Edgar Filing: OGE ENERGY CORP.

Q3 2014 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, 2014

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, 2014, there were 199,319,096 shares of common stock, par value $0.01 per share, outstanding.

OGE ENERGY CORP.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2014

TABLE OF CONTENTS



	Page
GLOSSARY OF TERMS	ii
FORWARD-LOOKING STATEMENTS	1

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income	2
Condensed Consolidated Statements of Comprehensive Income	3
Condensed Consolidated Statements of Cash Flows	4
Condensed Consolidated Balance Sheets	5
Condensed Consolidated Statements of Changes in Stockholders' Equity	7
Notes to Condensed Consolidated Financial Statements	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3. Quantitative and Qualitative Disclosures About Market Risk	44

Item 4. Controls and Procedures	44

Part II - OTHER INFORMATION
Item 1. Legal Proceedings	45

Item 1A. Risk Factors	45

Item 6. Exhibits	45

Signature	46

GLOSSARY OF TERMS

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



Abbreviation	Definition
2013 Form 10-K	Annual Report on Form 10-K for the year ended December 31, 2013
APSC	Arkansas Public Service Commission
ArcLight	Bronco Midstream Holdings, LLC, Bronco Midstream Holdings II, LLC, collectively
ASC	Financial Accounting Standards Board Accounting Standards Codification
ASU	Financial Accounting Standards Board Accounting Standards Update
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	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
NGLs	Natural gas liquids
NO_X	Nitrogen oxide
OCC	Oklahoma Corporation Commission
Off-system sales	Sales to other utilities and power marketers
OG&E	Oklahoma Gas and Electric Company, wholly-owned subsidiary of OGE Energy
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
Restoration of Retirement Income Plan	Supplemental retirement plan to the Pension Plan
SESH	Southeast Supply Header, LLC
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

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 2013 Form 10-K 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 serves, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable's interstate pipelines;


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


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


•	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 that the Company does not control; 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 2013 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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions except per share data)	2014			2013			2014			2013
OPERATING REVENUES
Electric Utility	$	754.7		$	723.2		$	1,926.9		$	1,750.8
Natural Gas Midstream Operations (Note 1)	—			—			—			608.0
Total operating revenues	754.7			723.2			1,926.9			2,358.8
COST OF SALES
Electric Utility	305.3			273.0			869.6			717.8
Natural Gas Midstream Operations (Note 1)	—			—			—			478.8
Total cost of sales	305.3			273.0			869.6			1,196.6
OPERATING EXPENSES
Other operation and maintenance	108.1			102.2			331.9			372.2
Depreciation and amortization	71.7			65.4			207.2			231.7
Taxes other than income	21.5			21.7			66.5			78.1
Total operating expenses	201.3			189.3			605.6			682.0
OPERATING INCOME	248.1			260.9			451.7			480.2
OTHER INCOME (EXPENSE)
Equity in earnings of unconsolidated affiliates (Note 1)	44.7			46.0			131.9			64.5
Allowance for equity funds used during construction	1.1			1.7			3.0			4.4
Other income	7.2			6.2			11.7			25.4
Other expense	(5.8		)	(5.2		)	(11.2		)	(15.9		)
Net other income	47.2			48.7			135.4			78.4
INTEREST EXPENSE
Interest on long-term debt	36.3			35.0			109.2			110.7
Allowance for borrowed funds used during construction	(0.6		)	(0.9		)	(1.7		)	(2.3		)
Interest on short-term debt and other interest charges	1.5			(0.4		)	5.0			3.8
Interest expense	37.2			33.7			112.5			112.2
INCOME BEFORE TAXES	258.1			275.9			474.6			446.4
INCOME TAX EXPENSE	70.8			60.7			137.2			110.2
NET INCOME	187.3			215.2			337.4			336.2
Less: Net income attributable to noncontrolling interests	—			—			—			6.2
NET INCOME ATTRIBUTABLE TO OGE ENERGY	$	187.3		$	215.2		$	337.4		$	330.0
BASIC AVERAGE COMMON SHARES OUTSTANDING	199.3			198.4			199.1			198.1
DILUTED AVERAGE COMMON SHARES OUTSTANDING	200.2			199.7			199.9			199.3
BASIC EARNINGS PER AVERAGE COMMON SHARE ATTRIBUTABLE TO OGE ENERGY COMMON SHAREHOLDERS	$	0.94		$	1.08		$	1.69		$	1.67
DILUTED EARNINGS PER AVERAGE COMMON SHARES ATTRIBUTABLE TO OGE ENERGY COMMON SHAREHOLDERS	$	0.94		$	1.08		$	1.69		$	1.66
DIVIDENDS DECLARED PER COMMON SHARE	$	0.25		$	0.20875		$	0.70		$	0.62625

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 September 30,						Nine Months Ended September 30,
(In millions)	2014			2013			2014			2013
Net income	$	187.3		$	215.2		$	337.4		$	336.2
Other comprehensive income (loss), net of tax
Pension Plan and Restoration of Retirement Income Plan:
Amortization of deferred net loss, net of tax of $0.3, $0.6, $0.9 and $1.8, respectively	0.5			0.9			1.4			2.8
Postretirement Benefit Plans:
Amortization of deferred net loss, net of tax of $0.1, $0.3, $0.4 and $0.9, respectively	0.1			0.6			0.6			1.6
Amortization of prior service cost, net of tax of ($0.2), ($0.3), ($0.8) and ($0.8), respectively	(0.4		)	(0.5		)	(1.3		)	(1.4		)
Deferred commodity contracts hedging losses reclassified in net income, net of tax of $0, $0.3, $0 and $0.2, respectively	—			0.3			—			0.2
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, net of tax	0.3			1.4			0.9			3.4
Comprehensive income	187.6			216.6			338.3			339.6
Less: Comprehensive income attributable to noncontrolling interests	—			—			—			6.3
Less: Deconsolidation of Enogex Holdings	—			—			—			6.1
Total comprehensive income attributable to OGE Energy	$	187.6		$	216.6		$	338.3		$	327.2

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)	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	337.4		$	336.2
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	207.2			233.0
Deferred income taxes and investment tax credits, net	142.1			106.5
Equity in earnings of unconsolidated affiliates	(131.9		)	(64.5		)
Distributions from unconsolidated affiliates	110.1			17.4
Allowance for equity funds used during construction	(3.0		)	(4.4		)
Gain on disposition of assets	(0.2		)	(8.7		)
Stock-based compensation	(5.4		)	(4.9		)
Regulatory assets	1.0			7.4
Regulatory liabilities	(5.6		)	(16.9		)
Other assets	(18.6		)	(9.2		)
Other liabilities	24.8			(18.5		)
Change in certain current assets and liabilities
Accounts receivable, net	(58.8		)	(111.8		)
Accounts receivable - unconsolidated affiliates	5.5			—
Accrued unbilled revenues	(13.3		)	(13.3		)
Fuel, materials and supplies inventories	33.5			5.2
Fuel clause under recoveries	(58.1		)	—
Other current assets	(5.8		)	1.4
Accounts payable	(100.7		)	(15.3		)
Accounts payable - unconsolidated affiliates	—			4.9
Fuel clause over recoveries	(0.4		)	(97.2		)
Other current liabilities	6.7			3.9
Net Cash Provided from Operating Activities	466.5			351.2
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (less allowance for equity funds used during construction)	(437.4		)	(772.9		)
Investment in unconsolidated affiliates	—			(2.7		)
Return of capital - Equity method investments	9.5			—
Proceeds from sale of assets	0.6			36.2
Net Cash Used in Investing Activities	(427.3		)	(739.4		)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt	246.5			247.4
Issuance of common stock	10.1			10.8
Changes in advances with unconsolidated affiliates	—			131.8
Contributions from noncontrolling interest partners	—			107.0
Distributions to noncontrolling interest partners	—			(2.5		)
Payment of long-term debt	(140.1		)	(0.2		)
(Decrease) increase in short-term debt	(28.2		)	16.1
Dividends paid on common stock	(134.3		)	(124.0		)
Net Cash (Used in) Provided from Financing Activities	(46.0		)	386.4
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(6.8		)	(1.8		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	6.8			1.8
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	—

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

OGE ENERGY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS



(In millions)	September 30, 2014		December 31, 2013
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	—	$	6.8
Accounts receivable, less reserve of $1.5 and $1.9, respectively	238.2		179.4
Accounts receivable - unconsolidated affiliates	6.9		12.4
Accrued unbilled revenues	72.0		58.7
Fuel inventories	45.4		74.4
Materials and supplies, at average cost	79.0		80.7
Deferred income taxes	168.2		215.8
Fuel clause under recoveries	84.3		26.2
Other	46.0		40.2
Total current assets	740.0		694.6
OTHER PROPERTY AND INVESTMENTS
Investment in unconsolidated affiliates	1,311.1		1,298.8
Other	67.4		61.0
Total other property and investments	1,378.5		1,359.8
PROPERTY, PLANT AND EQUIPMENT
In service	9,722.6		9,183.1
Construction work in progress	297.5		468.5
Total property, plant and equipment	10,020.1		9,651.6
Less accumulated depreciation	3,093.0		2,978.8
Net property, plant and equipment	6,927.1		6,672.8
DEFERRED CHARGES AND OTHER ASSETS
Regulatory assets	372.6		379.1
Other	44.5		28.4
Total deferred charges and other assets	417.1		407.5
TOTAL ASSETS	$	9,462.7	$	9,134.7

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, 2014			December 31, 2013
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt	$	411.4		$	439.6
Accounts payable	143.1			251.0
Dividends payable	49.8			44.7
Customer deposits	72.4			70.9
Accrued taxes	56.1			39.9
Accrued interest	32.9			43.4
Accrued compensation	43.6			56.9
Long-term debt due within one year	—			100.0
Other	59.8			47.4
Total current liabilities	869.1			1,093.8
LONG-TERM DEBT	2,509.7			2,300.1
DEFERRED CREDITS AND OTHER LIABILITIES
Accrued benefit obligations	247.7			241.5
Deferred income taxes	2,219.2			2,125.3
Regulatory liabilities	266.6			234.2
Other	107.4			102.7
Total deferred credits and other liabilities	2,840.9			2,703.7
Total liabilities	6,219.7			6,097.6
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS' EQUITY
Common stockholders' equity	1,080.7			1,073.6
Retained earnings	2,189.6			1,991.7
Accumulated other comprehensive loss, net of tax	(27.3		)	(28.2		)
Total stockholders' equity	3,243.0			3,037.1
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	9,462.7		$	9,134.7

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, 2013	$	2.0	$	1,071.6		$	1,991.7		$	(28.2	)	$	—		$	—		$	3,037.1
Net income	—		—			337.4			—			—			—			337.4
Other comprehensive income, net of tax	—		—			—			0.9			—			—			0.9
Dividends declared on common stock	—		—			(139.5		)	—			—			—			(139.5		)
Issuance of common stock	—		10.1			—			—			—			—			10.1
Stock-based compensation and other	—		(3.0		)	—			—			—			—			(3.0		)
Balance at September 30, 2014	$	2.0	$	1,078.7		$	2,189.6		$	(27.3	)	$	—		$	—		$	3,243.0

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, 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

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.

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.

The natural gas midstream operations segment currently represents the Company's investment in Enable, through its wholly owned subsidiary OGE Holdings. Enable is engaged in the business of gathering, processing, transporting and storing natural gas. Enable's natural gas gathering and processing assets are strategically located in four states and serve natural gas production from shale developments in the Anadarko, Arkoma and Ark-La-Tex basins. Enable also owns an emerging crude oil gathering business in the Bakken shale formation that commenced initial operations in November 2013. Enable is continuing to construct additional crude oil gathering capacity in this area. Enable's natural gas transportation and storage assets extend from western Oklahoma and the Texas Panhandle to Alabama and from Louisiana to Illinois. For periods prior to the formation of Enable, the natural gas midstream operations segment reflected the consolidated results of Enogex Holdings. All significant intercompany transactions have been eliminated in consolidation.

Enable was formed effective May 1, 2013 by OGE Energy, the ArcLight group and CenterPoint Energy, Inc. 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 and the Company deconsolidated its previously held investment in Enogex Holdings and acquired an equity interest in Enable. The Company determined that its contribution of Enogex LLC to Enable met the requirements of being in substance real estate and was recorded at historical cost. The general partner of Enable is equally controlled by CenterPoint and OGE Energy, who each have 50 percent management ownership. Based on the 50/50 management ownership, with neither company having control, effective May 1, 2013, OGE Energy began accounting for its interest in Enable using the equity method of accounting.

On April 16, 2014, Enable completed an initial public offering of 25,000,000 common units resulting in Enable becoming a publicly traded Master Limited Partnership. In connection with Enable’s initial public offering, approximately 61.4 percent of OGE Holdings and CenterPoint’s common units were converted into subordinated units. As a result, following the initial public offering, OGE Holdings owned 42,832,291 common units and 68,150,514 subordinated units of Enable. Holders of subordinated units are not entitled to receive any distribution of available cash until the common units have received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. The subordinated units will convert into common units when Enable has paid at least the minimum quarterly distribution for three years or paid at least 150 percent of the minimum quarterly distribution for one year.

Enable is expected to pay a minimum quarterly distribution of $0.2875 per unit on its outstanding units to the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to its general partner and its affiliates, within 45 days after the end of each quarter. If cash distributions to Enable’s unitholders exceed $0.330625 per unit in any quarter, the general partner will receive increasing percentages, up to 50 percent, of the cash Enable distributes in excess of that amount. OGE Holdings is entitled to 60 percent of those “incentive distributions.” In certain circumstances, the general partner, will have the right to reset the minimum quarterly distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable’s cash distributions at the time of the exercise of this reset election.

At September 30, 2014, OGE Energy held 26.3 percent of the limited partner interests in Enable.

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, 2014 and December 31, 2013, the results of its operations for the three and nine months ended September 30, 2014 and 2013 and the results of its cash flows for the nine months ended September 30, 2014 and 2013, 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, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 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 2013 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, 2014		December 31, 2013
Regulatory Assets
Current
Fuel clause under recoveries	$	84.3	$	26.2
Oklahoma demand program rider under recovery (A)	17.8		10.6
Crossroads wind farm rider under recovery (A)	—		4.7
Other (A)	8.7		7.3
Total Current Regulatory Assets	$	110.8	$	48.8
Non-Current
Benefit obligations regulatory asset	$	219.4	$	227.4
Income taxes recoverable from customers, net	56.1		56.5
Smart Grid	44.0		44.2
Deferred storm expenses	19.4		21.6
Unamortized loss on reacquired debt	16.5		11.8
Deferred pension credits	—		1.4
Other	17.2		16.2
Total Non-Current Regulatory Assets	$	372.6	$	379.1
Regulatory Liabilities
Current
Smart Grid rider over recovery (B)	$	14.5	$	16.7
Fuel clause over recoveries (B)	—		0.4
Crossroads wind farm rider over recovery (B)	10.7		—
Other (B)	1.6		3.1
Total Current Regulatory Liabilities	$	26.8	$	20.2
Non-Current
Accrued removal obligations, net	$	255.7	$	227.7
Pension tracker	10.9		—
Deferred pension credits	—		6.5
Total Non-Current Regulatory Liabilities	$	266.6	$	234.2


(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.

Investment in Unconsolidated Affiliate

OGE Energy's investment in Enable 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 since it does not have the power to direct the activities of Enable that are considered most significant to the economic performance of Enable. As discussed above, OGE Energy accounts for the investment in Enable 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 is limited to OGE Energy's equity investment in Enable as presented on the Company's Condensed Consolidated Balance Sheet at September 30, 2014. The Company evaluates its equity method investment 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 Enable 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 Enable 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, 2014 and 2013.



	Nine Months Ended September 30,
(In millions)	2014			2013
Balance at January 1	$	55.2		$	54.0
Liabilities settled	(0.2		)	(0.4		)
Accretion expense	1.9			1.7
Revisions in estimated cash flows (A)	1.7			(0.7		)
Balance at September 30	$	58.6		$	54.6


(A)	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, 2014. All amounts below are presented net of tax and noncontrolling interest.



	Pension Plan and Restoration of Retirement Income Plan					Postretirement Benefit Plans
(In millions)	Net loss			Prior service cost		Net loss			Prior service cost			Deferred interest rate swap hedging losses			Total
Balance at December 31, 2013	$	(27.4	)	$	0.1	$	(5.8	)	$	5.1		$	(0.2	)	$	(28.2	)
Amounts reclassified from accumulated other comprehensive income (loss)	1.4			—		0.6			(1.3		)	0.2			0.9
Net current period other comprehensive income (loss)	1.4			—		0.6			(1.3		)	0.2			0.9
Balance at September 30, 2014	$	(26.0	)	$	0.1	$	(5.2	)	$	3.8		$	—		$	(27.3	)

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, 2014.



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
(In millions)	September 30, 2014			September 30, 2014
Losses on cash flow hedges
Interest rate swap	$	(0.1	)	$	(0.3	)	Interest expense
	(0.1		)	(0.3		)	Total before tax
	—			(0.1		)	Tax benefit
	$	(0.1	)	$	(0.2	)	Net of tax

Amortization of defined benefit pension items
Actuarial losses	$	(0.8	)	$	(2.3	)	(A)
	(0.8		)	(2.3		)	Total before tax
	(0.3		)	(0.9		)	Tax benefit
	$	(0.5	)	$	(1.4	)	Net of tax

Amortization of postretirement benefit plan items
Actuarial losses	$	(0.2	)	$	(1.0	)	(A)
Prior service credit	0.6			2.1			(A)
	0.4			1.1			Total before tax
	0.1			0.4			Tax expense
	$	0.3		$	0.7		Net of tax

Total reclassifications for the period	$	(0.3	)	$	(0.9	)	Net of tax


(A)	These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (see Note 10 for additional information).


2.	Accounting Pronouncement

In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers" (ASC Topic 606). The new standard provides guidance for all revenue arising from contracts with customers and provides a model for the measurement and recognition of gains and losses arising from the sale of certain nonfinancial assets such as property and equipment, including real estate. The core principle of the revenue model is that an entity should recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. The principles of the standard will be applied in five steps:

1. Identify the contract(s) with a customer

2. Identify the performance obligations in the contract

3. Determine the transaction price

4. Allocate the transaction price to the performance obligations in the contract

5. Recognize revenue when (or as) the entity satisfies a performance obligation

The new guidance is effective for fiscal years beginning after December 15, 2016 and must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach. Early adoption is not permitted. The Company is currently evaluating the potential impact the adoption will have on its consolidated financial statements.


3.	Investment in Unconsolidated Affiliate 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 to own and operate the midstream businesses of OGE Energy and CenterPoint that was initially 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. The Company determined that its contribution of Enogex LLC to Enable met the requirements of being in substance real estate and was recorded at historical cost. 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.

The general partner of Enable is equally controlled by CenterPoint and OGE Energy, who each have 50 percent management ownership. Based on the 50/50 management ownership, with neither company having control, effective May 1, 2013, OGE Energy deconsolidated its interest in Enogex Holdings LLC and began accounting for its interest in Enable 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 in an initial public offering. On April 16, 2014, Enable completed an initial public offering of 25,000,000 common units resulting in Enable becoming a publicly traded Master Limited Partnership. The offering represented approximately 6.0 percent of the limited partner interests and raised approximately $464 million in net proceeds for Enable. In connection with the offering, underwriters exercised their option to purchase 3,750,000 additional common units which were fulfilled with units held by ArcLight. As a result of the offering, OGE Holding's ownership was reduced from 28.5 percent to 26.7 percent. On May 13, 2014, CenterPoint exercised its put right with respect to a 24.95 percent interest in SESH and pursuant to that right, on May 30, 2014, Enable issued 6,322,457 common units representing limited partner interests in Enable in exchange for CenterPoint's 24.95 percent interest in SESH. At September 30, 2014, OGE Energy held 26.3 percent of the limited partner interests in Enable.

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 following the initial public offering. See Note 1 for more information regarding incentive distributions.

Distributions received from Enable were $33.6 million and $110.1 million during the three and nine months ended September 30, 2014.

Related Party Transactions

Prior to May 1, 2013, operating costs charged and related party transactions between the Company and Enogex Holdings were eliminated in consolidation. 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, since its formation on May 1, 2013 are discussed below.

On May 1, 2013, OGE Energy and Enable entered into a Services Agreement, Employee Transition Agreement, and other agreements whereby OGE Energy agreed to provide certain support services to Enable such as accounting, legal, risk management and treasury functions for an initial term ending on April 30, 2016. The support services automatically extend year-to-year at the end of the initial term, unless terminated by Enable with at least 90 days’ notice. Enable may terminate the initial support services at any time with 180 days notice if approved by the board of Enable's general partner. Under these agreements, OGE Energy charged operating costs to Enable of $3.3 million and $6.6 million for the three months ended September 30, 2014 and September 30, 2013, respectively, and $13.1 million and $10.9 million for the nine months ended September 30, 2014 and September 30, 2013, respectively. OGE Energy charges operating costs to OG&E and Enable based on several factors. Operating costs directly related to OG&E and or Enable are assigned as such. Operating costs incurred for the benefit of OG&E and Enable are allocated 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. Effective April 1, 2014, Enable’s general partner, OGE Energy and CenterPoint agreed to reduce certain governance related costs billed to Enable for transition services.

Additionally, OGE Energy agreed to provide seconded employees to Enable to support its operations for an initial term ending on December 31, 2014. In October, 2014, CenterPoint, OGE Energy and Enable agreed to continue the secondment to Enable of approximately 200 OGE Energy employees that participate in OGE Energy's defined benefit and retirement plans beyond December 31, 2014. The Company anticipates that Enable will offer employment to all remaining OGE Energy employees whose secondment will end on December 31, 2014. OGE Energy did not transfer any employees to Enable at formation of the partnership or at any time during the period from May 1, 2013 to September 30, 2014. OGE Energy billed Enable for reimbursement of $25.0 million and $24.0 million during the three months ended September 30, 2014 and September 30, 2013, respectively, and $78.0 million and $40.8 million during the nine months ended September 30, 2014 and five months ended September 30, 2013, respectively, under the Transitional Seconding Agreement for employment costs incurred on or after May 1, 2013.

OGE Energy had accounts receivable from Enable of $6.9 million and $12.4 million as of September 30, 2014 and December 31, 2013, respectively, for amounts billed for transitional services, including the cost of seconded employees.

As of September 30, 2014 OGE Energy determined it cannot reasonably estimate the impact of the costs associated with the termination of employees related to the transfer of employees from OGE Energy to Enable, including the impact of the changes to the actuarial determination of employee benefit plan obligations. Pursuant to the transition agreements, Enable has agreed to reimburse OGE Energy for certain severance and termination costs related to the termination of OGE Energy's seconded employees.

Related Party Transactions with Enable



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2014		2013		2014		2013
Operating Revenues:
Electricity to power electric compression assets	$	4.1	$	3.9	$	10.1	$	5.2
Cost of Sales:
Natural gas transportation services	$	8.8	$	8.7	$	26.2	$	14.5
Natural gas storage services	0.1		3.1		4.5		5.4
Natural gas purchases/(sales) (A)	3.4		9.4		6.9		11.9


(A)	OG&E entered into a new contract with Enable to provide transportation services effective May 1, 2014 which also eliminated the natural gas storage services. In accordance with the cash-out provision of the contract, OG&E purchases gas from Enable when Enable's deliveries exceed OG&E's pipeline receipts. Enable purchases gas from OG&E when OG&E's pipeline receipts exceed Enable's deliveries.

Summarized Financial Information of Enable

Summarized unaudited financial information for 100 percent of Enable is presented below at September 30, 2014 and for the three and nine months ended September 30, 2014 and September 30, 2013.



Balance Sheet	September 30, 2014		December 31, 2013
	(In millions)
Current assets	$	520	$	549
Non-current assets	11,172		10,683
Current liabilities	519		720
Non-current liabilities	2,347		2,331



	Three Months Ended				Nine Months Ended
Income Statement	September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2013
	(In millions)
Operating revenues	$	803	$	796	$	2,632	$	1,298
Cost of sales	439		458		1,550		753
Operating income	152		132		452		207
Net income attributable to Enable	139		123		408		188

Enable concluded that the formation of Enable 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 were accordingly adjusted to estimated fair value, resulting in an increase to equity of $2.2 billion. Due to the Company's determination that its contribution of Enogex LLC to Enable met the requirements of being in substance real estate and thus recording the initial investment at historical cost, the effects of the amortization and depreciation expense associated with the fair value adjustments on Enable's results of operations have been eliminated in the Company's recording of its equity in earnings of Enable.

OGE Energy recorded equity in earnings of unconsolidated affiliates of $44.7 million and $131.9 million for the three and nine months ended September 30, 2014, respectively. Equity in earnings of unconsolidated affiliates includes OGE Energy's share of Enable earnings adjusted for the amortization of the basis difference of OGE Energy's investment in Enogex and its underlying equity in net assets of Enable. The basis difference is the result of the initial contribution of Enogex to Enable in May 2013, and subsequent issuances of equity by Enable, including the IPO in April 2014 and the issuance of common units for the acquisition of CenterPoint's 24.95 percent interest in SESH. 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, as described above.

The difference between the Company's investment in Enable and its underlying equity in the net assets of Enable was $1.0 billion as of September 30, 2014.



	Three Months Ended				Nine Months Ended
Reconciliation of Equity in Earnings of Unconsolidated Affiliates	September 30, 2014		September 30, 2013		September 30, 2014		September 30, 2013
(In millions)
OGE's share of Enable Net Income	$	36.4	$	35.1	$	111.1	$	53.6
Amortization of basis difference	3.4		5.9		10.4		5.9
Elimination of Enogex Holdings fair value and other adjustments	4.9		5.0		10.4		5.0
OGE's Equity in earnings of unconsolidated affiliates	$	44.7	$	46.0	$	131.9	$	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 are as follows:

Level 1 inputs are quoted prices in active markets for identical unrestricted assets or liabilities that are accessible at the measurement date.

Level 2 inputs are inputs other than quoted prices in active markets included within Level 1 that are either directly or indirectly observable at the reporting date for the asset or liability for substantially the full term of the asset or liability. Level 2

inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 inputs are prices or valuation techniques for the asset or liability that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

The Company had no financial instruments measured at fair value on a recurring basis at September 30, 2014.

The following table summarizes the fair value and carrying amount of the Company's financial instruments at September 30, 2014 and December 31, 2013.



	September 30, 2014				December 31, 2013
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-Term Debt
OG&E Senior Notes	$	2,264.1	$	2,627.9	$	2,154.5	$	2,405.0
OG&E Industrial Authority Bonds	135.4		135.4		135.4		135.4
OG&E Tinker Debt	10.2		9.9		10.3		9.1
OGE Energy Senior Notes	100.0		100.5		99.9		103.1

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.	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, 2014 and 2013 related to the Company's performance units, restricted stock and restricted stock units.



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2014		2013		2014		2013
Performance units
Total shareholder return	$	2.0	$	2.5	$	5.9	$	6.4
Earnings per share	0.1		0.6		2.2		1.9
Total performance units	2.1		3.1		8.1		8.3
Restricted stock	—		0.1		0.1		0.3
Total compensation expense	2.1		3.2		8.2		8.6
Less: Amount paid by unconsolidated affiliates	0.6		1.4		2.5		2.0
Net compensation expense	$	1.5	$	1.8	$	5.7	$	6.6
Income tax benefit	$	0.6	$	0.7	$	2.2	$	2.6

The Company has issued new shares to satisfy restricted stock grants and payouts of earned performance units. During the nine months ended September 30, 2014, there were 494,637 shares of new common stock issued pursuant to the Company's stock incentive plans related to restricted stock grants (net of forfeitures) and payouts of earned performance units. During the nine months ended September 30, 2014, there were 2,325 shares of restricted stock returned to the Company to satisfy tax liabilities.


6.	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 2011 or state and local tax examinations by tax authorities for years prior to 2010. 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 2013 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 2014, OG&E recorded an additional reserve for this item of $3.7 million ($2.4 million after the federal tax benefit) related to the same Oklahoma investment tax credits generated in the current year 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.


7.	Common Equity

Automatic Dividend Reinvestment and Stock Purchase Plan

The Company issued 90,151 shares and 280,113 shares of common stock under its Automatic Dividend Reinvestment and Stock Purchase Plan during the three and nine months ended September 30, 2014 and received proceeds of $3.3 million and $10.1 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, 2014, there were 3,565,390 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 and restricted stock units. Basic and diluted earnings per share for the Company were calculated as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions except per share data)	2014		2013		2014		2013
Net Income Attributable to OGE Energy	$	187.3	$	215.2	$	337.4	$	330.0
Average Common Shares Outstanding
Basic average common shares outstanding	199.3		198.4		199.1		198.1
Effect of dilutive securities:
Contingently issuable shares (performance and restricted stock units)	0.9		1.3		0.8		1.2
Diluted average common shares outstanding	200.2		199.7		199.9		199.3
Basic Earnings Per Average Common Share Attributable to OGE Energy Common Shareholders	$	0.94	$	1.08	$	1.69	$	1.67
Diluted Earnings Per Average Common Share Attributable to OGE Energy Common Shareholders	$	0.94	$	1.08	$	1.69	$	1.66
Anti-dilutive shares excluded from earnings per share calculation	—		—		—		—

Dividend Restrictions

The Company’s Certificate of Incorporation place restrictions on the amount of common stock dividends it can pay when preferred stock is outstanding. As there is no preferred stock outstanding, that restriction did not place any effective limit on the Company’s ability to pay dividends to its shareholders. Pursuant to the leverage restriction in the Company’s revolving credit agreement, the Company must maintain a percentage of debt to total capitalization at a level that does not exceed 65 percent. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization, which results in the restriction of approximately $460 million of the Company’s retained earnings from being paid out in dividends. Accordingly, approximately $1.532 billion of the Company’s retained earnings as of December 31, 2013 are unrestricted for the payment of dividends.

The Company depends on receipts from its equity investment in Enable and dividends from OG&E to pay dividends to its shareholders. Enable’s partnership agreement requires that it distribute all “available cash”, as defined as cash on hand at the end of a quarter after the payment of expenses and the establishment of cash reserves, and cash on hand resulting from working capital borrowings made after the end of the quarter. Pursuant to the Federal Power Act, OG&E is restricted from paying dividends from its capital accounts. Dividends are paid from retained earnings. Pursuant to the leverage restriction in OG&E’s revolving credit agreement, OG&E must also maintain a percentage of debt to total capitalization at a level that does not exceed 65 percent. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization, which results in the restriction of approximately $224 million of OG&E’s retained earnings from being paid out in dividends. Accordingly, approximately $1.589 billion of OG&E’s retained earnings as of December 31, 2013 are unrestricted for the payment of dividends.


8.	Long-Term Debt

At September 30, 2014, 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)
0.07%	-	0.20%	Garfield Industrial Authority, January 1, 2025	$	47.0
0.08%	-	0.18%	Muskogee Industrial Authority, January 1, 2025	32.4
0.06%	-	0.15%	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 March 25, 2014, OG&E completed the issuance of $250 million of 4.55 percent senior notes due March 15, 2044. The proceeds from the issuance were added to OG&E's general funds and were used to repay debt, fund capital expenditures and general corporate expenses, and utilized 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.

OG&E Senior Notes Due 2034

On August 1, 2014, OG&E redeemed all $140 million principal amount outstanding of its 6.50 percent senior notes due August 1, 2034 at 103.25 percent of their principal amount, plus accrued interest. The redemption premium of $4.6 million will be deferred and amortized through March 2044 to match the expected regulatory treatment.


9.	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 $411.4 million and $439.6 million at September 30, 2014 and December 31, 2013, respectively. The following table provides information regarding the Company's revolving credit agreements at September 30, 2014.



	Aggregate		Amount		Weighted-Average
Entity	Commitment		Outstanding (A)		Interest Rate			Maturity
	(In millions)
OGE Energy (B)	$	750.0	$	411.4	0.29	%	(D)	December 13, 2018	(E)
OG&E (C)	400.0		2.0		0.47	%	(D)	December 13, 2018	(E)
Total	$	1,150.0	$	413.4	0.29	%


(A)	Includes direct borrowings under the revolving credit agreements, commercial paper borrowings and letters of credit at September 30, 2014.


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

(E)

In December 2011, the Company and OG&E entered into unsecured five-year revolving credit agreements to total in the aggregate $1,150 million ($750 million for the Company and $400 million for OG&E). Each of the facilities contained an option, which could be exercised up to two times, to extend the term of the respective facility for an additional year. In the third quarter of 2013, the Company and OG&E utilized one of those extensions to extend the maturity of their respective credit facility from December 13, 2016 to December 13, 2017. In the second quarter of 2014, the Company and OG&E utilized their second extension to extend the maturity of their respective credit facility from December 13, 2017 to December 13, 2018. As of September 30, 2014, commitments of a single existing lender with respect to approximately $16.3 million and $8.7 million of the Company’s and OG&E’s credit facilities, respectively, however, were not extended and, unless the non-extending lender is replaced in accordance with the terms of the credit facility, such commitments will expire 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 by itself 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. OG&E has requested renewal of this authority for an additional two-year period and expects to receive approval prior to the expiration of its current authority.


10.	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)	2014 (B)			2013 (B)			2014 (C)			2013 (C)			2014 (B)		2013 (B)		2014 (C)		2013 (C)
Service cost	$	3.9		$	4.8		$	11.5		$	14.3		$	0.3	$	0.3	$	0.8	$	0.9
Interest cost	7.0			6.6			21.1			20.0			0.2		0.1		0.5		0.4
Expected return on plan assets	(11.3		)	(12.1		)	(34.0		)	(36.3		)	—		—		—		—
Amortization of net loss	3.6			6.6			10.7			19.8			0.1		0.1		0.2		0.3
Amortization of unrecognized prior service cost (A)	0.4			0.5			1.3			1.4			—		0.1		0.1		0.2
Total net periodic benefit cost	3.6			6.4			10.6			19.2			0.6		0.6		1.6		1.8
Less: Amount paid by unconsolidated affiliates	0.9			1.5			2.6			2.5			—		0.1		0.1		0.1
Net periodic benefit cost (net of unconsolidated affiliates)	$	2.7		$	4.9		$	8.0		$	16.7		$	0.6	$	0.5	$	1.5	$	1.7


(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 $3.3 million and $5.4 million of net periodic benefit cost recognized during the three months ended September 30, 2014 and 2013, respectively, OG&E recognized an increase in pension expense during the three months ended September 30, 2014 and 2013 of $2.8 million and $1.5 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 $9.5 million and $18.4 million of net periodic benefit cost recognized during the nine months ended September 30, 2014 and 2013, respectively, OG&E recognized an increase in pension expense during the nine months ended September 30, 2014 and 2013 of $8.4 million and $4.6 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)	2014 (B)			2013 (B)			2014 (C)			2013 (C)
Service cost	$	0.7		$	1.1		$	2.3		$	3.3
Interest cost	2.8			2.5			8.5			7.7
Expected return on plan assets	(0.6		)	(0.6		)	(1.8		)	(1.9		)
Amortization of net loss	3.1			5.4			9.3			16.1
Amortization of unrecognized prior service cost (A)	(4.1		)	(4.1		)	(12.4		)	(12.4		)
Total net periodic benefit cost	1.9			4.3			5.9			12.8
Less: Amount paid by unconsolidated affiliates	0.3			0.6			1.0			1.0
Net periodic benefit cost (net of unconsolidated affiliates)	$	1.6		$	3.7		$	4.9		$	11.8


(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 $1.6 million and $3.7 million of net periodic benefit cost recognized during the three months ended September 30, 2014 and 2013, respectively, OG&E recognized an increase in postretirement medical expense during the three months ended September 30, 2014 and 2013 of $1.3 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 $4.9 million and $11.8 million of net periodic benefit cost recognized during the nine months ended September 30, 2014 and 2013, respectively, OG&E recognized an increase in postretirement medical expense during the nine months ended September 30, 2014 and 2013 of $3.9 million and $0.4 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).



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2014		2013		2014		2013
Capitalized portion of net periodic pension cost	$	0.9	$	1.6	$	2.6	$	4.8
Capitalized portion of net periodic postretirement benefit cost	0.5		1.1		1.5		3.3


11.	Report of Business Segments

The Company reports its operations in two business segments: (i) the electric utility segment, which is engaged in the generation, transmission, distribution and sale of electric energy, and (ii) natural gas midstream operations segment.

As discussed in Note 3, in connection with the formation of Enable, effective May 1, 2013, OGE Energy deconsolidated its interest in Enogex Holdings and began accounting for its interest in Enable using the equity method of accounting. Accordingly, for periods through April 30, 2013, amounts reported for the natural gas midstream operations segment reflect the operating results of Enogex Holdings. Equity in earnings of unconsolidated affiliates in the natural gas midstream operations segment reflects OGE Energy's equity interest in Enable since May 1, 2013. Investment in unconsolidated affiliates in the natural gas midstream operations segment represents OGE Energy's investment in Enable.

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.

The following tables summarize the results of the Company's business segments during the three and nine months ended September 30, 2014 and 2013.



Three Months Ended September 30, 2014	Electric Utility		Natural Gas Midstream Operations			Other Operations			Eliminations			Total
(In millions)
Operating revenues	$	754.7	$	—		$	—		$	—		$	754.7
Cost of sales	305.3		—			—			—			305.3
Other operation and maintenance	111.0		0.3			(3.2		)	—			108.1
Depreciation and amortization	69.4		—			2.3			—			71.7
Taxes other than income	20.6		—			0.9			—			21.5
Operating income (loss)	248.4		(0.3		)	—			—			248.1
Equity in earnings of unconsolidated affiliates	—		44.7			—			—			44.7
Other income (expense)	2.9		—			(0.3		)	(0.1		)	2.5
Interest expense	35.3		—			2.0			(0.1		)	37.2
Income tax expense	58.7		16.2			(4.1		)	—			70.8
Net income (loss)	$	157.3	$	28.2		$	1.8		$	—		$	187.3
Investment in unconsolidated affiliates (at historical cost)	$	—	$	1,311.1		$	—		$	—		$	1,311.1
Total assets	$	8,003.1	$	1,427.2		$	204.1		$	(171.7	)	$	9,462.7



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 sales	273.0		—		—			—			273.0
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
Other income (expense)	4.1		—		(1.4		)	—			2.7
Interest expense	31.6		—		2.1			—			33.7
Income tax expense	62.0		0.2		(1.6		)	0.1			60.7
Net income (loss)	$	171.5	$	45.8	$	(2.0	)	$	(0.1	)	$	215.2
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



Nine Months Ended September 30, 2014	Electric Utility		Natural Gas Midstream Operations			Other Operations			Eliminations			Total
(In millions)
Operating revenues	$	1,926.9	$	—		$	—		$	—		$	1,926.9
Cost of sales	869.6		—			—			—			869.6
Other operation and maintenance	343.1		0.7			(11.9		)	—			331.9
Depreciation and amortization	198.7		—			8.5			—			207.2
Taxes other than income	63.1		—			3.4			—			66.5
Operating income (loss)	452.4		(0.7		)	—			—			451.7
Equity in earnings of unconsolidated affiliates	—		131.9			—			—			131.9
Other income (expense)	4.5		—			(0.8		)	(0.2		)	3.5
Interest expense	106.7		—			6.0			(0.2		)	112.5
Income tax expense	95.3		49.6			(7.7		)	—			137.2
Net income (loss)	$	254.9	$	81.6		$	0.9		$	—		$	337.4
Investment in unconsolidated affiliates (at historical cost)	$	—	$	1,311.1		$	—		$	—		$	1,311.1
Total assets	$	8,003.1	$	1,427.2		$	204.1		$	(171.7	)	$	9,462.7



Nine Months Ended September 30, 2013	Electric Utility		Natural Gas Midstream Operations		Other Operations			Eliminations			Total
(In millions)
Operating revenues	$	1,753.3	$	630.4	$	—		$	(24.9	)	$	2,358.8
Cost of sales	733.6		489.0		—			(26.0		)	1,196.6
Other operation and maintenance	318.0		60.9		(6.7		)	—			372.2
Depreciation and amortization	185.8		36.8		9.1			—			231.7
Taxes other than income	63.9		10.5		3.7			—			78.1
Operating income (loss)	452.0		33.2		(6.1		)	1.1			480.2
Equity in earnings of unconsolidated affiliates	—		64.5		—			—			64.5
Other income (expense)	9.5		8.9		(4.0		)	(0.5		)	13.9
Interest expense	96.0		10.6		6.1			(0.5		)	112.2
Income tax expense	102.0		16.5		(8.9		)	0.6			110.2
Net income (loss)	263.5		79.5		(7.3		)	0.5			336.2
Less: Net income attributable to noncontrolling interest	—		6.6		—			(0.4		)	6.2
Net income attributable to OGE Energy	$	263.5	$	72.9	$	(7.3	)	$	0.9		$	330.0
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


12.	Commitments and Contingencies

Except as set forth below, in Note 13 and under "Environmental Laws and Regulations" in Item 2 of Part I and in Item 1 of Part II of this Form 10-Q, the circumstances set forth in Notes 16 and 17 to the Company's Consolidated Financial Statements included in the Company's 2013 Form 10-K appropriately represent, in all material respects, the current status of the Company's material commitments and contingent liabilities.

OG&E Minimum Fuel Purchase Commitments

OG&E has coal contracts for purchases through December 2016. As a participant in the SPP integrated marketplace, OG&E now purchases a relatively small percentage of its supply through term gas agreements. Alternatively, OG&E relies on a combination of call natural gas agreements, whereby OG&E has the right but not the obligation to purchase a defined quantity of natural gas, combined with day and intra-day purchases to meet the demands of the SPP market.

Enable Gas Transportation and Storage Agreement

OG&E has historically contracted with Enable for gas transportation and storage services. The stated term of the previous contract expired April 30, 2009, but remained in effect from year-to-year thereafter. On January 31, 2014, in anticipation of entering into a new, five-year contract, OG&E provided written notice of termination of the contract, effective April 30, 2014. On March 17, 2014, OG&E entered into a new gas transportation contract effective May 1, 2014 and expiring April 30, 2019.

Environmental Laws and Regulations

Federal Clean Air Act New Source Review Litigation

As previously reported, in July 2008, OG&E received a request for information from the EPA regarding Federal Clean Air Act compliance at OG&E's Muskogee and Sooner generating plants. In recent years, the EPA has issued similar requests to numerous other electric utilities seeking to determine whether various maintenance, repair and replacement projects should have required permits under the Federal Clean Air Act's new source review process. In January 2012, OG&E received a supplemental request for an update of the previously provided information and for some additional information not previously requested. On May 1, 2012, OG&E responded to the EPA's supplemental request for information.

On July 8, 2013, the Department of Justice, filed a complaint against OG&E in United States District Court for the Western District of Oklahoma alleging that OG&E did not follow the Federal Clean Air Act procedures for projecting emission increases attributable to eight projects that occurred between 2003 and 2006. This complaint seeks to have OG&E submit a new assessment of whether the projects were likely to result in a significant emissions increase. The Sierra Club has intervened in this proceeding.

On August 12, 2013, the Sierra Club filed a separate complaint against OG&E in the United States District Court for the Eastern District of Oklahoma alleging that OG&E projects at Muskogee Unit 6 in 2008, were made without obtaining a prevention of significant deterioration permit and that the plant had exceeded emissions limits for opacity and particulate matter. The Sierra Club seeks a permanent injunction preventing OG&E from operating the Muskogee generating plant. On March 4, 2014, the Eastern District dismissed the prevention of significant deterioration permit claim based on the statute of limitations, but allowed the opacity and particulate matter claims to proceed. To obtain the right to appeal this decision, the Sierra Club subsequently withdrew a Notice of Intent to Sue for additional Clean Air Act violations and asked the Eastern District to dismiss its remaining claims with prejudice. On August 27, 2014, the Eastern District granted the Sierra Club's request. The Sierra Club has filed a Notice of Appeal with the 10th Circuit where briefing is currently scheduled to be completed before the end of 2014.

At this time, OG&E continues to believe that it has acted in compliance with the Federal Clean Air Act, and OG&E expects to vigorously defend against the claims that have been asserted. If OG&E does not prevail in these proceedings, the EPA and the Sierra Club could seek to require OG&E to install additional pollution control equipment, including scrubbers, baghouses and selective catalytic reduction systems with capital costs in excess of $1.1 billion and pay fines and significant penalties as a result of the allegations in the notice of violation. Section 113 of the Federal Clean Air Act (along with the Federal Civil Penalties Inflation Adjustment Act of 1996) provides for civil penalties as much as $37,500 per day for each violation. Due to the uncertain and preliminary nature of this litigation, OG&E cannot provide a range of reasonably possible loss in this case.

Other

In the normal course of business, the Company is confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other appropriate experts to assess the claim. If, in management's opinion, the Company has incurred a probable loss as set forth by GAAP, an estimate is made of the loss and the appropriate accounting entries are reflected in the Company's Condensed Consolidated Financial Statements. At the present time, based on currently available information, the Company believes that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to its financial statements and would not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.


13.	Rate Matters and Regulation

Except as set forth below, the circumstances set forth in Note 16 to the Company's Consolidated Financial Statements included in the Company's 2013 Form 10-K appropriately represent, in all material respects, the current status of the Company's regulatory matters.

Completed Regulatory Matters

Market-Based Rate Authority

On June 29, 2012, OG&E filed its triennial market power update with the FERC to retain its market-based rate authorization in the SPP's energy imbalance service market but to surrender its market-based rate authorization for any market-based rates sales outside of the SPP's energy imbalance service market. On May 2, 2013, the FERC issued an order accepting OG&E's June 2012 triennial market power update.

On December 30, 2013, OG&E submitted to the FERC a market-based rate change in status filing and a revised market-based rate tariff that would authorize OG&E to (i) sell electric energy and capacity at market-based rates without geographic restriction, and (ii) sell ancillary services in the SPP and Midcontinent Independent System Operator, Inc. markets. The primary goal of this filing was to implement the market-based rate authority OG&E needs to fully participate in SPP’s Integrated Marketplace. On February 28, 2014, FERC issued a letter order accepting OG&E’s market-based rate filing and tariff effective March 1, 2014. FERC found that OG&E passed the market power screens and satisfied requirements related to horizontal market power and vertical market power.

Section 206 Complaint

On November 26, 2013, Arkansas Electric Cooperative Corporation filed a complaint at the FERC against OG&E, arguing that the wholesale formula rate contract between OG&E and Arkansas Electric Cooperative Corporation (formerly between OG&E and Arkansas Valley Electric Cooperative) is unjust and unreasonable with respect to several items. OG&E and Arkansas Electric Cooperative Corporation agreed to terms of a settlement and filed the offer of settlement with the FERC on February 24, 2014. On April 17, 2014, the FERC accepted the settlement making it effective as of March 1, 2014. OG&E believes the reduction in revenue will be approximately $1.0 million per year for the term of the agreement, which ends June 30, 2015.

Fuel Adjustment Clause Review for Calendar Year 2012

The OCC routinely reviews the costs recovered from customers through OG&E's fuel adjustment clause. On July 31, 2013, the OCC Staff filed an application to review OG&E's fuel adjustment clause for calendar year 2012, including the prudence of OG&E's electric generation, purchased power and fuel procurement costs. OG&E filed the necessary information and documents needed to satisfy the OCC's minimum filing requirement rules on October 9, 2013. On April 24, 2014, the OCC administrative law judge at the hearing, on the merits, recommended that the OCC find that OG&E's 2012 electric generation, purchased power and fuel procurement processes and costs were prudent. On June 10, 2014, the OCC issued an order approving OG&E’s practices, policies and judgment regarding its electric generation, purchased power, and fuel procurement processes and costs for the calendar year 2012. The order also found that the costs were prudent, reasonable, and mathematically correct.

Pending Regulatory Matters

Energy Efficiency Program Filing

On February 14, 2014, OG&E filed an application with the APSC requesting approval of interim modifications to approved Energy Efficiency Programs, new tariff revisions and the waiver of certain provisions of the Commission’s Rules for Conservation and Energy Efficiency Programs.

Integrated Resource Plans

In June 2014, OG&E initiated the process to update its Integrated Resource Plans in Oklahoma and Arkansas. The Commissions’ rules provide for an update of OG&E’s triennial plan in the event of a significant change in the underlying assumptions used in the previous plan. The current Integrated Resource Plan, submitted in 2012, assumed that the Oklahoma SIP would be followed to comply with Regional Haze requirements. Subsequent to holding technical conferences and public stakeholder meetings, OG&E submitted its revised Integrated Resource Plans to the OCC on August 4, 2014 and to the APSC on September 8, 2014.

Environmental Compliance Plan

On August 6, 2014, OG&E filed an application with the OCC for approval of its plan to comply with EPA’s MATS and Regional Haze FIP while serving the best long-term interests of customers in light of future environmental uncertainties. The application seeks approval of the environmental compliance plan and for a recovery mechanism for the associated costs. The