retained fuel due from shippers of $5.9 million at December 31, 2012, which fuel reserves are based on the value of natural gas at the time the imbalance was created and which are not subject to revaluation at fair market value.


(C)	Gas imbalance liabilities exclude fuel reserves for over retained fuel due to shippers of $1.2 million at December 31, 2012, which fuel reserves are based on the value of natural gas at the time the imbalance was created and which are not subject to revaluation at fair market value.

The following table summarizes the fair value and carrying amount of the Company's financial instruments at September 30, 2013 and December 31, 2012.



	September 30, 2013				December 31, 2012
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-Term Debt
OG&E Senior Notes	$	2,154.3	$	2,455.2	$	1,904.2	$	2,401.6
OG&E Industrial Authority Bonds	135.4		135.4		135.4		135.4
OG&E Tinker Debt	10.4		9.1		10.7		10.0
OGE Energy Senior Notes	99.9		103.7		99.9		106.3
Enogex LLC Senior Notes	(A)		(A)		448.4		493.4
Enogex LLC Term Loan	(A)		(A)		250.0		250.0


(A)	As a result of the formation of Enable Midstream Partners on May 1, 2013 and the Company's deconsolidation of Enogex Holdings, the Company's consolidated financial statements do not include any obligations for the Enogex LLC Senior Notes and Enogex LLC Term Loan as of May 1, 2013.

The Company's long-term debt is valued at the carrying amount. The fair value of the Company's long-term debt is based on quoted market prices and estimates of current rates available for similar issues with similar maturities and is classified as Level 2 in the fair value hierarchy except for the Tinker Debt which fair value was based on calculating the net present value of the monthly payments discounted by the Company's current borrowing rate and is classified as Level 3 in the fair value hierarchy.


5.	Derivative Instruments and Hedging Activities

The Company is exposed to certain risks relating to its ongoing business operations. The primary risk managed using derivatives instruments is interest rate risk. The Company is also exposed to credit risk in its business operations.

Interest Rate Risk

The Company's exposure to changes in interest rates primarily relates to short-term variable-rate debt and commercial paper. The Company manages its interest rate exposure by monitoring and limiting the effects of market changes in interest rates. The Company utilizes interest rate derivatives to alter interest rate exposure in an attempt to reduce the effects of these changes. Interest rate derivatives are used solely to modify interest rate exposure and not to modify the overall leverage of the debt portfolio.

Credit Risk

The Company is exposed to certain credit risks relating to its ongoing business operations. Credit risk includes the risk that counterparties that owe the Company money or energy will breach their obligations. If the counterparties to these arrangements fail to perform, the Company may be forced to enter into alternative arrangements. In that event, the Company's financial results could be adversely affected and the Company could incur losses.

Cash Flow Hedges

For derivatives that are designated and qualify as a cash flow hedge, the effective portion of the change in fair value of the derivative instrument is reported as a component of Accumulated Other Comprehensive Income (Loss) and recognized into earnings in the same period during which the hedged transaction affects earnings. The ineffective portion of a derivative's change in fair value or hedge components excluded from the assessment of effectiveness is recognized currently in earnings. The Company measures the ineffectiveness of commodity cash flow hedges using the change in fair value method whereby the change in the expected future cash flows designated as the hedge transaction are compared to the change in fair value of the hedging instrument. Forecasted transactions, which are designated as the hedged transaction in a cash flow hedge, are regularly evaluated to assess whether they continue to be probable of occurring. If the forecasted transactions are no longer probable of occurring, hedge accounting will cease on a prospective basis and all future changes in the fair value of the derivative will be recognized directly in earnings.

The Company previously designated as cash flow hedges derivatives for OGE Holdings' NGLs volumes and corresponding keep-whole natural gas resulting from its natural gas processing contracts (processing hedges) and natural gas positions resulting from its natural gas gathering and processing operations and natural gas transportation and storage operations (operational gas

hedges). The Company also previously designated as cash flow hedges certain derivatives for certain natural gas storage inventory positions. Due to the deconsolidation effective May 1, 2013, the Company had no material instruments designated as cash flow hedges at September 30, 2013.

Fair Value Hedges

For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedge risk are recognized currently in earnings. The Company includes the gain or loss on the hedged items in Operating Revenues as the offsetting loss or gain on the related hedging derivative.

At September 30, 2013 and December 31, 2012, the Company had no derivative instruments that were designated as fair value hedges.

Derivatives Not Designated as Hedging Instruments

Derivative instruments not designated as hedging instruments are utilized in OGE Holdings' asset management activities. For derivative instruments not designated as hedging instruments, the gain or loss on the derivative is recognized currently in earnings.

At September 30, 2013 and December 31, 2012, the Company had no material derivative instruments that were not designated as hedging instruments.

Balance Sheet Presentation Related to Derivative Instruments

The Company had no material derivative instruments included in its Condensed Consolidated Balance Sheet at September 30, 2013. The fair value of the derivative instruments that are presented in the Company's Condensed Consolidated Balance Sheet at December 31, 2012 are as follows:



		Fair Value
Instrument	Balance Sheet Location	Assets		Liabilities
		(In millions)
Derivatives Designated as Hedging Instruments
Natural Gas
Financial Futures/Swaps	Other Current Assets	$	—	$	0.5
Total		$	—	$	0.5

Derivatives Not Designated as Hedging Instruments
Natural Gas
Financial Futures/Swaps	Current PRM	$	0.1	$	—
	Other Current Assets	5.0		4.7
Physical Purchases/Sales	Current PRM	0.4		0.3
Total		$	5.5	$	5.0
Total Gross Derivatives (A)		$	5.5	$	5.5


(A)	See Note 4 for a reconciliation of the Company's total derivatives fair value to the Company's Condensed Consolidated Balance Sheet at December 31, 2012.

Income Statement Presentation Related to Derivative Instruments

The following tables present the effect of derivative instruments on the Company's Condensed Consolidated Statement of Income for the three months ended September 30, 2012.

Derivatives in Cash Flow Hedging Relationships



(In millions)	Amount Recognized in Other Comprehensive Income			Amount Reclassified from Accumulated Other Comprehensive Income (Loss) into Income			Amount Recognized in Income
Natural Gas Financial Futures/Swaps	$	(0.8	)	$	—		$	—
Interest Rate Swap	—			(0.1		)	—
Total	$	(0.8	)	$	(0.1	)	$	—

Derivatives Not Designated as Hedging Instruments



(In millions)	Amount Recognized in Income
Natural Gas Physical Purchases/Sales	$	(2.7	)
Natural Gas Financial Futures/Swaps	(0.2		)
Total	$	(2.9	)

The following tables present the effect of derivative instruments on the Company's Condensed Consolidated Statement of Income for the nine months ended September 30, 2012.

Derivatives in Cash Flow Hedging Relationships



(In millions)	Amount Recognized in Other Comprehensive Income			Amount Reclassified from Accumulated Other Comprehensive Income (Loss) into Income			Amount Recognized in Income
Natural Gas Financial Futures/Swaps	$	(1.0	)	$	5.2		$	—
Interest Rate Swap	—			(0.3		)	—
Total	$	(1.0	)	$	4.9		$	—

Derivatives Not Designated as Hedging Instruments



(In millions)	Amount Recognized in Income
Natural Gas Physical Purchases/Sales	$	(8.8	)
Natural Gas Financial Futures/Swaps	0.8
Total	$	(8.0	)

For derivatives designated as cash flow hedges in the tables above, amounts reclassified from Accumulated Other Comprehensive Income (Loss) into income (effective portion) and amounts recognized in income (ineffective portion) for the three and nine months ended September 30, 2012, if any, are reported in Operating Revenues. For derivatives not designated as hedges in the tables above, amounts recognized in income for the three and nine months ended September 30, 2012, if any, are reported in Operating Revenues.

Credit-Risk Related Contingent Features in Derivative Instruments

At September 30, 2013 the Company had no derivative instruments that contain credit-risk related contingent features.


6.	Stock-Based Compensation

The following table summarizes the Company's pre-tax compensation expense and related income tax benefit during the three and nine months ended September 30, 2013 and 2012 related to the Company's performance units and restricted stock.



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2013		2012		2013		2012
Performance units
Total shareholder return	$	2.5	$	1.9	$	6.4	$	5.7
Earnings per share	0.6		0.7		1.9		2.0
Total performance units	3.1		2.6		8.3		7.7
Restricted stock	0.1		0.1		0.3		0.5
Total compensation expense	3.2		2.7		8.6		8.2
Less: Amount paid by unconsolidated affiliates	1.4		—		2.0		—
Net compensation expense	$	1.8	$	2.7	$	6.6	$	8.2
Income tax benefit	$	0.7	$	1.0	$	2.6	$	3.2

The Company has issued new shares to satisfy stock option exercises, restricted stock grants and payouts of earned performance units. During the three and nine months ended September 30, 2013, there were 292 shares forfeited and 549,228 shares of new common stock issued, respectively, pursuant to the Company's stock incentive plans related to exercised stock options, restricted stock grants (net of forfeitures) and payouts of earned performance units. During the nine months ended September 30, 2013, there were 125,264 of treasury stock shares issued. During the three and nine months ended September 30, 2013, there were 4,038 shares and 10,512 shares of restricted stock, respectively, returned to the Company to satisfy tax liabilities. The Company received $1.4 million during the nine months ended September 30, 2013 related to exercised stock options. The Company did not realize an income tax benefit for the tax deductions from the exercised stock options during the three and nine months ended September 30, 2013 due to the Company being in a tax net operating loss position in 2013.

As a result of the formation of Enable Midstream Partners on May 1, 2013, 50 percent of OGE Holdings' 2013 performance unit grants that were previously based on earnings before interest, taxes, depreciation and amortization were converted to stock-based compensation. The performance unit grants converted totaled 91,390, which is comprised of 45,596 total shareholder return performance units with a $25.89 grant date fair value and 45,794 earnings per share performance units with a $26.73 grant date fair value. As a result of a modification to the 2012 performance unit grants, 50 percent of OGE Holdings' 2012 performance unit grants that were previously based on earnings before interest, taxes and depreciation and amortization were converted to stock-based compensation. The performance unit grants converted totaled 82,400 , which is comprised of 41,288 total shareholder return performance units with a $47.71 grant date fair value and 41,112 earnings per share performance units with a $34.94 grant date fair value. The amount of these performance units were adjusted for the effects of the stock split. The impact of the modification of the performance unit grants on stock-based compensation expense for the three and nine months ended September 30, 2013 was not material.


7.	Income Taxes

The Company files consolidated income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal tax examinations by tax authorities for years prior to 2010 or state and local tax examinations by tax authorities for years prior to 2005. Income taxes are generally allocated to each company in the affiliated group based on its stand-alone taxable income or loss. Federal investment tax credits previously claimed on electric utility property have been deferred and are being amortized to income over the life of the related property. OG&E continues to amortize its Federal investment tax credits on a ratable basis throughout the year. OG&E earns both Federal and Oklahoma state tax credits associated with production from its wind farms and earns Oklahoma state tax credits associated with its investments in electric generating facilities which further reduce the Company's effective tax rate.

As previously reported in the Company's 2012 Form 10-K, in January 2013, OG&E determined that a portion of certain Oklahoma investment tax credits previously recognized but not yet utilized may not be available for utilization in future years. During the first quarter of 2013, OG&E recorded a reserve of $7.8 million ($5.1 million after tax) related to a portion of the Oklahoma investment tax credits generated in years prior to 2013 but not yet utilized due to management's determination that it is more likely than not that it will be unable to utilize these credits.

As a result of acquiring an equity interest in Enable Midstream Partners, the Company has a lower effective tax rate in conjunction with the formation of Enable Midstream Partners in states with lower state tax rates, which reduced income tax expense for the nine months ended September 30, 2013 by $3.9 million. In addition, deferred tax adjustments related to the Company's deconsolidation of Enogex Holdings increased income tax expense for the nine months ended September 30, 2013 by $3.9 million.

Acquisition of the equity interest in Enable Midstream Partners on May 1, 2013, is also expected to increase the Company's utilization of net operating loss carryforwards throughout 2013. The Company now projects utilization of approximately $122.0 million of Federal net operating loss carryforwards in 2013. State net operating loss utilization is expected to begin in 2014.

In the third quarter of 2013, the Company recognized a $17.1 million reduction in deferred state income taxes, associated with a remeasurement of the accumulated deferred taxes related to the formation of Enable Midstream Partners, LP.


8.	Common Equity

Forward Stock Split

Automatic Dividend Reinvestment and Stock Purchase Plan

The Company issued 105,595 shares and 304,385 shares, respectively, of common stock under its Automatic Dividend Reinvestment and Stock Purchase Plan during the three and nine months ended September 30, 2013 and received proceeds of $4.0 million and $10.4 million, respectively. The Company may, from time to time, issue additional shares under its Automatic Dividend Reinvestment and Stock Purchase Plan to fund capital requirements or working capital needs. At September 30, 2013, there were 3,940,603 shares of unissued common stock reserved for issuance under the Company's Automatic Dividend Reinvestment and Stock Purchase Plan.

Earnings Per Share

Basic earnings per share is calculated by dividing net income attributable to OGE Energy by the weighted average number of the Company's common 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 the Company consist of performance units. Basic and diluted earnings per share for the Company were calculated as follows:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2013		2012		2013		2012
Net Income Attributable to OGE Energy	$	215.2	$	185.5	$	330.0	$	316.5
Average Common Shares Outstanding
Basic average common shares outstanding	198.4		197.4		198.1		197.0
Effect of dilutive securities:
Contingently issuable shares (performance units)	1.3		0.9		1.2		0.9
Diluted average common shares outstanding	199.7		198.3		199.3		197.9
Basic Earnings Per Average Common Share Attributable to OGE Energy Common Shareholders	$	1.08	$	0.94	$	1.67	$	1.61
Diluted Earnings Per Average Common Share Attributable to OGE Energy Common Shareholders	$	1.08	$	0.94	$	1.66	$	1.60
Anti-dilutive shares excluded from earnings per share calculation	—		—		—		—


9.	Long-Term Debt

At September 30, 2013, the Company was in compliance with all of its debt agreements.

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 bonds, which can be tendered at the option of the holder during the next 12 months, are as follows:



SERIES			DATE DUE	AMOUNT
				(In millions)
0.18%	-	0.34%	Garfield Industrial Authority, January 1, 2025	$	47.0
0.12%	-	0.39%	Muskogee Industrial Authority, January 1, 2025	32.4
0.11%	-	0.30%	Muskogee Industrial Authority, June 1, 2027	56.0
Total (redeemable during next 12 months)				$	135.4

All of these bonds are subject to an optional tender at the request of the holders, at 100 percent of the principal amount, together with accrued and unpaid interest to the date of purchase. The bond holders, on any business day, can request repayment of the bond by delivering an irrevocable notice to the tender agent stating the principal amount of the bond, payment instructions for the purchase price and the business day the bond is to be purchased. The repayment option may only be exercised by the holder of a bond for the principal amount. When a tender notice has been received by the trustee, a third party remarketing agent for the bonds will attempt 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 Company's Condensed Consolidated Financial Statements. OG&E believes that it has sufficient liquidity to meet these obligations.

Issuance of Long-Term Debt

On May 8, 2013, OG&E issued $250 million of 3.9% senior notes due May 1, 2043. The proceeds from the issuance were added to OG&E's general funds and were used to repay short-term debt, fund capital expenditures, general corporate expenses and for working capital purposes. OG&E expects to issue additional long-term debt from time to time when market conditions are favorable and when the need arises.


10.	Short-Term Debt and Credit Facilities

The Company borrows on a short-term basis, as necessary, by the issuance of commercial paper and by borrowings under its revolving credit agreements. The short-term debt balance was $447.0 million and $430.9 million at September 30, 2013 and December 31, 2012, respectively. The following table provides information regarding the Company's revolving credit agreements at September 30, 2013.



	Aggregate			Amount		Weighted-Average
Entity	Commitment			Outstanding (A)		Interest Rate			Maturity
	(In millions)
OGE Energy (B)	$	750.0		$	447.0	0.30	%	(E)	December 13, 2017	(F)
OG&E (C)	400.0			2.1		0.53	%	(E)	December 13, 2017	(F)
Total	$	1,150.0	(D)	$	449.1	0.30	%


(A)	Includes direct borrowings under the revolving credit agreements, commercial paper borrowings and letters of credit at September 30, 2013.


(B)	This bank facility is available to back up OGE Energy's commercial paper borrowings and to provide revolving credit borrowings. This bank facility can also be used as a letter of credit facility.


(C)	This bank facility is available to back up OG&E's commercial paper borrowings and to provide revolving credit borrowings. This bank facility can also be used as a letter of credit facility.


(D)	Effective May 1, 2013, Enable Midstream Partners entered into a $1.4 billion, five-year senior unsecured revolving credit facility in accordance with the terms of the Master Formation Agreement and Enogex LLC's $400 million revolving credit facility was terminated.


(E)	Represents the weighted-average interest rate for the outstanding borrowings under the revolving credit agreements, commercial paper borrowings and letters of credit.

(F)

In December 2011, the Company and OG&E entered into unsecured five-year revolving credit agreements to total in the aggregate $1,150.0 million ($750 million for the Company and $400 million for OG&E). Each of the credit facilities contain an option, which may be exercised up to two times, to extend the term for an additional year, subject to consent of a specified percentage of the lenders. Effective July 29, 2013, the Company and OG&E utilized one of these one-year extensions, and received consent from all of the lenders, to extend the maturity of their credit agreements to December 13, 2017.

The Company's 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 Company's credit facilities could cause annual fees and borrowing rates to increase if an adverse ratings impact occurs. The impact of any future downgrade could include an increase in the costs of the Company's short-term borrowings, but a reduction in the Company's 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 Company to post cash 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 million in short-term borrowings at any one time for a two-year period beginning January 1, 2013 and ending December 31, 2014.


11.	Retirement Plans and Postretirement Benefit Plans

The details of net periodic benefit cost of the Company's Pension Plan, the Restoration of Retirement Income Plan and the postretirement benefit plans included in the Condensed Consolidated Financial Statements are as follows:

Net Periodic Benefit Cost



	Pension Plan												Restoration of Retirement Income Plan
	Three Months Ended						Nine Months Ended						Three Months Ended				Nine Months Ended
	September 30,						September 30,						September 30,				September 30,
(In millions)	2013 (B)			2012 (B)			2013 (C)			2012 (C)			2013 (B)		2012 (B)		2013 (C)		2012 (C)
Service cost	$	4.8		$	4.5		$	14.3		$	13.5		$	0.3	$	0.3	$	0.9	$	0.8
Interest cost	6.6			7.5			20.0			22.5			0.1		0.1		0.4		0.4
Expected return on plan assets	(12.1		)	(11.5		)	(36.3		)	(34.5		)	—		—		—		—
Amortization of net loss	6.6			6.0			19.8			17.9			0.1		0.1		0.3		0.3
Amortization of unrecognized prior service cost (A)	0.5			0.5			1.4			1.6			0.1		0.2		0.2		0.5
Total net periodic benefit cost	6.4			7.0			19.2			21.0			0.6		0.7		1.8		2.0
Less: Amount paid by unconsolidated affiliates	1.5			—			2.5			—			0.1		—		0.1		—
Net periodic benefit cost (net of unconsolidated affiliates)	$	4.9		$	7.0		$	16.7		$	21.0		$	0.5	$	0.7	$	1.7	$	2.0


(A)	Unamortized prior service cost is amortized on a straight-line basis over the average remaining service period to the first eligibility age of participants who are expected to receive a benefit and are active at the date of the plan amendment.

(B)

In addition to the $5.4 million and $7.7 million of net periodic benefit cost recognized during the three months ended September 30, 2013 and 2012, respectively, OG&E recognized an increase in pension expense during the three months ended September 30, 2013 and 2012 of $1.5 million and $1.9 million, respectively, to maintain the allowable amount to be recovered for pension expense in the Oklahoma jurisdiction which are included in the Pension tracker regulatory liability (see Note 1).

(C)

In addition to the $18.4 million and $23.0 million of net periodic benefit cost recognized during the nine months ended September 30, 2013 and 2012, respectively, OG&E recognized an increase in pension expense during the nine months ended September 30, 2013 and 2012 of $4.6 million and $7.6 million, respectively, to maintain the allowable amount to be recovered for pension expense in the Oklahoma jurisdiction which are included in the Pension tracker regulatory liability (see Note 1).



	Postretirement Benefit Plans
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2013 (B)			2012 (B)			2013 (C)			2012 (C)
Service cost	$	1.1		$	1.0		$	3.3		$	3.1
Interest cost	2.5			2.9			7.7			8.9
Expected return on plan assets	(0.6		)	(0.8		)	(1.9		)	(2.3		)
Amortization of transition obligation	—			0.7			—			2.1
Amortization of net loss	5.4			5.2			16.1			15.4
Amortization of unrecognized prior service cost (A)	(4.1		)	(4.1		)	(12.4		)	(12.4		)
Total net periodic benefit cost	4.3			4.9			12.8			14.8
Less: Amount paid by unconsolidated affiliates	0.6			—			1.0			—
Net periodic benefit cost (net of unconsolidated affiliates)	$	3.7		$	4.9		$	11.8		$	14.8


(A)	Unamortized prior service cost is amortized on a straight-line basis over the average remaining service period to the first eligibility age of participants who are expected to receive a benefit and are active at the date of the plan amendment.

(B)

In addition to the $3.7 million and $4.9 million of net periodic benefit cost recognized during the three months ended September 30, 2013 and 2012, respectively, OG&E recognized an increase in postretirement medical expense during the three months ended September 30, 2013 and 2012 of $0.1 million and $0.1 million, respectively, to maintain the allowable amount to be recovered for postretirement medical expense in the Oklahoma jurisdiction which are included in the Pension tracker regulatory liability (see Note 1).

(C)

In addition to the $11.8 million and $14.8 million of net periodic benefit cost recognized during the nine months ended September 30, 2013 and 2012, respectively, OG&E recognized an increase in postretirement medical expense during the nine months ended September 30, 2013 and 2012 of $0.4 million and $0.8 million, respectively, to maintain the allowable amount to be recovered for postretirement medical expense in the Oklahoma jurisdiction which are included in the Pension tracker regulatory liability (see Note 1).

The capitalized portion of net periodic pension benefit cost was $1.1 million and $3.7 million during the three and nine months ended September 30, 2013 as compared to $1.6 million and $4.7 million during the same period in 2012. The capitalized portion of net periodic postretirement benefit cost was $0.7 million and $2.3 million during the three and nine months ended September 30, 2013 as compared to $1.0 million and $3.0 million during the same period in 2012.

Pension Plan Funding

The Company previously reported in its 2012 Form 10-K that it may contribute up to $35 million to its Pension Plan during 2013. In May 2013, the Company contributed $35 million to its Pension Plan. No additional contributions are expected in 2013.


12.	Report of Business Segments

Prior to May 1, 2013, the Company's business was divided into three segments as follows: (i) electric utility, which is engaged in the generation, transmission, distribution and sale of electric energy, (ii) natural gas transportation and storage and (iii) natural gas gathering and processing. On March 14, 2013, OGE Energy entered into a Master Formation Agreement with the ArcLight group and CenterPoint Energy, Inc., pursuant to which OGE Energy, the ArcLight Group and CenterPoint Energy, Inc., agreed to form Enable Midstream Partners to own and operate the midstream businesses of OGE Energy and CenterPoint that will initially be structured as a private limited partnership. As a result, effective May 1, 2013, OGE Energy deconsolidated its interest in Enogex Holdings LLC and began accounting for its interest in Enable Midstream Partners using the equity method of accounting. The Company's business is now divided into two segments for financial reporting purposes as follows: (i) electric utility and (ii) natural gas midstream operations. 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. Equity in earnings of unconsolidated affiliates in the natural gas midstream operations segment includes OGE Energy's equity interest in Enable Midstream Partners from May 1, 2013 through September 30, 2013. Other than equity in earnings of unconsolidated affiliates, all amounts for the natural gas midstream operations segment are through April 30, 2013. Investment in unconsolidated affiliates in the natural gas midstream operations segment represents OGE Energy's investment in Enable Midstream Partners at September 30, 2013. Other Operations primarily includes the operations of the holding company. Intersegment revenues are recorded at prices comparable to those of unaffiliated customers and are affected by regulatory considerations. In reviewing its segment operating results, the Company focuses on operating income as its measure of segment profit and loss, and, therefore, has presented this information below. The following tables summarize the results of the Company's business segments during the three and nine months ended September 30, 2013 and 2012.



Three Months Ended September 30, 2013	Electric Utility		Natural Gas Midstream Operations		Other Operations			Eliminations			Total
(In millions)
Operating revenues	$	723.2	$	—	$	—		$	—		$	723.2
Cost of goods sold	273.0		—		—			—			273.0
Gross margin on revenues	450.2		—		—			—			450.2
Other operation and maintenance	105.9		—		(3.7		)	—			102.2
Depreciation and amortization	62.5		—		2.9			—			65.4
Taxes other than income	20.8		—		0.9			—			21.7
Operating income (loss)	$	261.0	$	—	$	(0.1	)	$	—		$	260.9
Equity in earnings of unconsolidated affiliates	$	—	$	46.0	$	—		$	—		$	46.0

Investment in unconsolidated affiliates (at historical cost)	$	—	$	1,295.8	$	—		$	—		$	1,295.8
Total assets	$	7,704.0	$	1,311.3	$	172.2		$	(43.3	)	$	9,144.2