UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number
Exact name of registrants as specified in their charters, address of principal executive offices and
registrants' telephone number
I.R.S. Employer Identification No.
1-12579
OGE ENERGY CORP.
73-1481638
1-1097
OKLAHOMA GAS AND ELECTRIC COMPANY
73-0382390
321 North Harvey
P.O. Box 321
Oklahoma City, Oklahoma 73101-0321
405-553-3000
State or other jurisdiction of incorporation or organization: Oklahoma
Securities registered pursuant to Section 12(b) of the Act:
Registrant
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
OGE Energy Corp.
Common Stock
OGE
New York Stock Exchange
Oklahoma Gas and Electric Company
None
N/A
N/A
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
OGE Energy Corp. ☑ Yes ☐ No
Oklahoma Gas and Electric Company ☑ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
OGE Energy Corp. ☐ Yes ☑ No
Oklahoma Gas and Electric Company ☐ Yes ☑ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
OGE Energy Corp. ☑ Yes ☐ No
Oklahoma Gas and Electric Company ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
OGE Energy Corp. ☑ Yes ☐ No
Oklahoma Gas and Electric Company ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of
"large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
OGE Energy Corp.
Large Accelerated Filer
☑
Accelerated Filer
☐
Non-accelerated Filer
☐
Smaller reporting company
☐
Emerging growth company ☐
Oklahoma Gas and
Electric Company
Large Accelerated Filer
☐
Accelerated Filer
☐
Non-accelerated Filer
☑
Smaller reporting company
☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
OGE Energy Corp. ☑
Oklahoma Gas and Electric Company ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously
issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers
during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
OGE Energy Corp. ☐ Yes ☑ No
Oklahoma Gas and Electric Company ☐ Yes ☑ No
At June 28, 2024, the last business day of OGE Energy Corp.'s most recently completed second fiscal quarter, the aggregate market value of shares of common stock held by non-affiliates was
$7,170,961,289 based on the number of shares held by non-affiliates (200,867,263) and the reported closing market price of the common stock on the New York Stock Exchange on such date of $35.70.
At June 30, 2024, there was no voting or non-voting common equity of Oklahoma Gas and Electric Company held by non-affiliates.
At January 31, 2025, there were 201,148,883 shares of OGE Energy Corp.'s common stock, par value $0.01 per share, outstanding.
At January 31, 2025, there were 40,378,745 shares of Oklahoma Gas and Electric Company's common stock, par value $2.50 per share, outstanding, all of which were held by OGE Energy Corp. There were
no other shares of capital stock of the registrant outstanding at such date.
DOCUMENTS INCORPORATED BY REFERENCE
The Proxy Statement for OGE Energy Corp.'s 2025 annual meeting of shareowners is incorporated by reference into Part III of this Form 10-K.
This combined Form 10-K represents separate filings by OGE Energy Corp. and Oklahoma Gas and Electric Company. Information contained herein related to an individual registrant is filed by such
registrant on its own behalf. Oklahoma Gas and Electric Company makes no representations as to the information relating to OGE Energy Corp.'s other operations.
Oklahoma Gas and Electric Company meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this form with the reduced disclosure format permitted by
General Instruction I(2).
2
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2024
TABLE OF CONTENTS
Page
GLOSSARY OF TERMS
3
FORWARD-LOOKING STATEMENTS
4
Part I
Item 1. Business
6
Item 1A. Risk Factors
15
Item 1B. Unresolved Staff Comments
24
Item 1C. Cybersecurity
25
Item 2. Properties
26
Item 3. Legal Proceedings
28
Item 4. Mine Safety Disclosures
29
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
30
Item 6. [Reserved]
30
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
31
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
45
Item 8. Financial Statements and Supplementary Data
48
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
106
Item 9A. Controls and Procedures
106
Item 9B. Other Information
109
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
109
Part III
Item 10. Directors, Executive Officers and Corporate Governance
110
Item 11. Executive Compensation
110
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
110
Item 13. Certain Relationships and Related Transactions, and Director Independence
110
Item 14. Principal Accountant Fees and Services
111
Part IV
Item 15. Exhibit and Financial Statement Schedules
112
Item 16. Form 10-K Summary
118
Signatures
119
3
GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations that are found throughout this Form 10-K.
Abbreviation
Definition
2023 Form 10-K
Annual Report on Form 10-K for the year ended December 31, 2023
401(k) Plan
Qualified defined contribution retirement plan
APSC
Arkansas Public Service Commission
ASC
Financial Accounting Standards Board Accounting Standards Codification
ASU
Financial Accounting Standards Board Accounting Standards Update
CO
Carbon dioxide
Code
Internal Revenue Code of 1986
COVID-19
Novel Coronavirus disease
Dry Scrubber
Dry flue gas desulfurization unit with spray dryer absorber
Enable
Enable Midstream Partners, LP, partnership formed to own and operate the midstream businesses of OGE Energy
and CenterPoint Energy, Inc. (prior to December 2, 2021)
Energy Transfer
Energy Transfer LP, a Delaware limited partnership, collectively with its subsidiaries
EPA
U.S. Environmental Protection Agency
Federal Clean Water Act
Federal Water Pollution Control Act of 1972, as amended
FERC
Federal Energy Regulatory Commission
FIP
Federal Implementation Plan
GAAP
Accounting principles generally accepted in the U.S.
IRP
Integrated Resource Plan
kV
Kilovolt
MRG
Member Resource Group
MW
Megawatt
MWh
Megawatt-hour
NAAQS
National Ambient Air Quality Standard
NERC
North American Electric Reliability Corporation
NO
Nitrogen oxide
OCC
Oklahoma Corporation Commission
ODEQ
Oklahoma Department of Environmental Quality
OG&E
Oklahoma Gas and Electric Company, wholly-owned subsidiary of OGE Energy
OGE Energy
OGE Energy Corp., collectively with its subsidiaries, holding company and parent company of OG&E
OSHA
U.S. Department of Labor's Occupational Safety and Health Administration
Other operations
Other operations primarily includes the operations of the holding company, other energy-related investments and
consolidating eliminations
Pension Plan
Qualified defined benefit retirement plan
PM
Particulate matter
Regional Haze
The EPA's Regional Haze Rule
Registrants
OGE Energy and OG&E
Restoration of Retirement Income
Plan
Supplemental retirement plan to the Pension Plan
SIP
State Implementation Plan
SO
Sulfur dioxide
SOFR
Secured Overnight Funding Rate
SPP
Southwest Power Pool
System sales
Sales to OG&E's customers
U.S.
United States of America
USFWS
United States Fish and Wildlife Service
Winter Storm Uri
Unprecedented, prolonged extreme cold weather event in February 2021
2
X
2
4
FILING FORMAT
This combined Form 10-K is separately filed by OGE Energy and OG&E. Information in this combined Form 10-K relating to each individual Registrant is
filed by such Registrant on its own behalf. OG&E makes no representation regarding information relating to any other companies affiliated with OGE Energy.
Neither OGE Energy, nor any of OGE Energy's subsidiaries, other than OG&E, has any obligation in respect of OG&E's debt securities, and holders of such debt
securities should not consider the financial resources or results of operations of OGE Energy nor any of OGE Energy's subsidiaries, other than OG&E (in
relevant circumstances), in making a decision with respect to OG&E's debt securities. Similarly, none of OG&E nor any other subsidiary of OGE Energy has any
obligation with respect to debt securities of OGE Energy. This combined Form 10-K should be read in its entirety. No one section of this combined Form 10-K
deals with all aspects of the subject matter of this combined Form 10-K.
FORWARD-LOOKING STATEMENTS
Except for the historical statements contained herein, the matters discussed within this Form 10-K, including those matters discussed within "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements that are subject to certain risks,
uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words "anticipate," "believe,"
"estimate," "expect," "forecast," "intend," "objective," "plan," "possible," "potential," "project," "target" and similar expressions. Actual results may vary
materially from those expressed in forward-looking statements. In addition to the specific risk factors discussed within "Item 1A. Risk Factors" and "Item 7.
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 inflation rates, and their impact on capital expenditures;
•
the ability of the Registrants to access the capital markets and obtain financing on favorable terms, as well as inflation rates and monetary
fluctuations;
•
the ability to obtain timely and sufficient rate relief to allow for recovery of items such as capital expenditures, fuel and purchased power costs,
operating costs, transmission costs and deferred expenditures;
•
prices and availability of electricity, coal and natural gas;
•
competitive factors, including the extent and timing of the entry of additional competition in the markets served by the Registrants, potentially
through deregulation;
•
the impact on demand for the Registrants' services resulting from cost-competitive advances in technology, such as distributed electricity
generation and customer energy efficiency programs;
•
technological developments, changing markets and other factors that result in competitive disadvantages and create the potential for impairment
of existing assets;
•
factors affecting utility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages;
unusual maintenance or repairs; unanticipated changes to fossil fuel, natural gas or coal supply costs or availability due to higher demand,
shortages, transportation problems or other developments; environmental incidents; or electric transmission or gas pipeline system constraints;
•
availability and prices of raw materials and equipment for current and future construction projects;
•
the effect of retroactive pricing of transactions in the SPP markets or adjustments in market pricing mechanisms by the SPP;
•
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 Registrants' markets;
•
environmental laws, safety laws or other regulations that may impact the cost of operations, restrict or change the way the Registrants' facilities are
operated or result in stranded assets;
•
the ability of the Registrants to meet future capacity requirements mandated by the SPP, which could be impacted by future load growth,
environmental regulations recently finalized by the EPA, and the availability of resources;
•
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 cyberattacks, including the Registrants losing control of their assets and
potential ransoms, and other catastrophic events;
•
the availability, cost, coverage and terms of insurance;
•
changes in the use, perception or regulation of generative artificial intelligence technologies, which could limit the Registrants' ability to utilize such
technology, create risk of enhanced regulatory scrutiny, generate uncertainty around intellectual
5
property ownership, licensing or use, or which could otherwise result in risk of damage to our business, reputation or financial results;
•
creditworthiness of suppliers, customers and other contractual parties, including large, new customers from emerging industries such as
cryptocurrency;
•
social attitudes regarding the electric utility and power industries;
•
identification of suitable investment opportunities to enhance shareholder returns and achieve long-term financial objectives through business
acquisitions and divestitures;
•
increased pension and healthcare costs;
•
national and global events that could adversely affect and/or exacerbate macroeconomic conditions, including inflationary pressures, interest rate
fluctuations, supply chain disruptions, economic recessions, pandemic health events and uncertainty surrounding continued hostilities or sustained
military campaigns, and their collateral consequences;
•
costs and other effects of legal and administrative proceedings, settlements, investigations, claims and matters, including, but not limited to, those
described in this Form 10-K; and
•
other risk factors listed in the reports filed by the Registrants with the Securities and Exchange Commission, including those listed within "Item 1A.
Risk Factors" herein.
The Registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise.
6
PART I
Item 1. Business.
Introduction
OGE Energy is a holding company whose primary investment provides electricity in Oklahoma and western Arkansas. OGE Energy's electric company
operations are conducted through its wholly-owned subsidiary, OG&E, which generates, transmits, distributes and sells electric energy in Oklahoma and
western Arkansas and are reported through OGE Energy's electric company business segment. OG&E's rates are subject to regulation by the OCC, the APSC
and the FERC. OG&E was incorporated in 1902 under the laws of the Oklahoma Territory and is the largest electric company in Oklahoma, with a franchised
service territory that includes Fort Smith, Arkansas and the surrounding communities. OG&E sold its retail natural gas business in 1928 and is no longer
engaged in the natural gas distribution business.
The Registrants' principal executive offices are located at 321 North Harvey, P.O. Box 321, Oklahoma City, Oklahoma, 73101-0321 (telephone 405-553-
3000). OGE Energy's website address is www.oge.com. Through OGE Energy's website, OGE Energy makes available, free of charge, the Registrants' annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such material is electronically filed with or furnished to
the Securities and Exchange Commission. OGE Energy's website and the information contained therein or connected thereto are not intended to be
incorporated into this Form 10-K and should not be considered a part of this Form 10-K. Reports filed with the Securities and Exchange Commission are also
made available on its website at www.sec.gov.
Strategy
OGE Energy's purpose is to energize life, providing life-sustaining and life-enhancing products and services that enrich its communities, encouraging
growth and a higher quality of life. Its business model is centered around growth and sustainability for employees (internally referred to as "members"),
communities and customers and the owners of OGE Energy, its shareholders.
OGE Energy is focused on:
•
strengthening and securing the energy grid to improve reliability and resiliency for all customers;
•
maintaining customer rates that are among the lowest rates in the country by continuing to focus on innovation, intellectual curiosity, and
execution with excellence;
•
delivering top-quartile safety results as it expands capacity of the energy grid with a balanced mix of cost-effective and proven generation
technologies to meet unprecedented demand for electricity;
•
transforming the customer experience through personalized products, programs, services, and self-service technology by centering decisions on
customer impact;
•
driving economic development and job growth by attracting new and diverse businesses to improve the communities it serves in Oklahoma and
Arkansas;
•
delivering on earnings commitments to shareholders to enhance access to lower-cost debt and equity capital that is needed to deploy
infrastructure for the long-term economic health of its communities;
•
fostering strong regulatory and legislative relationships, built on integrity, for the long-term benefit of our customers, communities, shareholders
and members; and
•
developing and growing our members to provide a greater contribution to the company's success, as they improve their own lives and deliver
improved value to communities, customers, and shareholders.
OGE Energy creates long-term shareholder value by targeting the consistent growth of consolidated earnings per share of five to seven percent,
supported by strong load growth enabled by low customer rates and a strategy of investing in lower risk infrastructure projects that improve the economic
vitality of the communities it serves in Oklahoma and Arkansas. In the next five years, OGE Energy expects to continue to grow the dividend, targeting a
dividend payout ratio of 65 to 70 percent. Over the next several years, OGE Energy expects earnings per share growth to exceed the dividend growth rate to
help achieve this target. OGE Energy's financial objectives also include maintaining investment grade credit ratings and providing a strong and reliable
dividend for shareholders.
7
OGE Energy's long-term sustainability is predicated on providing exceptional customer experiences, strengthening the energy grid, investing in proven
technologies to meet generation capacity needs, environmental stewardship, strong governance practices and caring for and supporting its members and
communities.
Electric Operations - OG&E
General
OG&E provides retail electric service to approximately 907,000 customers in Oklahoma and western Arkansas throughout a service area that covers
30,000 square miles including Oklahoma City, the largest city in Oklahoma, Fort Smith, Arkansas, the third largest city in that state, and other large
communities with their contiguous rural and suburban areas. OG&E derived 92 percent of its total electric operating revenues in 2024 from sales in
Oklahoma and the remainder from sales in Arkansas. OG&E does not currently serve wholesale customers in either state.
In 2024, OG&E's system control area peak demand was 7,435 MWs on August 18, 2024, and OG&E's load responsibility peak demand was 6,669 MWs on
August 18, 2024. The following table presents system sales and variations in system sales for 2024, 2023 and 2022.
Year Ended December 31
2024
2024 vs. 2023
2023
2023 vs. 2022
2022
System sales (Millions of MWh)
32.0
7.7%
29.7
(1.0)%
30.0
OG&E is subject to competition in various degrees from government-owned electric systems, municipally-owned electric systems, rural electric
cooperatives and, in certain respects, from other private utilities, power marketers and cogenerators. Oklahoma law forbids the granting of an exclusive
franchise to a utility for providing electricity.
Besides competition from other suppliers or marketers of electricity, OG&E competes with suppliers of other forms of energy. The degree of competition
between suppliers may vary depending on relative costs and supplies of other forms of energy. It is possible that changes in regulatory policies or advances in
technologies such as fuel cells, microturbines, windmills and photovoltaic solar cells will reduce costs of new technology to levels that are equal to or below
that of most central station electricity production. OG&E is committed to a balanced energy mix of proven and cost-effective technologies, while advancing
innovative technologies that show promise. OG&E's ability to maintain relatively low cost, efficient and reliable operations is a significant determinant of its
competitiveness.
8
OKLAHOMA GAS AND ELECTRIC COMPANY
CERTAIN OPERATING STATISTICS
Year Ended December 31
2024
2023
2022
ELECTRIC ENERGY (Millions of MWh)
Generation (exclusive of station use)
14.7
13.3
13.6
Purchased
19.6
18.8
19.0
Total generated and purchased
34.3
32.1
32.6
OG&E use, free service and losses
(1.5 )
(1.6 )
(1.5 )
Electric energy sold
32.8
30.5
31.1
ELECTRIC ENERGY SOLD (Millions of MWh)
Residential
9.8
9.6
10.4
Commercial
10.5
8.5
7.8
Industrial
4.2
4.2
4.3
Oilfield
4.4
4.4
4.4
Public authorities and street light
3.1
3.0
3.1
System sales
32.0
29.7
30.0
Integrated market
0.8
0.8
1.1
Total sales
32.8
30.5
31.1
ELECTRIC OPERATING REVENUES (In millions)
Residential
$
1,148.5 $
1,040.4 $
1,307.0
Commercial
839.1
688.4
818.3
Industrial
254.1
240.5
327.5
Oilfield
227.7
211.9
308.8
Public authorities and street light
262.0
234.9
299.0
System sales revenues
2,731.4
2,416.1
3,060.6
Provision for rate refund and tax refund
(3.0 )
2.0
(1.2 )
Integrated market
74.5
71.6
163.8
Transmission
152.9
143.0
131.7
Other
29.5
41.6
20.8
Total operating revenues
$
2,985.3 $
2,674.3 $
3,375.7
ACTUAL NUMBER OF ELECTRIC CUSTOMERS (At end of year)
Residential
772,140
762,433
756,751
Commercial
107,943
106,787
105,018
Industrial
2,273
2,377
2,464
Oilfield
6,644
6,739
6,791
Public authorities and street light
17,952
17,766
17,735
Total customers
906,952
896,102
888,759
Regulation and Rates
OG&E's retail electric tariffs are regulated by the OCC in Oklahoma and by the APSC in Arkansas. The issuance of certain securities by OG&E is also
regulated by the OCC and the APSC. OG&E's transmission activities, short-term borrowing authorization and accounting practices are subject to the
jurisdiction of the FERC. The Secretary of the U.S. Department of Energy has jurisdiction over some of OG&E's facilities and operations. In 2024, 87 percent of
OG&E's electric revenue was subject to the jurisdiction of the OCC, eight percent to the APSC and five percent to the FERC.
The OCC and the APSC require that, among other things, (i) OGE Energy permits the OCC and the APSC access to the books and records of OGE Energy
and its affiliates relating to transactions with OG&E; (ii) OGE Energy employs accounting and other procedures and controls to protect against subsidization
of non-utility activities by OG&E's customers; and (iii) OGE Energy refrains from pledging OG&E assets or income for affiliate transactions. In addition, the
FERC has access to the books and records of OGE Energy and its affiliates as the FERC deems relevant to costs incurred by OG&E or necessary or appropriate
for the protection of utility customers with respect to the FERC jurisdictional rates.
9
For information concerning OG&E's recently completed and currently pending regulatory proceedings, see Note 14 within "Item 8. Financial Statements
and Supplementary Data."
Regulatory Assets and Liabilities
OG&E, as a regulated electric company, is subject to accounting principles for certain types of rate-regulated activities, which provide that certain
incurred costs that would otherwise be charged to expense can be deferred as regulatory assets, based on the expected recovery from customers in future
rates. Likewise, certain actual or anticipated credits that would otherwise reduce expense can be deferred as regulatory liabilities, based on the expected
flowback to customers in future rates. Management's expected recovery of deferred costs and flowback of deferred credits generally results from specific
decisions by regulators granting such ratemaking treatment.
OG&E records certain incurred costs and obligations as regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is
probable that the costs or obligations will be included in amounts allowable for recovery or refund in future rates. 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 or liabilities, which could have significant financial effects. See Note 1 within
"Item 8. Financial Statements and Supplementary Data" for further discussion of OG&E's regulatory assets and liabilities.
Rate Structures
Oklahoma
OG&E's standard tariff rates include a cost of service component (including an authorized return on capital) plus a fuel adjustment clause mechanism
that allows OG&E to pass through to customers the actual cost of fuel and purchased power.
OG&E offers several alternative customer programs and rate options, as described below.
•
Under OG&E's Smart Grid-enabled SmartHours programs, time-of-use and variable peak pricing rates offer customers the ability to save on their
electricity bills by shifting some of their electricity consumption to off-peak times when demand for electricity is lowest.
•
The Guaranteed Flat Bill option for residential and small general service accounts allows qualifying customers the opportunity to purchase their
electricity needs at a set monthly price for an entire year.
•
The Renewable Energy Credit purchase program, the Green Power Wind Rider and the Utility Solar Program are rate options that make renewable
energy resources available as a voluntary option to all OG&E Oklahoma retail customers. OG&E's ownership and access to wind and solar resources
makes the renewable option a possible choice in meeting the renewable energy needs of OG&E's conservation-minded customers.
•
Load Reduction is a voluntary load curtailment program that provides qualifying OG&E commercial and industrial customers who enroll with the
opportunity to curtail usage on a voluntary basis when OG&E's system conditions merit curtailment action. Large customers greater than 50 MWs
who enroll in the program are also required to participate in Direct Load Control, giving OG&E direct control over the curtailable portion of the
customer's load. Customers that curtail their usage will receive credit for their curtailment response.
•
OG&E offers certain qualifying customers day-ahead price and flex price rate options which allow participating customers to adjust their electricity
consumption based on price signals received from OG&E. The prices for the day-ahead price and flex price rate options are based on OG&E's
projected next day hourly operating costs.
In addition to specific rate structures, OG&E provides customers with other programs such as Average Monthly Billing which helps to make the
customer's bill more predictable on a monthly basis. Similarly, OG&E has energy efficiency programs which provide qualified customers with programs such
as in-home weatherization and opportunities to lower their monthly bill. OG&E also has a Low Income Assistance Program and a Senior Citizen Discount,
which provide qualified customers with a monthly bill credit.
OG&E has Public Schools-Demand and Public Schools Non-Demand rate classes that provide OG&E with flexibility to provide targeted programs for load
management to public schools and their unique usage patterns. OG&E also provides service level, seasonal
10
and time period fuel charge differentiation that allows customers to pay fuel costs that better reflect the underlying costs of providing electric service. Lastly,
OG&E has a military base rider that demonstrates Oklahoma's continued commitment to its military partners.
The previously discussed rate options, coupled with OG&E's other rate choices, provide many tariff options for OG&E's Oklahoma retail customers. The
revenue impacts associated with these options are not determinable in future years because customers may choose to remain on existing rate options
instead of volunteering for the alternative rate option choices. Revenue variations may occur in the future based upon changes in customers' usage
characteristics if they choose alternative rate options.
Arkansas
OG&E's standard tariff rates include a cost of service component (including an authorized return on capital) plus an energy cost recovery mechanism that
allows OG&E to pass through to customers the actual cost of fuel and purchased power. OG&E's current rate order from the APSC includes a formula rate
rider that provides for an annual adjustment to rates if the earned rate of return falls outside of a plus or minus 50 basis point dead-band around the allowed
return on equity. Adjustments are limited to plus or minus four percent of revenue for each rate class for the 12 months preceding the test period. The initial
term for the formula rate rider has expired; however, the APSC ruled that OG&E was able update to its formula rate rider with the last adjustment to rates
occurring in April 2024. Subsequent to the April 2024 update, the formula rate rider will continue until new rates are set in a future general rate review.
OG&E offers several alternative customer programs and rate options, as described below.
•
The time-of-use and variable peak pricing tariffs allow participating customers to save on their electricity bills by shifting some of their electricity
consumption to off-peak times when demand for electricity is lowest.
•
The Renewable Energy Credit purchase program and the Universal Solar Program are rate options that make renewable energy resources available
as a voluntary option to all OG&E Arkansas retail customers. OG&E's ownership and access to wind and solar resources makes the renewable option
a possible choice in meeting the renewable energy needs of OG&E's conservation-minded customers.
•
Load Reduction is a voluntary load curtailment program that provides qualifying OG&E commercial and industrial customers with the opportunity to
curtail usage on a voluntary basis and receive a billing credit when OG&E's system conditions merit curtailment action.
•
OG&E offers certain qualifying customers day-ahead price and flex price rate options which allow participating customers to adjust their electricity
consumption based on a price signal received from OG&E. The day-ahead price and flex price rate options are based on OG&E's projected next day
hourly operating costs.
In addition to specific rate structures, OG&E provides customers with other programs such as the Levelized Billing Plan which helps to make the
customer's bill more predictable on a monthly basis. Similarly, OG&E has energy efficiency programs which provide qualified customers with programs such
as in-home weatherization and opportunities to lower their monthly bill.
Fuel Supply and Generation
The following table presents the OG&E-generated energy produced and purchased, by type, for the last three years.
Generation Mix (A)
2024
2023
2022
Natural gas
74 %
75 %
60 %
Coal
18 %
16 %
30 %
Renewable
8 %
9 %
10 %
Total
100 %
100 %
100 %
(A)
Generation mix calculated as a percent of net MWhs generated and includes purchased power agreements.
OG&E participates in the SPP Integrated Marketplace. As part of the Integrated Marketplace, the SPP has balancing authority responsibilities for its
market participants. The SPP Integrated Marketplace functions as a centralized dispatch, where market participants, including OG&E, submit offers to sell
power to the SPP from their resources and bid to purchase power from the SPP for their customers. The SPP Integrated Marketplace is intended to allow the
SPP to optimize supply offers and demand bids based upon reliability and economic considerations and to determine which generating units will run at any
given time for maximum
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cost-effectiveness within the SPP area. As a result, OG&E's generating units produce output that is different from OG&E's customer load requirements. Net
fuel and purchased power costs are generally recoverable through fuel adjustment clauses.
The following table presents the weighted-average cost of fuel used, by type, for the last three years.
Fuel Cost (A)
(In cents/Kilowatt-Hour)
2024
2023
2022
Natural gas
2.640
2.976
7.032
Coal
3.083
3.385
3.253
Renewable
—
—
—
Total
2.637
2.926
5.480
(A)
Total fuel and purchased power weighted-average cost was 3.139, 2.837 and 5.096 cents per kilowatt-hour in 2024, 2023 and 2022, respectively.
The change in the weighted average cost of fuel in 2024 compared to 2023 and in 2023 compared to 2022 was primarily due to lower natural gas prices.
Fuel costs are generally recoverable through OG&E's fuel adjustment clauses that are approved by the OCC and the APSC. See Notes 1 and 14 within "Item 8.
Financial Statements and Supplementary Data" for further discussion.
The following table presents OG&E's total MWs of generation capability by fuel type for 2024.
Generation
Capability
Percent of Total
Natural gas
4,560
65.9 %
Coal
1,559
22.5 %
Dual fuel generation (coal/gas)
321
4.6 %
Wind
449
6.5 %
Solar
32
0.5 %
Total
6,921
100 %
Natural Gas
As a participant in the SPP Integrated Marketplace, OG&E purchases its natural gas supply through short-term agreements. OG&E relies on a diversified
portfolio of natural gas supply comprised of (i) base load agreements that include first-of-month agreements with a fixed price for the month term; (ii) call
agreements, whereby OG&E has the right but not the obligation to purchase a defined quantity of natural gas; and (iii) day and intra-day purchases to meet
the demands of the SPP Integrated Marketplace. OG&E holds two storage service contracts which provides additional physical storage capacity. These two
contracts provide OG&E security in both volume and price to further help protect customers against volatile natural gas prices.
Coal
OG&E's coal-fired units are designed to burn primarily low sulfur western sub-bituminous coal. The coal purchased in 2024 had a weighted average sulfur
content of 0.23 percent. Based on the average sulfur content and EPA-certified data, OG&E's coal units have an approximate emission rate of 0.15 lbs. of SO2
per MMBtu.
For 2025 through 2027, OG&E has coal supply agreements for 100 percent of its expected coal requirements for the Sooner, Muskogee and River Valley
facilities. In 2024, OG&E purchased 1.9 million tons of coal from its sub-bituminous suppliers. See "Environmental Laws and Regulations" within "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of environmental matters which may affect OG&E in
the future, including its utilization of coal.
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Wind
OG&E owns the 120 MW Centennial, 101 MW OU Spirit and 228 MW Crossroads wind farms. OG&E's current wind power portfolio also includes
purchased power contracts as presented in the following table.
Company
Location
Original Term of
Contract
Expiration of
Contract
MWs
CPV Keenan
Woodward County, OK
20 years
2030
152.0
Edison Mission Energy
Dewey County, OK
20 years
2031
130.0
NextEra Energy
Blackwell, OK
20 years
2032
60.0
Solar
OG&E currently owns and operates the solar sites presented in the following table.
Name
Location
Year Completed
Photovoltaic Panels
MWs
Mustang
Oklahoma City, OK
2015
9,867
2.5
Covington
Covington, OK
2018
38,000
9.7
Choctaw Nation
Durant, OK
2020
15,344
5.0
Chickasaw Nation
Davis, OK
2020
15,344
5.0
Branch
Branch, AR
2021
15,444
5.0
Durant 2
Durant, OK
2022
15,471
5.0
OG&E will continue to evaluate the need to add additional solar sites to its generation portfolio based on customer demand, utility-scale component
supply, cost and reliability.
Environmental Matters
The activities of OG&E are subject to numerous stringent and complex federal, state and local laws and regulations governing environmental protection.
These laws and regulations can change, restrict or otherwise impact the Registrants' business activities in many ways, including the handling or disposal of
waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and
operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative,
civil and criminal penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Management believes that all of
the Registrants' operations are in substantial compliance with current federal, state and local environmental standards.
Changes in presidential administrations can result in uncertainty regarding policy or initiatives relating to activities that may affect the environment. The
Registrants cannot assure that future events, such as changes in existing laws, the promulgation of new laws or regulations, or the development or discovery
of new facts or conditions will not cause them to incur significant costs. In the meantime, the Registrants continue to have obligations to take or complete
action under current environmental rules.
Management continues to evaluate the Registrants' compliance with existing and proposed environmental legislation and regulations and implement
appropriate environmental programs in a competitive market but at the current time, based on existing rules, does not expect capital expenditures for
environmental control facilities to be material for 2025 or 2026. For further discussion of environmental matters and capital expenditures related to
environmental factors that may affect the Registrants, see "2024 Capital Requirements, Sources of Financing and Financing Activities," "Future Capital
Requirements" and "Environmental Laws and Regulations" within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Human Capital Management
Our company fulfills a critical role in the nation's electric utility infrastructure. In order to do so, we need to attract, retain, motivate and develop a high
quality, diverse workforce and provide a safe, inclusive and productive work environment for everyone. Our company's core values are teamwork,
transparency, respect, integrity, public service, and individual safety and well-being. Our company's core beliefs are unleash potential, live safely, achieve
together, create shared trust, value diversity and inclusion, take charge and values matter. We believe that our company's values and beliefs serve as a
foundation for our relationships with our employees, who we refer to internally as "members" of the Registrants. These core values and beliefs are
reinforced to all members at the time of hire, annually through a review of our Code of Ethics and periodically through small and large group meetings. We
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believe the efforts described herein, among others, contribute to our members' sense of purpose for the work we perform and result in the retention of our
members. This belief is supported by OGE Energy being included on Forbes Best Employers in Oklahoma list in 2024 based on safety of work environment,
competitiveness of compensation, opportunities for advancement, openness to telecommuting and how likely members would be to recommend OGE
Energy as an employer. At December 31, 2024, the Registrants had 2,291 full-time employees.
Total Rewards
To help us attract and retain the most qualified individuals for our businesses, we provide a combination of strong compensation and comprehensive
benefit offerings, including healthcare, health savings and flexible spending accounts, short-term and long-term incentive plans, retirement savings plans
with company matching contributions, disability coverage, paid time off, parental leave and employee assistance programs. We also have a defined benefit
pension plan that covers certain members hired on or before December 1, 2009. Our members are also offered two days of paid volunteer leave every year,
which is intended to further enrich both their lives and the lives of others in the communities we serve.
Employee Recruiting, Development and Engagement
We make it a priority to attract, retain, motivate and develop a high-quality workforce. Our recruitment efforts begin with industry and career awareness
efforts directed toward learning institutions, parents and students. We have built partnerships with universities, state career tech systems, state education
departments, technical learning/trade schools, military bases and local school districts to increase awareness of the employment opportunities we provide
and the total rewards packages that are tied to those opportunities. We build these relationships to create talent pipelines that will funnel qualified
individuals back to our organization and the workforce needs we have identified.
We provide our members with a variety of opportunities for career growth and development. Many of the positions in our company are highly
specialized, so having appropriate training and succession planning is critical to business continuity and competitiveness. We provide leadership, career
development and skill-building opportunities, including internal and external training as well as tuition reimbursement, to invest in the next generation of
leaders for our company. The number of annual hours of training per employee that we target, and historically average, aligns with the benchmark published
annually by the American Society of Training and Development.
OGE Energy, like many electric companies across the country, is planning for and managing the effects of turnover of our workforce due to a significant
number of retirements occurring now and expected during the next five to ten years. This will also be a period impacted by major transformation of our
business through technology investments, regulatory changes to our electric generation portfolio and upgrades to our distribution infrastructure.
Management engages in ongoing succession planning discussions, which includes the annual involvement of OGE Energy's Board of Directors as it relates to
officer succession planning.
OGE Energy conducts and/or participates in employee engagement surveys to seek feedback from its members on a variety of topics, including
understanding of and alignment with the company's strategy, objectives, values and beliefs, management practices, operational performance and the
employee value proposition. OGE Energy shares the survey results with members, and senior management incorporates the results of the surveys into their
action plans in order to respond to the feedback and further enhance member engagement. In 2024, OG&E was named a Top Workplace in the Energy and
Utilities sector as a result of an employee engagement survey conducted by a third party.
Safety
At OGE Energy, safety is more than a priority; it is a value and is paramount in the work we perform. Our safety principles are core to who we are and
what we do. These principles are communicated, demonstrated and embraced at all levels of the company and supported by our core belief to "Live Safely."
To us, "Live Safely" means we protect ourselves and others from injury by constant engagement, "always living safely." Our goal is to have zero safety
incidents every year, and we educate all members on our incident and injury-free workplace vision through extensive training on safety culture and task
specific training to perform their work safely.
To achieve our vision of safety excellence, our health and safety professionals, supervisors and Safety Task Force teams conduct routine work
observations to verify members and contractors are following safety protocols and procedures and provide coaching, if necessary. To further drive
improvements in our safety performance, we report and analyze all near misses and incidents to
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understand the causal factors and associated corrective actions necessary to reduce the likelihood of recurrence. We share what we have learned
companywide to provide real-time learning opportunities for all members. We continue to analyze trends and engage in discussions with our members,
creating a dialogue to enhance safety performance and work toward our incident and injury-free workplace. Our focus on safety has contributed to the last
nine years being the safest in our 122-year history. We track our safety performance and benchmark ourselves to a peer utility group, and in 2024, our safety
performance ranked first in such peer group.
Since the inception of our safety principle that all incidents and injuries are preventable and embracing our incident and injury free vision, we have seen
a sustained decline in our injury rate. We have reduced our 5-year averages for OSHA recordable injuries by 67 percent and our Days Away, Restricted,
Transfer Rate by 76 percent since our 2011 baseline. The Days Away, Restricted, Transfer rate is an OSHA calculation that determines how safe businesses
have been in a calendar year in reference to particular types of worker compensation injuries.
OG&E is subject to a number of federal, state and local regulations, which are administered by a variety of agencies. These agencies cover areas such as
health and safety, transportation and the environment. OG&E has processes and procedures for these areas, and we believe we are in material compliance
with all applicable regulations.
Employee and Community Integration
We strive to reinforce the belief that our members are one of our greatest assets by creating a culture of inclusion throughout the company. One of our
core beliefs is to "Value Diversity and Inclusion," which to us means that we embrace the uniqueness of each individual to make us a stronger and more
resourceful organization.
Within our overall recruitment and retention efforts, we are focused on fostering a culture of inclusion so that the company's workforce represents the
communities we serve. Supporting a workplace where we share ideas and leverage our different experiences and perspectives results in business decisions
that address the needs of our various stakeholders. Our collaborative culture encourages creative and innovative thinking, embraces ideas from all our
members, and enables us to grow our business, members, and communities.
Several of the talent pipeline partnerships referenced above are with organizations and trade schools that help integrate into our Company the rich
diversity of our communities. We continue working with others to recruit students to their programs who represent these communities, which can lead to
potential employment for our positions. We have also formed relationships with universities to provide scholarships to students with diverse backgrounds
and have focused on hiring individuals transitioning out of the military.
The company currently has ten employee-led MRGs supporting Asian American & Pacific Islander, Black, Hispanic, Indigenous People, LGBTQ+, Veteran,
and Women members along with new members, those dedicated to public service and to wellness. All groups are voluntary and inclusive. Each MRG selects
an officer of the company to serve as its Executive Sponsor. These MRGs are intended to foster a sense of belonging for all members, inspire conversation,
introduce new ways of thinking about issues, drive innovation among our diverse population of members and provide an opportunity for professional
development, community involvement and recruitment.
15
Information About the Registrants' Executive Officers
The following table presents the names, titles and business experience for the most recent five years for those persons serving as Executive Officers of
the Registrants as of February 18, 2025:
Name
Age
Current Title and Business Experience
Sean Trauschke
57
2020 - Present:
Chairman of the Board, President and Chief Executive Officer of OGE Energy Corp.
Charles B. Walworth
50
2024 - Present:
Chief Financial Officer and Treasurer of OGE Energy Corp.
2024:
Interim Chief Financial Officer and Treasurer of OGE Energy Corp.
2020 - 2024:
Treasurer of OGE Energy Corp.
Sarah R. Stafford
43
2020 - Present:
Controller and Chief Accounting Officer of OGE Energy Corp.
Donnie O. Jones
58
2020 - Present:
Vice President - Utility Operations of OG&E
David A. Parker
48
2020 - Present:
Vice President - Technology, Data and Security of OG&E
2020:
Director Enterprise Security and Risk of OGE Energy Corp.
William H. Sultemeier
57
2022 - Present:
General Counsel, Corporate Secretary and Chief Compliance Officer of OGE Energy Corp.
2020 - 2022:
General Counsel and Chief Compliance Officer of OGE Energy Corp.
No family relationship exists between any of the Executive Officers of the Registrants. Messrs. Trauschke, Walworth, Sultemeier and Ms. Stafford are also
officers of OG&E. Each Executive Officer is to hold office until the next annual election of officers by the Board of Directors which is typically accomplished at
the first regular board meeting following the Annual Meeting of Shareholders, currently scheduled for May 15, 2025.
Item 1A. Risk Factors.
In the discussion of risk factors set forth below, unless the context otherwise requires, the terms "we," "our" and "us" refer to the Registrants. In
addition to the other information in this Form 10-K and other documents filed by us and/or our subsidiaries with the Securities and Exchange Commission
from time to time, the following factors should be carefully considered in evaluating OGE Energy and its subsidiaries. Such factors could affect actual results
and cause results to differ materially from those expressed in any forward-looking statements made by or on behalf of us or our subsidiaries. Additional risks
and uncertainties not currently known to us or that we currently view as immaterial may also impair our business operations.
The Registrants are subject to a variety of risks which can be classified as regulatory, operational, financial and general. Risk factors of OG&E are also risk
factors of OGE Energy.
REGULATORY RISKS
The Registrants' profitability depends to a large extent on the ability of OG&E to fully recover its costs, including its cost of capital, from its customers in a
timely manner, and there may be changes in the regulatory environment that impair its ability to recover costs from its customers.
OG&E is subject to comprehensive regulation by several federal and state regulatory agencies, which significantly influences its operating environment
and its ability to fully recover its costs, including its cost of capital, from customers. Recoverability of any under recovered amounts from OG&E's customers
due to a rise in fuel costs is a significant risk. The utility commissions in the states where OG&E operates regulate many aspects of its electric operations
including siting and construction of facilities, customer service and the rates that OG&E can charge customers. The profitability of the electric operations is
dependent on OG&E's ability to fully recover costs related to providing electricity and power services to its customers in a timely manner. Any failure to
obtain commission approval to increase rates to fully recover costs, or a delay in the receipt of such approval, could have an adverse impact on OG&E's
results of operations. In addition, OG&E's jurisdictions have fuel adjustment clauses that permit OG&E to recover fuel and purchased power costs through
rates without a general rate review, subject to a later determination that such costs were prudently incurred. If the state regulatory commissions determine
that such costs were not prudently incurred, recovery could be disallowed.
In recent years, the regulatory environments in which OG&E operates have received an increased amount of attention. It is possible that there could be
changes in the regulatory environment that would impair OG&E's ability to fully recover costs historically paid by OG&E's customers. State regulatory
commissions generally possess broad powers to ensure that the needs of the utility customers
16
are being met. OG&E cannot assure that the OCC, APSC and the FERC will grant rate increases in the future or in the amounts requested, and they could
instead lower OG&E's rates.
The Registrants are unable to predict the impact on their operating results from future regulatory activities of any of the agencies that regulate OG&E.
Changes in regulations, legislation or the imposition of additional regulations or legislation could have an adverse impact on the Registrants' results of
operations.
OG&E's rates are subject to rate regulation by the states of Oklahoma and Arkansas, as well as by a federal agency, whose regulatory paradigms and
goals may not be consistent.
OG&E is a vertically integrated electric company. Most of its revenue results from the sale of electricity to retail customers subject to bundled rates that
are approved by the applicable state regulatory commission.
OG&E operates in Oklahoma and western Arkansas and is subject to rate regulation by the OCC and the APSC, in addition to FERC regulation of its
transmission activities and any wholesale sales. Exposure to inconsistent state and federal regulatory standards may limit our ability to operate profitably.
Further alteration of the regulatory landscape in which we operate, including a change in our authorized return on equity, may harm our financial position
and results of operations.
Costs of compliance with environmental and other laws and regulations are significant, and the cost of compliance with future environmental and other
laws and regulations may adversely affect our results of operations, financial position or liquidity.
We are subject to extensive federal, state and local environmental statutes, rules and regulations relating to air quality, water quality, waste
management, wildlife conservation, natural resources and health and safety that could, among other things, restrict or limit the output of certain facilities or
the use of certain fuels required for the production of electricity and/or require additional pollution control equipment and otherwise increase costs. We are
also subject to SPP-related capacity methodologies which are expected to continue to impact our future capacity needs. There are significant capital,
operating and other costs associated with compliance with these environmental and other statutes, rules and regulations and those costs may be even more
significant in the future.
In response to recent regulatory and judicial decisions and international accords, emissions of greenhouse gases including, most significantly, CO2, could
be restricted in the future as a result of federal or state legal requirements or litigation relating to greenhouse gas emissions. Rules from the EPA to reduce
emissions of greenhouse gases from fossil fuel-fired electric generating units under the Clean Air Act Section 111 were finalized in 2024, but the rules still
might change before implementation. For example, as detailed further below, power plant-specific rules are currently under judicial review and could
ultimately be upheld, modified, or overturned. In addition, legislation reflecting a focus on reducing greenhouse gas emissions may potentially be introduced
in Congress. Any such changes, as well as any enforcement actions or judicial decisions regarding those laws and regulations, could result in significant
additional compliance costs that would affect our future financial position, results of operations and cash flows if such costs are not recovered through
regulated rates. Such changes also could affect the manner in which we conduct our business and could require us to make substantial additional capital
expenditures or abandon certain projects.
Recent environmental regulations may also impact our plan to comply with potential additional changes to the SPP’s planning reserve margin and, as
further discussed in Note 14 within "Item 8. Financial Statements and Supplementary Data," recent changes to the resource capacity accreditation
methodologies for both thermal and renewable resources. Both changes may increase OG&E's generation capacity needs. We may be constrained by the
ability to procure resources or labor that is needed to construct projects on time and at a reasonable price, which could significantly impact the extent to
which we can successfully comply with these proposed environmental regulations and SPP requirements.
There is inherent risk of the incurrence of environmental costs and liabilities in our operations and historical industry practices. These activities are
subject to stringent and complex federal, state and local laws and regulations that can restrict or impact OG&E's business activities in many ways, such as
restricting the way OG&E can handle or dispose of its wastes or requiring remedial action to mitigate pollution conditions that may be caused by its
operations or that are attributable to former operators. OG&E may be unable to recover these costs from insurance or other regulatory mechanisms, or
certain insurance may be unavailable to us. If regulations are enacted regarding any of our generating units, as listed in "Item 2. Properties," it could
potentially result in stranded assets.
17
In addition, we may be required to make significant expenditures in connection with the investigation and remediation of alleged or actual spills,
personal injury or property damage claims, and the repair, upgrade or expansion of our facilities to meet future requirements and obligations under
environmental laws.
For further discussion of environmental matters that may affect the Registrants, see "Environmental Laws and Regulations" within "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations."
We are subject to financial risks associated with climate change and the transition to a lower carbon economy.
In addition to the potential for physical risk related to climate change (discussed below), climate change, and the risks related to our transition to a lower
carbon economy, creates financial risk. Transition risks represent those risks related to the social and economic changes needed to shift toward a lower
carbon future. These risks are often interconnected, representing policy and regulatory changes, technology and market risks, and risks to our reputation and
financial performance.
Potential regulation associated with climate change legislation could pose financial risks to OGE Energy and its affiliates. Potential legislation and
regulation as discussed above, could result in enforceable greenhouse gas emission reduction requirements that could lead to increased compliance costs for
OGE Energy and its affiliates. For example, in May 2024, the EPA finalized rules to reduce emissions of greenhouse gases from fossil fuel-fired electric
generating units under Clean Air Act Section 111 for both new units and existing units. However, as detailed further below, these power plant-specific rules
are currently under judicial review and could ultimately be upheld, modified, or overturned. For further discussion, see "Environmental Laws and
Regulations" within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." It is unknown what the outcome, or
any potential material impacts, if any, will be from the litigation or any final action by the EPA.
As we expand our cleaner energy generation asset mix, the ability to integrate renewable technologies into our operations and maintain reliability and
affordability is key. The intermittency of renewables remains a critical challenge particularly as cost-efficient energy storage is still in development. Other
technology risks include the need for significant upfront financial investments, lengthy development timelines, and the uncertainty of integration and
scalability across our entire service territory.
In addition, to the extent that any climate change adversely affects the national or regional economic health through physical impacts or increased rates
caused by the inclusion of additional regulatory costs, CO2 taxes or imposed costs, OGE Energy and its affiliates may be adversely impacted. There are also
increasing risks for energy companies from shareholders currently invested in fossil-fuel energy companies concerned about the potential effects of climate
change who may elect in the future to shift some or all of their investments into entities that emit lower levels of greenhouse gases or into non-energy
related sectors. Institutional investors and lenders who provide financing to fossil-fuel energy companies also have become more attentive to sustainable
investing and lending practices and some of them may elect not to provide funding for fossil fuel energy companies. To the extent financial markets view
climate change and emissions of greenhouse gases as a financial risk, this could negatively affect our ability to access capital markets or cause us to receive
less than ideal terms and conditions.
In addition, we may be subject to financial risks from private party litigation relating to greenhouse gas emissions. Defense costs associated with such
litigation can be significant and an adverse outcome could require substantial capital expenditures and could possibly require payment of substantial
penalties or damages. Such payments or expenditures could affect results of operations, financial condition or cash flows if such costs are not recovered
through regulated rates.
We may not be able to recover the costs of our substantial investments in capital improvements and additions.
Our business plan calls for extensive investments in capital improvements and additions in OG&E, including modernizing existing infrastructure as well as
other initiatives. Significant portions of OG&E's facilities were constructed many years ago. Older generation equipment, even if maintained in accordance
with good engineering practices, may require significant capital expenditures to maintain efficiency, to comply with environmental requirements or to
provide reliable operations. The Infrastructure Investment and Jobs Act and Inflation Reduction Act present opportunities for federal grants and tax
incentives intended to hasten the future economy-wide deployment of various greenhouse gas emission reducing technologies and approaches. We have
been awarded grant funds for specific projects through the Infrastructure Investment and Jobs Act, and we plan to pursue additional opportunities available
to us under this Act, however, under the Trump Administration, the status of additional funding under these Acts is unclear at this time. We expect to
typically be responsible for any project costs not covered by grants on further investments related to this Act. OG&E currently provides service at rates
approved by one or more regulatory commissions. If these regulatory commissions do not approve adjustments to the rates OG&E charges, it would not be
able to recover the costs associated with its planned extensive investment.
18
This could adversely affect the Registrants' financial position and results of operations. While OG&E may seek to limit the impact of any denied recovery by
attempting to reduce the scope of its capital investment, there can be no assurance as to the effectiveness of any such mitigation efforts, particularly with
respect to previously incurred costs and commitments.
The regional power market in which OG&E operates has changing transmission regulatory structures, which may affect the transmission assets and
related revenues and expenses.
OG&E currently owns and operates transmission and generation facilities as part of a vertically integrated electric company. OG&E is a member of the
SPP regional transmission organization and has transferred operational authority (but not ownership) of OG&E's transmission facilities to the SPP. The SPP
has implemented regional day ahead and real-time markets for energy and operating reserves, as well as associated transmission congestion rights.
Collectively, the three markets operate together under the global name, SPP Integrated Marketplace. OG&E represents owned and contracted generation
assets and customer load in the SPP Integrated Marketplace for the sole benefit of its customers. OG&E has not participated in the SPP Integrated
Marketplace for any speculative trading activities. Our revenues, expenses, assets and liabilities may be adversely affected by changes in the organization,
operation and regulation of the SPP Integrated Marketplace by the FERC or the SPP.
Increased competition resulting from efforts to restructure utility and energy markets or deregulation could have a significant financial and load growth
impact on us and consequently impact our revenue and affordability of services.
We have been and will continue to be affected by competitive changes to the utility and energy industries. Significant changes have occurred and
additional changes have been proposed to the wholesale electric market. Retail competition and the unbundling of regulated energy service could have a
significant financial impact on us due to possible impairments of assets, a loss of retail customers, impact profit margins and/or increased costs of capital.
Further, we regularly engage in negotiations on renewals of franchise agreements with municipal governments within our service territories. Any such
restructuring could have a significant impact on our financial position, results of operations and cash flows. Further, our load growth could be impacted,
which could result in an impact on the affordability of our services. We cannot predict when we will be subject to changes in legislation or regulation, nor can
we predict the impact of these changes on our financial position, results of operations or cash flows.
We are subject to substantial regulation by governmental agencies. Compliance with current and future regulatory requirements and procurement of
necessary approvals, permits and certifications may result in significant costs to us.
We are subject to substantial regulation from federal, state and local regulatory agencies. We are required to comply with numerous laws and
regulations and to obtain permits, approvals and certifications from the governmental agencies that regulate various aspects of our businesses, including
customer rates, service regulations, retail service territories, sales of securities, asset acquisitions and sales, accounting policies and practices and the
operation of generating facilities. We believe the necessary permits, approvals and certificates have been obtained for our existing operations and that our
business is conducted in accordance with applicable laws; however, we are unable to predict the impact on our operating results from future regulatory
activities of these agencies.
The NERC is responsible for the development and enforcement of mandatory reliability and cyber security standards for the wholesale electric power
system. OG&E's plan is to comply with all applicable standards and to expediently correct a violation should it occur. As one of OG&E's regulators, the NERC
has comprehensive regulations and standards related to the reliability and security of our operating systems and is continuously developing additional
mandatory compliance requirements for the electric power industry. The increasing development of NERC rules and standards will increase compliance costs
and our exposure for potential violations of these standards.
OPERATIONAL RISKS
Our results of operations may be impacted by disruptions to fuel supply or the electric grid that are beyond our control.
We are exposed to risks related to performance of contractual obligations by our suppliers and transporters. We are dependent on coal and natural gas
for much of our electric generating capacity. We rely on suppliers to deliver coal and natural gas in accordance with short- and long-term contracts. We have
certain supply and transportation contracts in place; however, there can be no assurance that the counterparties to these agreements will fulfill their
obligations to supply and transport coal and natural gas to us. The suppliers and transporters under these agreements may experience financial or technical
problems that inhibit their ability to fulfill their obligations to us. In addition, the suppliers and transporters under these agreements may not be required to
provide the commodity
19
or service under certain circumstances, such as in the event of a natural disaster. Deliveries may be subject to short-term interruptions or reductions due to
various factors, including transportation problems, weather, availability of equipment and labor shortages. Failure or delay by our suppliers and transporters
of coal and natural gas could disrupt our ability to deliver electricity and require us to incur additional expenses to meet the needs of our customers.
Additionally, due to our generation and transmission systems being part of an interconnected regional grid, we face the risk of possible loss of business
due to a disruption or black-out caused by an event such as a severe storm, generator or transmission facility outage on a neighboring system or the actions
of a neighboring utility. Any such disruption could result in a significant decrease in revenues and significant additional costs to repair assets, which could
have a material adverse impact on our financial position, results of operations and cash flows.
OG&E's electric generation, transmission and distribution assets are subject to operational risks that could result in unscheduled plant outages,
unanticipated operation and maintenance expenses, increased purchased power costs, accidents and third-party liability.
OG&E owns and operates coal-fired, natural gas-fired, wind-powered and solar-powered generating assets. Operation of electric generation,
transmission and distribution assets involves risks that can adversely affect energy output and efficiency levels or that could result in loss of human life,
significant damage to property, environmental pollution and impairment of OG&E's operations. Included among these risks are:
•
increased prices for fuel, fuel transportation, purchased power and purchased capacity as existing contracts expire;
•
facility shutdowns due to a breakdown or failure of equipment or processes or interruptions in fuel supply;
•
operator or contractor error or safety related stoppages;
•
disruptions in the delivery of electricity;
•
intentional destruction of electric grid equipment; and
•
catastrophic events such as fires, explosions, tornadoes, floods, earthquakes or other similar occurrences.
The occurrence of any of these events, if not fully covered by insurance or if insurance is not available to us, could have a material effect on our financial
position and results of operations. Further, when unplanned maintenance work is required on power plants or other equipment, OG&E will not only incur
unexpected maintenance expenses, but it may also have to make spot market purchases of replacement electricity that could exceed OG&E's costs of
generation, or be forced to retire a generation unit if the cost or timing of the maintenance is not reasonable and prudent. If OG&E is unable to recover any
of these increased costs in rates, it could have a material adverse effect on our financial performance.
Changes in technology, regulatory policies and customer electricity consumption may cause our assets to be less competitive and impact our results of
operations.
OG&E is a vertically integrated electric company and primarily generates electricity at large central facilities. We believe this method is the most efficient
and cost-effective method for power delivery, as it typically results in economies of scale and lower costs than newer technologies such as fuel cells,
microturbines, wind turbines and photovoltaic solar cells. It is possible that advances in technologies or changes in regulatory policies will reduce costs of
new technology to levels that are equal to or below that of most central station electricity production, which could have a material adverse effect on our
results of operations. OG&E's widespread use of Smart Grid technology allowing for two-way communications between the electric company and its
customers could enable the entry of technology companies into the interface between OG&E and its customers, resulting in unpredictable effects on our
current business.
Reductions in customer electricity consumption, thereby reducing electric sales, could result from increased deployment of renewable energy
technologies as well as increased efficiency of household appliances, among other general efficiency gains in technology. However, this potential reduction in
load would not reduce our need for ongoing investments in our infrastructure to reliably serve our customers. Continued electric infrastructure investment
without increased electricity sales could cause increased rates for customers, potentially resulting in further reductions in electricity sales and reduced
profitability.
20
Weather conditions such as tornadoes, thunderstorms, ice storms, windstorms, flooding, earthquakes, prolonged droughts and the occurrence of wildfires,
as well as seasonal temperature variations may adversely affect our financial position, results of operations and cash flows.
Weather conditions directly influence the demand for electric power. In OG&E's service area, demand for power peaks during the hot summer months,
with market prices also typically peaking at that time. As a result, overall operating results may fluctuate on a seasonal and quarterly basis. In addition, we
have historically sold less power, and consequently received less revenue, when weather conditions are milder. Unusually mild weather in the future could
reduce our revenues, net income, available cash and borrowing ability. Severe weather, such as tornadoes, thunderstorms, ice storms, windstorms, flooding,
earthquakes, prolonged droughts and the occurrence of wildfires, may cause outages and property damage which may require us to incur additional costs
that may not be adequately insured and that may not be recoverable from customers. The effect of the failure of our facilities to operate as planned, as
described above, would be particularly burdensome during a peak demand period. In addition, prolonged droughts could cause a lack of sufficient water for
use in cooling during the electricity generating process.
Physical risks from climate change can be considered in both acute (event-driven) and chronic (longer-term shifts in climate patterns) terms. The effects
of climate change could exacerbate physical changes in weather and the extreme weather events discussed above, including prolonged droughts, rise in
temperatures and more extreme weather events like wildfires and ice storms, among other weather impacts. We have observed some of these events in
recent years, and the trend could continue. OG&E is committed to strengthening and securing our energy grid and infrastructure against extreme weather by
upgrading physical infrastructure, deploying advanced monitoring technologies and devices, and enhancing emergency preparedness and response plans.
These measures aim to ensure reliable service and rapid recovery during severe weather events. OG&E can incur significant restoration costs as a result of
these weather events. If OG&E is unable to recover any of these increased costs in rates, either due to increased investments or restoration costs, it could
have a material adverse effect on our financial performance.
FINANCIAL RISKS
Market performance, increased retirements, changes in retirement plan regulations and increasing costs associated with our Pension Plan, health care
plans and other employee-related benefits may adversely affect our financial position, results of operations or cash flows.
We have a Pension Plan that covers certain employees hired before December 1, 2009. We also have defined benefit postretirement plans that cover
certain employees hired prior to February 1, 2000. Assumptions related to future costs, returns on investments, interest rates and other actuarial
assumptions with respect to the defined benefit retirement and postretirement plans have a significant impact on our results of operations and funding
requirements. We expect to make future contributions to maintain required funding levels as necessary, and it has been our practice to also make voluntary
contributions to maintain more prudent funding levels than minimally required. We may continue to make voluntary contributions in the future. These
amounts are estimates and may change based on actual stock market performance, changes in interest rates and any changes in governmental regulations.
If the employees who participate in the Pension Plan retire when they become eligible for retirement over the next several years, or if our plan
experiences adverse market returns on its investments, or if interest rates materially fall, our pension expense and contributions to the plans could rise
substantially over historical levels. The timing and number of employees retiring and selecting the lump-sum payment option could result in pension
settlement charges that could materially affect our results of operations if we are unable to recover these costs through our electric rates. In addition,
assumptions related to future costs, returns on investments, interest rates and other actuarial assumptions, including projected retirements, have a
significant impact on our financial position and results of operations. Those factors are outside of our control.
In addition to the costs of our Pension Plan, the costs of providing health care benefits to our employees and retirees have increased in recent years. We
believe that our employee benefit costs, including costs related to health care plans for our employees, will continue to rise. The increasing costs and funding
requirements with our Pension Plan, health care plans and other employee benefits may adversely affect our financial position, results of operations or
liquidity.
21
OGE Energy is a holding company with its primary asset being its subsidiary, OG&E.
OGE Energy is a holding company and thus its primary asset is its subsidiary, OG&E. Substantially all of OGE Energy's operations are conducted by this
subsidiary. Consequently, OGE Energy's operating cash flow and its ability to pay dividends and service its indebtedness are dependent upon the operating
cash flow of OG&E and the payment of funds by OG&E to OGE Energy in the form of dividends. At December 31, 2024, OGE Energy and OG&E had
outstanding indebtedness and other liabilities of $9.1 billion. OG&E is a separate legal entity that has no obligation to pay any amounts due on OGE Energy's
indebtedness or to make any funds available for that purpose. In addition, OG&E's ability to pay dividends to OGE Energy depends on any statutory and
contractual restrictions that may be applicable to the entity, which may include requirements to maintain minimum levels of working capital and other
assets. Claims of creditors, including general creditors, of OG&E on its assets will generally have priority over OGE Energy claims (except to the extent that
OGE Energy may be a creditor and its claims are recognized) and claims by OGE Energy shareholders.
In addition, as discussed above, OG&E is regulated by state utility commissions in Oklahoma and Arkansas as well as a federal regulatory agency which
generally possess broad powers to ensure that the needs of customers are being met. To the extent that the state commissions or federal regulatory agency
attempt to impose restrictions on the ability of OG&E to pay dividends to OGE Energy, it could adversely affect its ability to continue to pay dividends.
GENERAL RISKS
Governmental and market reactions to events involving other public companies or other energy companies that are beyond our control may have
negative impacts on our business, financial position, results of operations, cash flows and access to capital.
Accounting irregularities at public companies in general, and energy companies in particular, and investigations by governmental authorities into energy
trading activities and political contributions, could lead to public and regulatory scrutiny and suspicion for public companies, including those in the regulated
and unregulated utility business. Accounting irregularities could cause regulators and legislators to review current accounting practices, financial disclosures
and relationships between companies and their independent auditors. The capital markets and rating agencies also could increase their level of scrutiny. We
believe that we are complying with all applicable laws and accounting standards, but it is difficult or impossible to predict or control what effect any of these
types of events may have on our business, financial position, cash flows or access to the capital markets. It is unclear what additional laws or regulations may
develop, and we cannot predict the ultimate impact of any future changes in accounting regulations or practices in general with respect to public companies,
the energy industry or our operations specifically. Any new accounting standards could affect the way we are required to record revenues, expenses, assets,
liabilities and equity. These changes in accounting standards could lead to negative impacts on reported earnings or decreases in assets or increases in
liabilities that could, in turn, affect our financial position, results of operations and cash flows.
Economic conditions, including inflationary pressures and supply chain disruptions, could negatively impact our business and our results of operations.
Our operations have been and are affected by local, national and worldwide economic conditions. National and global events could adversely affect
and/or exacerbate macroeconomic conditions, including inflationary pressures, interest rate fluctuations, supply chain disruptions, potential tariffs and
economic recessions, which in turn affect our operations and our customers. OG&E has experienced rising costs to produce electricity through increased fuel
prices, raw material inflation, logistical challenges and certain component shortages. We are dependent upon others, such as fuel suppliers and transporters
and suppliers for our capital projects, to help execute our operations. Supply chain disruption has resulted, and may continue to result, in delays in
construction activities and equipment deliveries related to our capital projects.
The consequences of a recession could include a lower level of economic activity and uncertainty regarding energy prices and the capital and commodity
markets. A lower level of economic activity and general inflation could result in a decline in energy consumption, which could adversely affect our revenues
and future growth. Instability in the financial markets, as a result of recession or otherwise, also could affect the cost of capital and our ability to raise capital.
Economic conditions may also impact the valuation of certain long-lived assets that are subject to impairment testing, potentially resulting in impairment
charges, which could have a material adverse impact on our results of operations.
Economic conditions may be impacted by insufficient financial sector liquidity or inflationary pressures, leading to potential increased unemployment,
which could impact the ability of our customers to pay timely, increase customer bankruptcies, and could
22
lead to increased bad debt. If such circumstances occur, we expect that commercial and industrial customers would be impacted first, with residential
customers following.
In addition, economic conditions, particularly budget shortfalls, could increase the pressure on federal, state and local governments to raise additional
funds by increasing corporate tax rates and/or delaying, reducing or eliminating tax credits, grants or other incentives that could have a material adverse
impact on our results of operations and cash flows.
We are subject to cybersecurity risks and increased reliance on processes dependent on technology.
In the regular course of our business, we handle a range of sensitive security and customer information. We are subject to numerous laws and rules
concerning safeguarding and maintaining the confidentiality of this information. A significant security breach of our information systems due to theft,
ransomware, viruses, increased use of artificial intelligence technologies, denial of service, hacking, acts of war or terrorism, or inappropriate release of
certain types of information, including confidential customer information or system operating information, could have a material adverse impact on our
financial position, results of operations and cash flows.
OG&E operates in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network
infrastructure. Despite implementation of security measures, the technology systems are vulnerable to disability, failures or unauthorized access. Such
failures or breaches of the systems could impact the reliability of OG&E's generation, transmission and distribution systems which may result in a loss of
service to customers and also subject OG&E to financial harm due to the significant expense to respond to security breaches or repair system damage. Our
generation and transmission systems are part of an interconnected system. Therefore, a disruption caused by the impact of a cybersecurity incident of the
regional electric transmission grid, natural gas pipeline infrastructure or other fuel sources of our third-party service providers' operations could also
negatively impact our business. If the technology systems were to fail or be breached and not recovered in a timely manner, critical business functions could
be impaired and sensitive confidential data could be compromised, which could have a material adverse impact on our financial position, results of
operations and cash flows.
Security threats continue to evolve and adapt. We and our third-party vendors have been subject to, and will likely continue to be subject to, attempts to
gain unauthorized access to systems and/or confidential data, or to disrupt operations. None of these attempts has individually or in aggregate resulted in a
security incident with a material impact on our financial condition or results of operations. Despite implementation of security and control measures, there
can be no assurance that we will be able to prevent the unauthorized access of our systems and data, or the disruption of our operations, either of which
could have a material impact. Our security procedures, which include among others, virus protection software, cybersecurity controls and monitoring and
our business continuity planning, including disaster recovery policies and back-up systems, may not be adequate or implemented properly to fully address
the adverse effect of cybersecurity attacks on our systems, which could adversely impact our operations.
We maintain property, casualty and cybersecurity insurance that may cover certain resultant cyber and physical damage or third-party injuries caused by
potential cyber events. However, damage and claims arising from such incidents may exceed the amount of any insurance available, certain insurance may
be unavailable to us, and other damage and claims arising from such incidents may not be covered at all. For these reasons, a significant cyber incident could
reduce future net income and cash flows and impact financial condition.
The failure of our technology infrastructure, or the failure to enhance existing technology infrastructure and implement new technology, including
potential generative artificial intelligence, could adversely affect our business.
Our operations are dependent upon the proper functioning of our internal systems, including the technology and network infrastructure that support
our underlying business processes. Any significant failure or malfunction of such technology infrastructure may result in disruptions of our operations. In the
ordinary course of business, we rely on technology infrastructure, including the internet and third-party hosted services, to support a variety of business
processes and activities and to store sensitive data. Our technology infrastructure is dependent upon global communications and cloud service providers, as
well as their respective vendors, many of whom have at some point experienced significant system failures and outages in the past and may experience such
failures and outages in the future. These providers' systems are susceptible to cybersecurity and data breaches, outages from fire, floods, power loss,
telecommunications failures, physical attack and similar events. Failure to prevent or mitigate data loss from system failures or outages could materially
adversely affect our results of operations, financial position and cash flows.
In addition to maintaining our current technology infrastructure, we believe the digital transformation of our business, including potential generative
artificial intelligence, is key to driving internal efficiencies as well as providing additional capabilities to customers.
23
Our technology infrastructure is critical to cost-effective, reliable daily operations and our ability to effectively serve our customers. We expect our customers
to continue to demand more sophisticated technology-driven solutions, and we must enhance or replace our technology infrastructure in response. This
involves significant development and implementation costs to keep pace with changing technologies and customer demand. If we fail to successfully
implement critical technology infrastructure, or if it does not provide the anticipated benefits or meet customer demands, such failure could materially
adversely affect our business strategy as well as impact our results of operations, financial position and cash flows.
Terrorist attacks, and the threat of terrorist attacks, have resulted in increased costs to our business and could impact our ability to operate critical
infrastructure. Continued hostilities or sustained military campaigns may adversely impact our financial position, results of operations and cash flows.
In recent years, physical attacks on electric equipment owned by other electric companies in the U.S. resulted in the loss of power for a period of time.
Authorities have indicated they believe these attacks may have been carried out by domestic extremists, as the U.S. electric grid is noted as being highly
vulnerable to domestic terrorism. While OG&E has experienced physical attacks on its electric equipment, these incidents have not been material to its
operations. The long-term impact of terrorist attacks and the magnitude of the threat of future terrorist attacks on the electric utility in general, and on us in
particular, cannot be known. Increased security measures taken by us as a precaution against possible terrorist attacks have resulted in increased costs to our
business. Uncertainty surrounding continued hostilities or sustained military campaigns may affect our operations in unpredictable ways, including
disruptions of supplies and markets for our products, and the possibility that our infrastructure facilities could be direct targets of, or indirect casualties of, an
act of terror. Changes in the insurance markets attributable to terrorist attacks may make certain types of insurance more difficult for us to obtain. Moreover,
the insurance that may be available to us may be significantly more expensive than existing insurance coverage.
Health epidemics and other outbreaks could adversely impact economic activity and conditions worldwide, which could have a material adverse effect on
our results of operations and financial condition.
Health epidemics and other outbreaks could adversely impact economic activity and conditions worldwide, by, among other things, leading to
shutdowns, disrupting supply chains, increasing unemployment, resulting in customer slow payment or non-payment and decreasing commercial and
industrial load. In response to health epidemics and other outbreaks, an extended slowdown of the United States' economic growth, demand for
commodities and/or material changes in governmental policy could result in lower economic growth and lower demand for electricity in our key markets as
well as the ability of various customers, contractors, suppliers and other business partners to fulfill their obligations, which could have a material adverse
effect on our results of operations, financial condition and prospects.
We face certain human resource risks associated with the availability of trained and qualified labor to meet our future staffing requirements.
Workforce demographic issues challenge employers nationwide and are of particular concern to the electric utility industry. The median age of utility
workers is higher than the national average. Over the next three years, 26.2 percent of our current employees will meet the eligibility requirements to retire.
Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to the new
employees, may adversely affect our ability to manage and operate our business.
We may be able to incur substantially more indebtedness, which may increase the risks created by our indebtedness.
The terms of the indentures governing our debt securities do not fully prohibit OGE Energy or OG&E from incurring additional indebtedness. If we are in
compliance with the financial covenants set forth in our revolving credit agreements and the indentures governing our debt securities, we may be able to
incur substantial additional indebtedness. If we incur additional indebtedness, the related risks that we now face may intensify.
Any reductions in our credit ratings or changes in benchmark interest rates could increase our financing costs and the cost of maintaining certain
contractual relationships or limit our ability to obtain financing on favorable terms.
We cannot assure you that any of the current credit ratings of the Registrants will remain in effect for any given period of time or that a rating will not be
lowered or withdrawn entirely by a rating agency if, in its judgment, circumstances so warrant. Our ability to access the commercial paper market could be
adversely impacted by a credit ratings downgrade or major market disruptions. Pricing grids associated with our credit facilities could cause annual fees and
borrowing rates to increase if an adverse rating impact occurs.
24
The impact of any future downgrade could include an increase in the costs of our short-term borrowings, but a reduction in our 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 us to post collateral or letters of credit.
Beginning December 2022, the Registrants began utilizing SOFR for their credit facility reference rate. SOFR is a relatively new reference rate and we
have been using it for only a relatively short period of time and, accordingly, we do not have much historical rate information. The use of SOFR or transition
to other alternative rates, whether in connection with borrowings under the current credit facilities, or borrowings under replacement facilities or lines of
credit, could expose the Registrants' future borrowings to less favorable rates. If the use of SOFR, or other alternative rates, results in increased alternative
interest rates or if the Registrants' lenders have increased costs due to such changes, then the Registrants' debt that uses benchmark rates could be affected
and, in turn, the Registrants' cash flows and interest expense could be adversely impacted.
Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities.
We have revolving credit agreements for working capital, capital expenditures, acquisitions and other corporate purposes. The credit facilities for OGE
Energy and OG&E have a financial covenant requiring them to maintain a maximum debt to capitalization ratio of 70 percent and 65 percent, respectively.
The levels of our debt could have important consequences, including the following:
•
the ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or
the financing may not be available on favorable terms;
•
a portion of cash flows will be required to make interest payments on the debt, reducing the funds that would otherwise be available for operations
and future business opportunities; and
•
our debt levels may limit our flexibility in responding to changing business and economic conditions.
We are exposed to the credit risk of our key customers and counterparties, and any material nonpayment or nonperformance by our key customers and
counterparties could adversely affect our financial position, results of operations and cash flows.
We are exposed to credit risks in our generation and retail distribution operations. Credit risk includes the risk that counterparties who owe us money or
energy will breach their obligations. If the counterparties to these arrangements fail to perform, we may be forced to enter into alternative arrangements. In
that event, our financial results could be adversely affected, and we could incur losses.
We have seen increased interest for electric service from emerging industries such as data mining and hydrogen production, which are both large
consumers of electricity. If this continues, these types of customers could represent a significant portion of our revenues.
Item 1B. Unresolved Staff Comments.
None.
25
Item 1C. Cybersecurity.
Risk Management and Strategy
In the regular course of business, the Registrants handle a range of sensitive security and customer information. The Registrants are subject to numerous
laws and rules concerning safeguarding and maintaining the confidentiality of this information. The Registrants utilize a risk-based, comprehensive,
systematic and layered approach to cybersecurity risk, which helps them to continually assess, identify and manage enterprise-wide material cybersecurity
risks. This comprehensive approach to protecting the Registrants’ assets, employees, and data - including customer information - utilizes a defense-in-depth
approach, which enables the Registrants to continually evaluate enterprise-wide cyber and physical security risks. The Registrants’ defense-in-depth
methodology is based on leading cybersecurity frameworks, including:
•
U.S. Department of Energy’s Cybersecurity Capability Maturity Model standard,
•
National Institute of Standards and Technology Cybersecurity Framework, and, particularly for the bulk electric system,
•
North American Electric Reliability Corporation’s Critical Infrastructure Protection Standards.
In addition, the Registrants’ cybersecurity team regularly coordinates with industry peers, the Edison Electric Institute, and state and federal agencies to
improve threat intelligence, situational awareness, and security practices.
The Registrants have a comprehensive cybersecurity threat detection and monitoring program for their technology and network infrastructure, which
leverages various systems, processes and operational measures to monitor, detect and respond to cyber incidents. The Registrants have established a
security incident response plan, a business resiliency and event management framework, as well as disaster recovery mechanisms, which are tested and
updated to prepare the Registrants to respond to material cybersecurity threats. The Registrants’ cybersecurity processes, including their threat detection,
monitoring and response protocols, are subject to periodic internal audits. The Registrants’ Enterprise Security team partners with Internal Audit and third-
party experts to conduct periodic penetration tests and assessments of the Registrants' cybersecurity processes.
Cybersecurity risks are integrated into the Registrants’ Enterprise Risk Management process. The Enterprise Risk Management process engages internal
stakeholders, helps identify key internal and external business risks, including cybersecurity risks, and then supports evaluations of those risks, providing
consistent assessment. Key risks are then assessed using a methodology that includes a quantification of potential financial and operational impacts. Priority
cybersecurity risks are assigned internal risk owners which report to the Vice President of Technology, Data and Security, who is responsible for the
Registrants’ Enterprise Security including, among other responsibilities, developing and updating risk management plans.
The Enterprise Security team utilizes third-party consultants to regularly conduct a review of the Registrants’ cybersecurity program that includes
assessing their (i) ability to detect and respond to malicious behavior, (ii) configuration of security tools and (iii) security roadmap, training and staffing plans.
The Enterprise Security team also utilizes multiple sources of threat intelligence information from real time feeds that come from government, industry and
private sources to help stay abreast of emerging threats that could impact the Registrants.
The Registrants have third-party vendor risk management processes to oversee and identify risks from cybersecurity threats associated with their use of
third-party service providers. Enterprise Security works cross-functionally across the companies to review new vendors and their proposed solutions as they
are engaged by the Registrants. The Enterprise Security team’s monitoring and assessment of third-party cybersecurity practices is continuous and ongoing
throughout the Registrants’ relationship with the third party. Based on this process, the Enterprise Security team may require specific security controls on
the third-party application, system, hardware or software being deployed. Enterprise Security monitors vendors for disclosed vulnerabilities and change in
scores from external risk scoring agencies.
The Registrants and their third-party vendors have been subject to, and will likely continue to be subject to, attempts to gain unauthorized access to
systems, or confidential data, or to disrupt operations. None of these attempts has individually or in aggregate resulted in a security incident with a material
impact on the Registrants financial condition or results of operations. Although prior incidents have not materially affected the Registrants, any future
incidents related to the Registrants' information systems due to theft, ransomware, viruses, increased use of artificial intelligence technologies, denial of
service, hacking, acts of war or terrorism, or inappropriate release of certain types of information, including confidential customer information or system
operating information,
26
could have a materially adverse impact on the Registrants, and affect their business strategy, results of operations or its financial condition. See “Item 1A.
Risk Factors” for further discussion.
Governance
The Board of Directors is responsible for reviewing and overseeing the long-term strategic plans and principal issues facing the Registrants and includes
the oversight of the major risk exposures and the risk management activities of the Registrants. As part of its risk oversight role, the Board delegates specific
roles to its committees to help ensure risks, mitigations and opportunities are appropriately monitored and managed. The Audit Committee has overall
oversight responsibility over the Registrants’ major financial risks, while the Nominating, Corporate Governance and Stewardship Committee oversees the
Registrants’ cybersecurity risk exposure and management. These Committees and the full Board of Directors are updated regularly by the Vice President of
Technology, Data and Security and the Director of Enterprise Security on cybersecurity risks and related matters, including results from audits and
assessments of the Registrants’ cybersecurity practices and systems, as well as the results of their incident response and business resiliency exercises.
The Vice President of Technology, Data, and Security leads an information security team responsible for management of cybersecurity risk. The Vice
President of Technology, Data and Security has decades of experience relevant to risk management, information systems and enterprise security. The Vice
President of Technology, Data and Security serves on the Corporate Risk Oversight Committee where cyber risks are regularly discussed and addressed. The
Registrants’ Corporate Risk Oversight Committee includes corporate officers and members of management and is responsible for the overall development,
implementation and enforcement of strategies and policies for all significant risk management activities of the Registrants.
The Registrants’ contingency plans, including its security incident response plan and event management framework, set forth the processes through
which cybersecurity incidents are managed, including how management is informed of cybersecurity incidents. As part of these plans, incidents are
evaluated, classified and elevated, as necessary, to an executive team which includes the Vice President of Technology, Data and Security and other
executives on the Registrants’ Corporate Risk Oversight Committee. Once elevated, these executives are ultimately responsible for the management,
mitigation and remediation of incidents.
Item 2. Properties.
OG&E owns and operates an interconnected electric generation, transmission and distribution system, located in Oklahoma and western Arkansas,
which included 18 generating stations with an aggregate capability of 6,921 MWs at December 31, 2024. The following table presents information with
respect to OG&E's electric generating facilities. Unless otherwise indicated, these electric generating facilities are located in Oklahoma.
27
Station & Unit
Year
Installed
Unit Design
Type
Fuel
Capability
2024
Capacity
Factor (A)
Unit
Capability
(MW)
Station
Capability
(MW)
Seminole
1
1971
Steam-Turbine
Gas
9.0 %
500
2
1973
Steam-Turbine
Gas
15.8 %
513
3
1975
Steam-Turbine
Gas
28.8 %
508
1,521
Muskogee
4
1977
Steam-Turbine
Gas
23.0 %
498
5
1978
Steam-Turbine
Gas
37.7 %
491
6
1984
Steam-Turbine
Coal
11.2 %
521
1,510
Sooner
1
1979
Steam-Turbine
Coal
18.8 %
519
2
1980
Steam-Turbine
Coal
20.0 %
519
1,038
Horseshoe Lake
5A
(B)
1971
Combustion-
Turbine
Gas/Jet Fuel
6.0 %
33
5B
(B)
1971
Combustion-
Turbine
Gas/Jet Fuel
3.9 %
31
8
1969
Steam-Turbine
Gas
14.3 %
377
9
2000
Combustion-
Turbine
Gas
26.8 %
45
10
2000
Combustion-
Turbine
Gas
9.2 %
46
532
Redbud (C)
1
2003
Combined Cycle
Gas
45.2 %
156
2
2003
Combined Cycle
Gas
41.2 %
154
3
2003
Combined Cycle
Gas
40.6 %
154
4
2003
Combined Cycle
Gas
48.5 %
155
619
Mustang
6
2018
Combustion-
Turbine
Gas
—
57
7
2018
Combustion-
Turbine
Gas
0.2 %
56
8
2017
Combustion-
Turbine
Gas
17.3 %
58
9
2018
Combustion-
Turbine
Gas
21.6 %
57
10
2018
Combustion-
Turbine
Gas
30.6 %
55
11
2018
Combustion-
Turbine
Gas
30.7 %
58
12
2018
Combustion-
Turbine
Gas
—
57
398
McClain (D)
1
2001
Combined Cycle
Gas
42.9 %
375
375
Frontier
1
1989
Combined Cycle
Gas
66.4 %
126
126
River Valley
1
1991
Steam-Turbine
Coal/Gas
22.1 %
161
2
1991
Steam-Turbine
Coal/Gas
22.6 %
160
321
Total Generating Capability (all stations, excluding renewable)
6,440
(A)
2024 Capacity Factor = 2024 Net Actual Generation / (2024 Net Maximum Capacity (Nameplate Rating in MWs) x Period Hours (8,784 Hours)). Capacity
Factors are impacted by events that reduce Net Actual Generation such as outages.
(B)
Represents units located at Tinker Air Force Base that are maintained by Horseshoe Lake.
(C)
Represents OG&E's 51 percent ownership interest in the Redbud Plant.
(D)
Represents OG&E's 77 percent ownership interest in the McClain Plant.
28
In 2024, OG&E retired Unit 7 located at the Horseshoe Lake station.
Renewable
2024
Station
Year Installed
Location
Number of
Units
Fuel Capability
Capacity
Factor
(A)
Unit
Capability
(MW)
Station
Capability
(MW)
Crossroads
2011
Canton, OK
98
Wind
15.9 %
2.30
228
Centennial
2007
Laverne, OK
80
Wind
16.1 %
1.50
120
OU Spirit
2009
Woodward, OK
44
Wind
15.3 %
2.30
101
Mustang
2015
Oklahoma City, OK
90
Solar
21.0 %
< 0.1
2
Covington
2018
Covington, OK
4
Solar
20.2 %
2.5
10
Choctaw Nation
2020
Durant, OK
2
Solar
21.2 %
2.5
5
Chickasaw Nation
2020
Davis, OK
2
Solar
23.9 %
2.5
5
Branch
2021
Branch, AR
2
Solar
22.6 %
2.5
5
Durant 2
2022
Durant, OK
2
Solar
24.0 %
2.5
5
Total Generating Capability (renewable)
481
(A)
2024 Capacity Factor = 2024 Net Actual Generation / (2024 Net Maximum Capacity (Nameplate Rating in MWs) x Period Hours (8,784 Hours)). Capacity
Factors are impacted by events that reduce Net Actual Generation such as outages.
The following table presents certain operating data relating to the OG&E's electricity transmission and distribution assets at December 31, 2024.
Oklahoma
Arkansas
Transmission system:
Substations
55
7
Total capacity (million kV-amps)
15.3
2.9
Structure miles - lines
5,208
347
Distribution system:
Substations
351
30
Total capacity (million kV-amps)
11.0
1.0
Structure miles - overhead
29,727
2,810
Miles of underground conduit
3,391
290
Miles of underground conductors
11,863
761
During the three years ended December 31, 2024, both Registrants' gross property, plant and equipment (excluding construction work in progress)
additions were $2.9 billion, and gross retirements were $521.6 million. These additions were provided by cash generated from operations, short-term
borrowings (through a combination of bank borrowings and commercial paper), long-term borrowings and permanent financings. The additions during this
three-year period amounted to 17.6 percent of gross property, plant and equipment (excluding construction work in progress) for both Registrants at
December 31, 2024.
Item 3. Legal Proceedings.
In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to
lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to
assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the
appropriate accounting entries are reflected in the Registrants' financial statements. If the assessment indicates that a potential loss is not probable but
reasonably possible, the nature of the contingent matter, together with an estimate of the range of possible loss, if determinable and material, would be
disclosed. At the present time, based on currently available information, except as disclosed in Note 13 within "Item 8. Financial Statements and
Supplementary Data," the Registrants believe that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits
or claims would not be quantitatively material to their financial statements and would not have a material adverse effect on the Registrants' financial
position, results of operations or cash flows.
29
Item 4. Mine Safety Disclosures.
Not Applicable.
30
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
OGE Energy's common stock is listed for trading on the New York Stock Exchange under the ticker symbol "OGE." At December 31, 2024, there were
11,091 holders of record of OGE Energy's common stock.
Currently, all of OG&E's outstanding common stock is held by OGE Energy. Therefore, there is no public trading market for OG&E's common stock.
Performance Graph
The below graph shows a five-year comparison of cumulative total returns for OGE Energy's common stock, the S&P 500 Index and the S&P 1500
Composite Utilities Sector Index. The graph assumes that the value of the investment in OGE Energy's common stock and each index was $100 as of
December 31, 2019, and that all dividends were reinvested.
The above graph and related information should not be deemed "soliciting material" or to be "filed" with the Securities Exchange Commission, nor
should such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of
1934, as amended, except to the extent that OGE Energy specifically incorporates such information by reference into such a filing. The graph and information
are included for historical comparative purposes only and should not be considered indicative of future stock performance.
Issuer Purchases of Equity Securities
None.
Item 6. [Reserved]
31
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following combined discussion is separately filed by OGE Energy and OG&E. However, OG&E does not make any representations as to information
related solely to OGE Energy or the subsidiaries of OGE Energy other than itself.
Overview
OGE Energy is a holding company whose primary investment provides electricity in Oklahoma and western Arkansas. OGE Energy's electric company
operations are conducted through its wholly-owned subsidiary, OG&E, which generates, transmits, distributes and sells electric energy in Oklahoma and
western Arkansas and are reported through OGE Energy's electric company business segment. OG&E's rates are subject to regulation by the OCC, the APSC
and the FERC. OG&E was incorporated in 1902 under the laws of the Oklahoma Territory and is the largest electric company in Oklahoma, with a franchised
service territory that includes Fort Smith, Arkansas and the surrounding communities. OG&E sold its retail natural gas business in 1928 and is no longer
engaged in the natural gas distribution business.
The accounts of OGE Energy and its wholly-owned subsidiaries, including OG&E, are included in OGE Energy's consolidated financial statements. All
intercompany transactions and balances are eliminated in such consolidation.
Recent Developments
OG&E's Regulatory Matters
On November 26, 2024, the OCC issued an interim order approving the settlement agreement in OG&E's most recent rate review. The settlement
included a base rate revenue increase of $126.7 million, effective July 1, 2024. OG&E also submitted its final 2024 IRP for Oklahoma and Arkansas in March
2024 and is currently reviewing proposals submitted in this process. These matters, as well as other regulatory matters, are discussed in Note 14 within "Item
8. Financial Statements and Supplementary Data."
Summary of OGE Energy 2024 Operating Results Compared to 2023
OGE Energy's net income was $441.5 million, or $2.19 per diluted share, in 2024 as compared to $416.8 million, or $2.07 per diluted share, in 2023. The
increase in net income of $24.7 million, or $0.12 per diluted share, in 2024 as compared to 2023 is further discussed below.
•
An increase in net income at OG&E of $43.5 million, or $0.21 per diluted share of OGE Energy's common stock, was primarily due to higher
operating revenues (excluding the impact of recoverable fuel, purchased power and direct transmission expense not impacting earnings) driven
primarily by load growth and recovery of capital investments, partially offset by higher depreciation and amortization expense driven by additional
assets being placed into service, higher income tax expense, higher interest expense driven by borrowings under OG&E's revolving credit
agreement and senior notes issuances in August 2024 and April 2023, and lower other income.
•
An increase in net loss of other operations (holding company) of $18.8 million, or $0.09 per diluted share of OGE Energy's common stock, was
primarily due to higher interest expense driven by borrowings under OGE Energy's revolving credit agreement and OGE Energy's senior notes
issuance in May 2024, as well as lower net other income.
A more detailed discussion regarding the financial performance for the year ended December 31, 2024 as compared to December 31, 2023 can be
found under "Results of Operations" below. A discussion of the financial performance for the year ended December 31, 2023 compared to December 31,
2022 for OGE Energy and OG&E can be found within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of the
Registrants' 2023 Form 10-K.
32
2025 Outlook
Key assumptions for the 2025 outlook are discussed below.
OGE Energy is projected to earn approximately $447 million to $471 million, or $2.21 to $2.33 per average diluted share, with a midpoint of $459
million, or $2.27 per average diluted share in 2025 and is based off the following assumptions:
•
OGE Energy forecasts earnings for OG&E of $491 million, or $2.43 per average diluted share;
•
OGE Energy forecasts a loss of $32 million for other operations (primarily the holding company), or a loss of $0.16 per average diluted share;
•
OG&E experiences normal weather patterns for the year; OG&E has significant seasonality in its earnings; OG&E typically shows minimal earnings
in the first and fourth quarters with a majority of its earnings in the third quarter due to the seasonal nature of air conditioning demand;
•
total retail load growth of approximately 7.5 percent to 9.5 percent;
•
operating expenses of approximately $1.205 billion to $1.217 billion, with operation and maintenance expenses comprising approximately 44
percent of the total;
•
net interest expense of approximately $281 million to $284 million which assumes a $15 million allowance for borrowed funds used during
construction reduction to interest expense, and assumes a debt issuance at OG&E of $300 million to $350 million;
•
other income of approximately $16 million including $18 million of allowance for equity funds used during construction;
•
an effective consolidated tax rate of approximately 16.5 percent; and
•
approximately 202.1 million average diluted shares outstanding.
Results of Operations
The following discussion and analysis presents factors that affected the Registrants' results of operations for the years ended December 31, 2024 and
2023 and the Registrants' financial positions at December 31, 2024 and 2023. The following information should be read in conjunction with the financial
statements and notes thereto. Known trends and contingencies of a material nature are discussed to the extent considered relevant.
OGE Energy
Year Ended December 31,
(In millions except per share data)
2024
2023
Net income
$
441.5 $
416.8
Basic average common shares outstanding
200.8
200.3
Diluted average common shares outstanding
201.3
200.9
Basic earnings per average common share
$
2.20 $
2.08
Diluted earnings per average common share
$
2.19 $
2.07
Dividends declared per common share
$
1.6789 $
1.6646
Results by Business Segment
Year Ended December 31,
(In millions)
2024
2023
Net income:
OG&E (Electric Company)
$
469.9 $
426.4
Other operations
(28.4 )
(9.6 )
OGE Energy net income
$
441.5 $
416.8
33
The following discussion of results of operations for OG&E includes intercompany transactions that are eliminated in OGE Energy's consolidated
financial statements.
OG&E (Electric Company)
Year Ended December 31 (Dollars in millions)
2024
2023
Operating revenues
$
2,985.3 $
2,674.3
Fuel, purchased power and direct transmission expense
1,076.4
911.7
Other operation and maintenance
514.1
505.0
Depreciation and amortization
539.5
506.6
Taxes other than income
109.7
99.4
Operating income
745.6
651.6
Allowance for equity funds used during construction
25.5
19.4
Other net periodic benefit income (expense)
(1.6 )
6.5
Other income
12.5
23.9
Other expense
4.5
6.3
Interest expense
214.4
199.9
Income tax expense
93.2
68.8
Net income
$
469.9 $
426.4
Operating revenues by classification:
Residential
$
1,148.5 $
1,040.4
Commercial
839.1
688.4
Industrial
254.1
240.5
Oilfield
227.7
211.9
Public authorities and street light
262.0
234.9
System sales revenues
2,731.4
2,416.1
Provision for rate refund and tax refund
(3.0 )
2.0
Integrated market
74.5
71.6
Transmission
152.9
143.0
Other
29.5
41.6
Total operating revenues
$
2,985.3 $
2,674.3
MWh sales by classification (In millions)
Residential
9.8
9.6
Commercial
10.5
8.5
Industrial
4.2
4.2
Oilfield
4.4
4.4
Public authorities and street light
3.1
3.0
System sales
32.0
29.7
Integrated market
0.8
0.8
Total sales
32.8
30.5
Number of customers
906,952
896,102
Weighted-average cost of energy per kilowatt-hour (In cents)
Natural gas
2.640
2.976
Coal
3.083
3.385
Total fuel
2.637
2.926
Total fuel and purchased power
3.139
2.837
Degree days (A)
Heating - Actual
2,791
3,092
Heating - Normal
3,568
3,568
Cooling - Actual
2,313
2,215
Cooling - Normal
1,893
1,893
(A)
Degree days are calculated as follows: The high and low degrees of a particular day are added together and then averaged. If the calculated average is
above 65 degrees, then the difference between the calculated average and 65 is expressed as cooling degree days, with each degree of difference
equaling one cooling degree day. If the calculated average is below 65 degrees, then the difference between the calculated average and 65 is expressed
as heating degree days, with each degree of difference equaling
34
one heating degree day. The daily calculations are then totaled for the particular reporting period. The calculation of heating and cooling degree normal
days is based on a 30-year average and updated every ten years.
OG&E's net income increased $43.5 million, or 10.2 percent, in 2024 as compared to 2023. The following section discusses the primary drivers for the
increase in net income in 2024 as compared to 2023.
Operating revenues increased $311.0 million, or 11.6 percent, primarily driven by the below factors.
(In millions)
$ Change
Fuel, purchased power and direct transmission expense (A)
$
164.7
Price variance (B)
104.3
Non-residential demand and related revenues (C)
28.1
New customer growth
22.0
Wholesale transmission revenue
8.5
Other
(0.1 )
Quantity impacts (includes weather)
(1.6 )
Industrial and oilfield sales
(3.2 )
Guaranteed Flat Bill program (D)
(11.7 )
Change in operating revenues
$
311.0
(A)
These expenses are generally recoverable from customers through regulatory mechanisms and are offset in Fuel, Purchased Power and Direct
Transmission Expense in the statements of income. The primary drivers of the changes in fuel, purchased power and direct transmission expense during
the period are further detailed in the table below.
(B)
Increased primarily due to new rates effective July 1, 2024 resulting from the Oklahoma general rate review interim order received in November 2024
and increased recovery through rider mechanisms, such as the Storm Cost Recovery Rider.
(C)
Increased primarily due to initiating new customer service that includes a demand component.
(D)
The Guaranteed Flat Bill program allows qualifying customers the opportunity to purchase their electricity needs at a set monthly price for an entire
year which can result in variances when actual fuel and purchased power prices differ from what is included in Guaranteed Flat Bill rates.
Fuel, purchased power and direct transmission expense for OG&E consists of fuel used in electric generation, purchased power and transmission related
charges. As described above, the actual cost of fuel used in electric generation and certain purchased power costs are generally recoverable from OG&E's
customers through fuel adjustment clauses. The fuel adjustment clauses are subject to periodic review by the OCC and the APSC. OG&E's fuel, purchased
power and direct transmission expense increased $164.7 million, or 18.1 percent, primarily driven by the below factors.
(In millions)
$ Change
Fuel expense (A)
$
(1.6 )
Purchased power costs:
Purchases from SPP (B)
119.1
Capacity (C)
29.2
Wind
5.4
Other
9.6
Transmission expense
3.0
Change in fuel, purchased power and direct transmission expense
$
164.7
(A)
Decreased primarily due to lower fuel costs related to the generating assets utilized during 2024.
(B)
Increased primarily due to higher market prices and increased MWhs purchased during 2024.
(C)
Increased primarily due to capacity agreements in order for OG&E to meet generation requirements.
Other operation and maintenance expense increased $9.1 million, or 1.8 percent, primarily due to an increase in various costs such as software
expense, contract technical and construction services, and payroll and benefits, net of capitalized labor.
Depreciation and amortization expense increased $32.9 million, or 6.5 percent, primarily due to additional assets being placed into service and
increased amortization of certain regulatory assets, partially offset by a decrease in depreciation expense due to new depreciation rates effective as of July 1,
2024 resulting from the Oklahoma general rate review interim order received in November 2024.
35
Allowance for equity funds used during construction increased $6.1 million, or 31.4 percent, primarily due to higher construction work in progress
balances resulting from increased spending on new generation and information technology projects.
Other net periodic benefit expense changed $8.1 million, primarily due to higher pension expense driven by changes to the level of pension expense
included in base rates, effective July 1, 2024, as approved in the Oklahoma general rate review interim order received in November 2024.
Other income decreased $11.4 million, or 47.7 percent, primarily due to the carrying charge for the higher fuel under recovery balance in 2023.
Interest expense increased $14.5 million, or 7.3 percent, primarily due to the $200.0 million in borrowings under OG&E's revolving credit agreement
during the second and third quarters of 2024, the $350.0 million senior notes issuance in August 2024, and the $350.0 million senior notes issuance in April
2023. These borrowings were used to support OG&E's growing asset base. The increase in interest expense was partially offset by an increase in allowance
for borrowed funds used during construction primarily due to higher construction work in progress balances resulting from increased spending on new
generation and information technology projects.
Income tax expense increased $24.4 million, or 35.5 percent, primarily due to higher pretax income and a decrease in state tax credits generated.
Liquidity and Capital Resources
Cash Flows
OGE Energy
Year Ended December 31 (In millions)
2024
2023
$
Change
%
Change
Net cash provided from operating activities (A)
$
812.8 $
1,232.3 $
(419.5 )
(34.0)
Net cash used in investing activities (B)
$
(1,161.2 ) $
(1,272.1 ) $
110.9
(8.7)
Net cash provided from (used in) financing activities (C)
$
348.8 $
(48.1 ) $
396.9
*
* Change is greater than 100 percent.
(A)
Changed primarily due to decreased cash received from customers, including cash related to fuel recoveries, and increased interest payments from
recent debt issuances, partially offset by decreased vendor payments, including payments for fuel.
(B)
Changed primarily due to timing of power supply and power delivery projects.
(C)
Changed primarily due to OGE Energy's $350.0 million senior notes issuance in May 2024 and OG&E's $350.0 million senior notes issuance in August
2024, partially offset by a decrease in commercial paper borrowings.
Working Capital
Working capital is defined as the difference in current assets and current liabilities. OGE Energy's working capital requirements are driven generally by
changes in accounts receivable, accounts payable, commodity prices, credit extended to and the timing of collections from OG&E's customers, the level and
timing of spending for maintenance and expansion activity, inventory levels and fuel recoveries. The following discussion addresses changes in OGE Energy's
working capital balances at December 31, 2024 compared to December 31, 2023.
Accounts Receivable and Accrued Unbilled Revenues increased $33.7 million, or 12.0 percent, primarily due to an increase in billings to OG&E's retail
customers reflecting higher usage in 2024 and new rates as approved in the Oklahoma general rate review interim order received in November 2024.
Fuel Clause Under Recoveries increased $112.7 million and Fuel Clause Over Recoveries decreased $11.2 million, or 54.6 percent, primarily due to lower
recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power.
36
Other Current Assets increased $30.1 million, or 51.2 percent, primarily due to an increase in SPP deposits, the SPP transmission formula rate true-up
and under-recovered riders. At December 31, 2024, other current assets is primarily comprised of $46.6 million in SPP-related activities and under-recovered
riders.
Accounts Payable increased $29.3 million, or 10.6 percent, primarily due to timing of vendor payments and an increase in purchased power payables.
Accrued Taxes increased $11.2 million, or 23.5 percent, primarily resulting from an increase in tax accruals related to ad valorem and income taxes.
Long-Term Debt Due Within One Year increased $32.4 million, due to the reclassification of the Muskogee industrial authority bonds which matured in
January 2025.
2024 Capital Requirements, Sources of Financing and Financing Activities
In 2024, OGE Energy's primary sources of capital were cash generated from operations and the proceeds from the issuance of long- and short-term
debt. Changes in working capital reflect the seasonal nature of OGE Energy's business, the revenue lag between billing and collection from customers and
fuel inventories. See "Working Capital" for a discussion of significant changes in net working capital requirements as it pertains to operating cash flow and
liquidity.
Future Material Cash Requirements
OGE Energy's primary material cash requirements are related to acquiring or constructing new facilities and replacing or expanding existing facilities at
OG&E. Other working capital requirements are expected to be primarily related to maturing debt, operating lease obligations, fuel clause under recoveries
and other general corporate purposes. Further, working capital requirements can be seasonal. OGE Energy generally meets its cash needs through a
combination of cash generated from operations, short-term borrowings (through a combination of bank borrowings and commercial paper) and permanent
financings. We believe our cash flows from operations, existing borrowing capacity, and access to debt and equity capital markets as needed, should be
sufficient to satisfy our material cash requirements over the short-term and long-term.
Capital Expenditures
The following table presents OGE Energy's estimates of capital expenditures for the years 2025 through 2029. These capital investments are customer-
focused and targeted to maintain and improve the safety, resiliency and reliability of OG&E's distribution and transmission grid and generation fleet, enhance
the ability of OG&E's system to perform during extreme weather events and to serve OG&E's growing customer base.
(In millions)
2025
2026 (A)
2027 (A)
2028 (A)
2029 (A)
Total
Transmission
$
110 $
195 $
225 $
240 $
240 $
1,010
Oklahoma distribution
495
665
705
725
775
3,365
Arkansas distribution
25
25
25
25
25
125
Generation reliability
175
155
160
165
165
820
Generation capacity projects
210
35
—
—
—
245
Technology, fleet & facilities
135
125
135
145
145
685
Total
$
1,150 $
1,200 $
1,250 $
1,300 $
1,350 $
6,250
(A)
OG&E expects to continually evaluate the capital prioritization for transmission, distribution, technology, and generation investments based on the
evolving capacity, reliability, and economic growth needs of the electrical power system.
37
Additional capital expenditures beyond those identified in the table above, including additional incremental growth opportunities, will be evaluated
based upon the requirements of OG&E's power supply, transmission and distribution operational teams and the expected resultant customer benefits. In
May 2024, OG&E issued requests for proposals for resources to meet the capacity needs identified in its 2024 IRP and is currently reviewing the proposals
submitted in the process. OG&E intends to file for approval of additional generation capacity investments and would expect to update its capital plan based
on final orders received by state regulators. The annual level of investments in the transmission and distribution system could vary depending on the amount
and timing of incremental generation capacity investments.
Contractual Obligations
The following table presents OGE Energy's total contractual obligations for the next five years at December 31, 2024. For further detail of OGE Energy's
contractual obligations, which include operating leases, long-term debt and purchase obligations and commitments (including information for maturities
beyond the next five years), see Notes 4, 9 and 13, respectively, within "Item 8. Financial Statements and Supplementary Data."
(In millions)
2025
2026
2027
2028
2029
Total
Total contractual obligations
$
443.2 $
261.6 $
436.9 $
629.4 $
478.7 $
2,249.8
Amounts recoverable through fuel adjustment clause and
other regulatory mechanisms (A)
(230.4 )
(181.0 )
(175.2 )
(123.3 )
(122.5 )
(832.4 )
Total contractual obligations, net
$
212.8 $
80.6 $
261.7 $
506.1 $
356.2 $
1,417.4
(A)
Includes expected recoveries of costs incurred for OG&E's railcar operating lease obligations, OG&E's minimum fuel purchase commitments, OG&E's
expected wind purchase commitments and OG&E's capacity agreements.
The actual cost of fuel used in electric generation (which includes the operating lease obligations for OG&E's railcar leases shown in Note 4 within "Item
8. Financial Statements and Supplementary Data") and certain purchased power costs are passed on to OG&E's customers through fuel adjustment clauses
and other regulatory mechanisms. Accordingly, while the cost of fuel related to operating leases and the vast majority of minimum fuel purchase
commitments of OG&E noted in Notes 4 and 13, respectively, within "Item 8. Financial Statements and Supplementary Data" may increase capital
requirements, such costs are generally recoverable through fuel adjustment clauses and have little, if any, impact on net capital requirements and future
contractual obligations. OG&E's fuel adjustment clauses are subject to periodic review by the OCC and the APSC. Otherwise, as discussed above, OGE Energy
expects to meet these cash requirement needs through cash generated from operations, short-term borrowings and permanent financings.
Pension and Postretirement Benefit Plans
At December 31, 2024, 22.6 percent of the Pension Plan investments were in listed common stocks with the balance primarily invested in corporate
fixed income and other securities, U.S. Treasury notes and bonds and mutual funds, as presented in Note 11 within "Item 8. Financial Statements and
Supplementary Data." During 2024, the actual return on the Pension Plan was $11.8 million, compared to an expected return on plan assets of $16.5 million.
During the same time, corporate bond yields, which are used in determining the discount rate for future pension obligations, increased. Funding levels are
dependent on returns on plan assets and future discount rates. OGE Energy made a contribution to its Pension Plan of $10.0 million in 2024 and did not make
a contribution to its Pension Plan in 2023. OGE Energy expects to contribute $10.0 million to the Pension Plan in 2025, of which $5.0 million was contributed
in January 2025. OGE Energy could be required to make additional contributions if the value of its pension trust and postretirement benefit plan trust assets
are adversely impacted by a major market disruption in the future.
The following table presents the status of OGE Energy's Pension Plan, the Restoration of Retirement Income Plan and the postretirement benefit plans
at December 31, 2024 and 2023. These amounts have been recorded in Accrued Benefit Obligations with the offset in Accumulated Other Comprehensive
Loss (except OG&E's portion, which is recorded as a regulatory asset as discussed in Note 1 within "Item 8. Financial Statements and Supplementary Data") in
the balance sheets. The amounts in Accumulated Other Comprehensive Loss and those recorded as a regulatory asset represent a net periodic benefit cost to
be recognized in the statements of income in future periods.
38
Pension Plan
Restoration of Retirement
Income Plan
Postretirement
Benefit Plans
December 31 (In millions)
2024
2023
2024
2023
2024
2023
Benefit obligations
$
303.1 $
303.7 $
7.0 $
5.5 $
98.1 $
103.3
Fair value of plan assets
246.9
243.7
—
—
30.0
32.7
Funded status at end of year
$
(56.2 ) $
(60.0 ) $
(7.0 ) $
(5.5 ) $
(68.1 ) $
(70.6 )
Common Stock Dividends
OGE Energy's dividend policy is reviewed by the Board of Directors at least annually and is based on numerous factors, including management's
estimation of the long-term earnings power of its businesses. In 2024, the Board of Directors reviewed a recommendation from management of an increase
in the quarterly dividend to $0.42125 per share from $0.41820 per share and subsequently approved the recommendation to become effective with the
dividend payment in October 2024.
Financing Activities and Future Sources of Financing
Management expects that cash generated from operations, proceeds from the issuance of long- and short-term debt, proceeds from the sales of
common stock to the public through OGE Energy's Automatic Dividend Reinvestment and Stock Purchase Plan, or other offerings will be adequate over the
next three years to meet anticipated cash needs and to fund future growth opportunities. OGE Energy utilizes short-term borrowings (through a combination
of bank borrowings and commercial paper) to satisfy temporary working capital needs and as an interim source of financing capital expenditures until
permanent financing is arranged.
Short-Term Debt and Credit Facilities
OGE Energy borrows on a short-term basis, as necessary, by issuance of commercial paper and borrowings under its revolving credit agreements.
OGE Energy has unsecured five-year revolving credit facilities totaling $1.1 billion ($550.0 million for OGE Energy and $550.0 million for OG&E), which
can also be used as letter of credit facilities. OGE Energy also has a $120.0 million floating rate unsecured three-year credit agreement, of which $60.0 million
is considered a revolving loan. The following table presents information about OGE Energy's revolving credit agreements as of December 31, 2024.
(Dollars in millions)
December 31, 2024
Balance of outstanding supporting letters of credit
$
0.4
Weighted-average interest rate of outstanding supporting letters of credit
1.20 %
Net available liquidity under revolving credit agreements, commercial paper borrowings and letters of credit
$
690.3
Balance of cash and cash equivalents
$
0.6
The following table presents information about OGE Energy's total short-term debt activity for the year ended December 31, 2024.
(Dollars in millions)
Year Ended December
31, 2024
Average balance of short-term debt
$
444.8
Weighted-average interest rate of average balance of short-term debt
5.52 %
Maximum month-end balance of short-term debt
$
755.7
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 $1.0 billion in short-term borrowings at any one time for a two-year period beginning January 1, 2025 and ending December 31, 2026.
Long-Term Debt
On May 9, 2024, OGE Energy issued $350.0 million of 5.45 percent senior notes due May 15, 2029. The proceeds from this issuance were added to OGE
Energy's general funds to be used for general corporate purposes and to repay short-term debt.
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On August 15, 2024, OG&E issued $350.0 million of 5.60 percent senior notes due April 1, 2053, bringing the aggregate total principal amount of this
series of senior notes to $700.0 million. The proceeds from this issuance were added to OG&E's general funds to be used for repayment of short-term debt
and borrowings under OG&E's revolving credit agreement, and to fund OG&E's capital investment program and working capital needs.
In 2025, OG&E expects to issue $300 million to $350 million in long-term debt to help fund general operating needs.
Refinance of Industrial Authority Bonds
On October 2, 2024, OG&E caused the refinancing of its Garfield industrial authority bonds, series due January 1, 2025. The $47.0 million in bonds are
now due October 1, 2039, and will continue to be remarketed on a weekly basis.
Security Ratings
Moody's Investors Service
S&P's Global Ratings
Fitch Ratings
Rating
Outlook
Rating
Outlook
Rating
Outlook
OG&E Senior Notes
A3
Stable
A-
Stable
A
Stable
OG&E Commercial Paper
P2
Stable
A2
Stable
F2
Stable
OGE Energy Senior Notes
Baa1
Stable
BBB
Stable
BBB+
Stable
OGE Energy Commercial Paper
P2
Stable
A2
Stable
F2
Stable
Access to reasonably priced capital is dependent in part on credit and security ratings. Generally, lower ratings lead to higher financing costs. Pricing
grids associated with OGE Energy's credit facilities could cause annual fees and borrowing rates to increase if an adverse rating impact occurs. The impact of
any future downgrade could include an increase in the costs of OGE Energy's short-term borrowings, but a reduction in OGE Energy'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 OGE Energy to post collateral or letters of credit.
A security rating is not a recommendation to buy, sell or hold securities. Such rating may be subject to revision or withdrawal at any time by the credit
rating agency, and each rating should be evaluated independently of any other rating.
Future financing requirements may be dependent, to varying degrees, upon numerous factors such as general economic conditions, abnormal weather,
load growth, commodity prices, acquisitions of other businesses and/or development of projects, actions by rating agencies, inflation, changes in
environmental laws or regulations, rate increases or decreases allowed by regulatory agencies, new legislation, and market entry of competing electric power
generators.
Common Stock
OGE Energy expects to issue between $15 million to $25 million of common stock from its Automatic Dividend Reinvestment and Stock Purchase Plan in
2025. See Note 8 within "Item 8. Financial Statements and Supplementary Data" for a discussion of OGE Energy's common stock activity.
Critical Accounting Policies and Estimates
The financial statements and notes thereto contain information that is pertinent to management's discussion and analysis. In preparing the 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 financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Changes to these assumptions and estimates could have a material effect on the Registrants'
financial statements. However, the Registrants believe they have taken reasonable positions where assumptions and estimates are used in order to minimize
the negative financial impact to the Registrants that could result if actual results vary from the assumptions and estimates.
In management's opinion, the areas where the most significant judgment is exercised include the determination of pension and postretirement plan
assumptions, income taxes, contingency reserves, and regulatory assets and liabilities. The selection, application
40
and disclosure of the following critical accounting estimates have been discussed with the Audit Committee of OGE Energy's Board of Directors. The
Registrants discuss their significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments
or estimates, in Note 1 within "Item 8. Financial Statements and Supplementary Data."
Pension and Postretirement Plan Assumptions
OGE Energy has a Pension Plan that covers certain employees, including OG&E's employees, hired before December 1, 2009. Effective December 1,
2009, OGE Energy's Pension Plan is no longer being offered to employees hired on or after December 1, 2009. OGE Energy also has defined benefit
postretirement plans that cover certain employees, including OG&E's employees hired prior to February 1, 2020. Pension and other postretirement plan
expenses and liabilities are determined on an actuarial basis and are affected by the market value of plan assets, estimates of the expected return on plan
assets, assumed discount rates, and the level of funding. Actual changes in the fair market value of plan assets and differences between the actual return on
plan assets and the expected return on plan assets could have a material effect on the amount of pension expense ultimately recognized. The Pension Plan
rate assumptions are shown in Note 11 within "Item 8. Financial Statements and Supplementary Data." The assumed return on plan assets is based on
management's expectation of the long-term return on the plan assets portfolio. The discount rate used to compute the present value of plan liabilities is
based generally on rates of high-grade corporate bonds with maturities similar to the average period over which benefits will be paid. Funding levels are
dependent on returns on plan assets and future discount rates. Higher returns on plan assets and an increase in discount rates will reduce funding
requirements to the Pension Plan.
The following table presents the sensitivity of the Pension Plan funded status to these variables.
Change
Impact on Funded
Status
Actual plan asset returns
+/- 1 percent
+/- $2.5 million
Discount rate
+/- 0.25 percent
+/- $5.2 million
Contributions
+/- $10 million
+/- $10.0 million
Income Taxes
The Registrants use the asset and liability method of accounting for income taxes. Under this method, a deferred tax asset or liability is recognized for
the estimated future tax effects attributable to temporary differences between the financial statement basis and the tax basis of assets and liabilities, as well
as tax credit carry forwards and net operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in the period of the change.
The application of income tax law is complex. Laws and regulations in this area are voluminous and often ambiguous. Interpretations and guidance
surrounding income tax laws and regulations change over time. Accordingly, it is necessary to make judgments regarding income tax exposure. As a result,
changes in these judgments can materially affect amounts the Registrants recognized in their financial statements. Tax positions taken by the Registrants on
their income tax returns that are recognized in the financial statements must satisfy a more likely than not recognition threshold, assuming that the position
will be examined by taxing authorities with full knowledge of all relevant information.
Contingency Reserves
In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to
lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to
assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the
appropriate accounting entries are reflected in the financial statements.
Regulatory Assets and Liabilities
OG&E, as a regulated electric company, is subject to accounting principles for certain types of rate-regulated activities, which provide that certain
incurred costs that would otherwise be charged to expense can be deferred as regulatory assets, based on the expected recovery from customers in future
rates. Likewise, certain actual or anticipated credits that would otherwise reduce expense
41
can be deferred as regulatory liabilities, based on the expected flowback to customers in future rates. Management's expected recovery of deferred costs
and flowback of deferred credits generally results from specific decisions by regulators granting such ratemaking treatment.
OG&E records certain incurred costs and obligations as regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is
probable that the costs or obligations will be included in amounts allowable for recovery or refund in future rates. 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.
Accounting Pronouncements
See Note 2 within "Item 8. Financial Statements and Supplementary Data" for further discussion of recently adopted accounting standards and recently
issued accounting standards that are not yet effective that could have a material impact on the Registrants' financial position, results of operations or cash
flows upon adoption.
Commitments and Contingencies
In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to
lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to
assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the
appropriate accounting entries are reflected in the financial statements. If the assessment indicates that a potential loss is not probable but reasonably
possible, the nature of the contingent matter, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. At
the present time, based on currently available information, the Registrants believe that any reasonably possible losses in excess of accrued amounts arising
out of pending or threatened lawsuits or claims would not be quantitatively material to their financial statements and would not have a material adverse
effect on their financial position, results of operations or cash flows. See Notes 13 and 14 within "Item 8. Financial Statements and Supplementary Data" and
"Item 3. Legal Proceedings" for further discussion of the Registrants' commitments and contingencies.
Environmental Laws and Regulations
The activities of OG&E are subject to numerous stringent and complex federal, state and local laws and regulations governing environmental protection.
These laws and regulations can change, restrict or otherwise impact the Registrants' business activities in many ways, including the handling or disposal of
waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and
operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative,
civil and criminal penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Management believes that all of
the Registrants' operations are in substantial compliance with current federal, state and local environmental standards.
Changes in presidential administrations can result in uncertainty regarding policy or initiatives relating to activities that may affect the environment. The
Registrants cannot assure that future events, such as changes in existing laws, the promulgation of new laws or regulations, or the development or discovery
of new facts or conditions will not cause them to incur significant costs.
Environmental regulation can increase the cost of planning, design, initial installation and operation of OG&E's facilities. Management continues to
evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a
competitive market.
42
Air
OG&E's operations are subject to the Federal Clean Air Act of 1970, as amended, and comparable state laws and regulations. These laws and regulations
regulate emissions of air pollutants from various industrial sources, including electric generating units and also impose various monitoring and reporting
requirements. Such laws and regulations may require that OG&E obtain pre-approval for the construction or modification of certain projects or facilities
expected to produce air emissions or result in the increase of existing air emissions, obtain and strictly comply with air permits containing various emissions
and operational limitations or install emission control equipment. OG&E likely will be required to incur certain capital expenditures in the future for air
pollution control equipment and technology in connection with obtaining and maintaining operating permits and approvals for air emissions.
Cross State Air Pollution Rule
The EPA revised the NAAQS for ozone in 2015. Although Oklahoma complies with the revised standard, the Federal Clean Air Act of 1970, as amended,
requires states to submit to the EPA for approval a SIP to prohibit in-state sources from contributing significantly to nonattainment of the NAAQS in another
state. On October 28, 2018, Oklahoma submitted its SIP to the EPA related to these "Good Neighbor" requirements. On January 31, 2023, the EPA
disapproved the SIPs of 19 states, including Oklahoma. On March 2, 2023, the Oklahoma Attorney General and the ODEQ jointly filed a Petition for Review of
the SIP disapproval in the Tenth Circuit. On March 16, 2023, OG&E filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On June 6, 2023,
OG&E, together with the Oklahoma Attorney General and other parties, jointly filed a motion with the Tenth Circuit requesting a stay of the EPA’s
disapproval of the Oklahoma SIP; the stay was granted on July 27, 2023. On February 27, 2024, the Tenth Circuit issued a decision to transfer venue to the
U.S. Court of Appeals for the District of Columbia and vacated oral argument originally scheduled for March 21, 2024 but did not vacate the stay it granted.
On March 28, 2024, the Oklahoma Attorney General, on behalf of the parties noted above, petitioned the U.S. Supreme Court to review the Tenth Circuit’s
decision to transfer the SIP disapproval cases to the D.C. Circuit, and on April 24, 2024, the D.C. Circuit ordered that the cases be held in abeyance pending
action by the U.S. Supreme Court. On October 21, 2024, the U.S. Supreme Court granted review of the Tenth Circuit’s venue decision. On November 6, 2024,
the D.C. Circuit ordered that the cases remain in abeyance pending the U.S. Supreme Court’s review of the Clean Air Act’s venue provision. Briefing is ongoing
at the U.S. Supreme Court. On January 24, 2025, the EPA asked the U.S. Supreme Court to hold the briefing schedule in abeyance because the EPA’s acting
administrator has determined that the agency should reassess the basis for and soundness of the underlying disapproval action. However, on February 6,
2025, the U.S. Supreme Court denied the EPA's motion to hold the case in abeyance. Oral argument at the U.S. Supreme Court is set to be scheduled for
March 2025. The timing of a U.S. Supreme Court decision or further action at the D.C. Circuit is unknown.
In a separate but related matter, on April 6, 2022, the EPA also published a proposed FIP related to the "Good Neighbor" requirements intended to
reduce interstate NOX emissions contributions. OG&E filed comments to the proposed FIP with the EPA on June 21, 2022. On June 5, 2023, the EPA published
a final FIP for 23 states, including Oklahoma. The issuance of the FIP resulted from the EPA's aforementioned SIP disapprovals. Among other changes, the EPA
finalized a revision of the current Oklahoma NOX emissions budget for electric generating units, including OG&E's units, which began in 2023. Under the
terms of the FIP, the emissions budget will decline over time based on the level of reductions that the EPA has determined is achievable through particular
emissions controls. OG&E’s analysis indicates that Oklahoma’s state budget for 2026 will be reduced by 34.5 percent from 2023 levels and that for 2027 it
will be reduced by 50 percent from 2021 levels. In October 2023, several state and industry petitioners filed emergency applications for a stay of the EPA’s
Good Neighbor FIP in the U.S. Supreme Court. On June 27, 2024, the U.S. Supreme Court granted the emergency applications and stayed the EPA's final FIP,
pending review of petitioners' challenges in the D.C. Circuit Court. On February 6, 2025, the EPA requested that the D.C. Circuit Court not issue an opinion
and place the case in abeyance for 60 days in order for the new EPA leadership to determine how they want to proceed in the litigation.
In light of the issuance of the FIP, OG&E has been evaluating various control strategies to reduce emissions at its generating units, which can range from
some combination of purchase of emission allowances, installation of selective catalytic reduction controls, conversion of coal-fired units to gas-fired units or
retirement and replacement of capacity. OG&E submitted its final 2024 IRP to the OCC and APSC on March 29, 2024. The IRP evaluates various potential
compliance options related to the EPA's Good Neighbor FIP. Due to the uncertainty relating to the disapproval of the SIP and implementation of the FIP,
OG&E cannot determine the cost to comply with certainty, as such costs are dependent upon the timing and outcome of the litigation discussed above, the
particular control strategies ultimately selected for each unit, the terms and timing of regulatory approvals required from the OCC and APSC and the time
period necessary to complete the projects. However, OG&E preliminarily estimates that the cost of compliance with the FIP as issued could be approximately
$2.4 billion to $2.8 billion in total, including $100 million to $300 million over the 12- to 18-month
43
period following effectiveness of the FIP. OG&E expects that it would seek recovery of any necessary environmental expenditures to address state and
federally mandated environmental upgrades, but there is no guarantee that all of such expenditures will be approved for recovery or will be approved for
recovery on a timely basis.
New Source Performance Standards
On December 13, 2024, the EPA published in the Federal Register a proposed rule that would revise the new source performance standards regulating
NOx and SO2 emissions from new, modified, and reconstructed stationary combustion turbines. The EPA is proposing more stringent NOx emissions standards
and to retain the existing SO2 standards. The deadline to submit comments on the Proposed Rule is March 13, 2025. It is unknown what potential material
impacts, if any, there will be from any final action by the EPA.
Particulate Matter NAAQS
On February 7, 2024, the EPA issued a final rule resulting from its reconsideration of the primary (health-based) and secondary (welfare-based) NAAQS
for PM, which were set in 2013 and which the EPA declined to revise in 2020. The final rule lowers the primary annual PM2.5 NAAQS from 12.0 µg/m3 to 9.0
µg/m3 and retains the other PM standards at their current levels, including the 24-hour PM2.5 NAAQS. The EPA will determine which areas of the country
meet the standards, such as making initial attainment and nonattainment designations, no later than two years after new standards are issued. States must
develop and submit attainment plans no later than 18 months after the EPA finalizes nonattainment designations.
The final rule was published in the Federal Register on March 6, 2024. Litigation on the final rule is proceeding in the D.C. Circuit. A coalition of 24
states, including Oklahoma, filed challenges to the final rule, and a separate coalition of states and other stakeholders filed to intervene in these challenges
on behalf of the EPA. A coalition of 22 state governors separately requested the EPA to pause implementation of the final rule.
The revised NAAQS could impact regional air quality goals and emission limits for emission sources; however, it is unknown at this time what, if any,
potential material impacts to OG&E individual operating permit emission limits will result from the EPA actions.
Regional Haze
In July 2020, the ODEQ notified OG&E that the Horseshoe Lake generating units would be included in Oklahoma's second Regional Haze implementation
period evaluation of visibility impairment impacts to the Wichita Mountains. OG&E submitted an analysis of all potential control measures for NOx on these
units to the ODEQ. The ODEQ submitted a revised SIP to the EPA on August 12, 2022. On June 28, 2024, the EPA entered into a consent decree which
requires the EPA to propose action on the Oklahoma SIP no later than December 31, 2025 and take final action no later than December 31, 2026. It is
unknown at this time what the outcome, or any potential material impacts, if any, will be from the evaluations by OG&E, the ODEQ and the EPA.
Mercury and Air Toxics Standards
On April 25, 2024, the EPA released the final revised Mercury and Air Toxics Standards regulation with a compliance date in May 2027. On May 8, 2024,
a coalition of states, including Oklahoma, filed a challenge to the final rule in the D.C. Circuit Court and on June 7, 2024 filed a motion to stay the final rule
which was ultimately denied. Subsequently, this coalition of states filed an emergency stay application with the U.S. Supreme Court on August 16, 2024. The
U.S. Supreme Court denied the applications on October 4, 2024. It is unknown what potential material impacts, if any, will be from the final action by the
EPA.
Greenhouse Gas
OG&E monitors possible changes in legal standards for emissions of greenhouse gases, including CO2, sulfur hexafluoride and methane. As discussed
below, recently promulgated federal rules under the Biden Administration will potentially impose requirements on fossil fuel assets, but the Trump
Administration is evaluating energy-related regulations impacting reliability and affordability. If these recently promulgated rules are implemented and
enforced as currently written or if legislation or regulations are passed at the federal or state levels in the future requiring mandatory reductions of CO2 and
other greenhouse gases at OG&E's facilities, this could result in significant additional compliance costs that would affect OG&E's future financial position,
results of operations and cash flows if such costs are not recovered through regulated rates.
44
On May 9, 2024, the EPA published its final rule addressing emission guidelines under Section 111(d) for existing fossil fuel fired steam units, including
both coal-fired and oil/gas-fired steam units, and revising performance standards under Section 111(b) for new gas turbines. Unlike the proposed rules, the
final rules do not address existing simple and combined-cycle combustion turbine units which are now addressed in a separate rulemaking with proposed
rules expected later in the first quarter of 2025.
Under Section 111(d), existing coal units will be required to use carbon capture covering 90 percent of emissions by 2032 if they plan to operate beyond
2039. If the coal units plan to operate until 2039, they must co-fire with natural gas at 40 percent by 2030. Coal plants that commit to retire by 2032 are
exempt and may continue to operate as is. Subject to litigation, compliance decisions must be submitted to the state for inclusion in the SIP, which is due to
the EPA in May 2026.
The EPA also addressed existing natural gas-fired boilers under Section 111(d) with emissions rates based on a unit’s annual capacity factor. OG&E’s
existing gas boilers currently meet the new requirements and therefore no additional compliance steps beyond reporting are expected.
Under Section 111(b), the EPA finalized standards for new natural gas-fired turbines commencing construction after May 23, 2023, using capacity factor
thresholds to differentiate among new units establishing three subcategories: baseload, intermediate load, and low load. All three categories are subject to
efficiency standards. Baseload units, those with a capacity factor greater than 40 percent, are also subject to a phase two requirement based on 90 percent
capture of CO2 with a compliance deadline of January 1, 2032.
Significant litigation is underway, including a challenge by OG&E and a multi-state challenge joined by Oklahoma. Briefing in this challenge has begun in
the D.C. Circuit.
On May 24, 2024, several groups of petitioners, including OG&E, which joined with Edison Electric Institute and three other declarants, filed motions for
stay of the rule at the D.C. Circuit. The Court consolidated these motions and on July 19, 2024, denied all stay requests. On July 29, 2024, OG&E, jointly with
Edison Electric Institute and another applicant, appealed the stay denial to the U.S. Supreme Court. Other industry and state petitioners, including Oklahoma,
appealed the D.C. Circuit's stay denial to the U.S. Supreme Court as well. On October 16, 2024, the U.S. Supreme Court denied the stay request. Petitioners
can seek another stay from the U.S. Supreme Court in the event the D.C. Circuit rules against them. Oral argument was held before the D.C. Circuit on
December 6, 2024; the timing of a decision is not known at this time. However, on February 5, 2025, the EPA requested that the D.C. Court not issue an
opinion and place the case in abeyance for 60 days in order for the new EPA leadership to determine how they want to proceed in the litigation. It is
unknown what the outcome of the litigation will be, or potential material impacts, if any, it will have on these new emission standards and guidelines, but the
Registrants continue to plan for compliance and, if the new emission standards and guidelines are implemented as adopted, such compliance costs would be
material.
As a member of the SPP Integrated Marketplace, OG&E customers have access to clean energy resources while maintaining reliability and affordability.
With respect to its calendar year 2024 direct emissions, compared to 2005 levels, OG&E has reduced CO2 emissions by approximately 60 percent, emissions
of ozone-forming NOx have been reduced by approximately 80 percent, and emissions of SO2 have been reduced by approximately 95 percent. Direct
emission reductions are due to factors such as OG&E’s conversion of certain coal units to natural gas units, its participation in the SPP integrated market, and
its active engagement with customers in OG&E’s SmartHours and Load Reduction Programs which helps reduce the amount of generation required to serve
peak demand. OG&E is also planning to deploy more renewable energy sources that do not emit greenhouse gases. OG&E has leveraged its geographic
position to develop and access renewable energy resources and completed transmission investments to deliver the renewable energy.
Endangered Species
Certain federal laws, including the Bald and Golden Eagle Protection Act, the Migratory Bird Treaty Act and the Endangered Species Act, provide special
protection to certain designated species. These laws and any state equivalents provide for significant civil and criminal penalties for unpermitted activities
that result in harm to or harassment of certain protected animals and plants, including damage to their habitats. If such species are located in an area in
which OG&E conducts operations, or if additional species in those areas become subject to protection, OG&E's operations and development projects,
particularly transmission, wind or solar projects, could be restricted or delayed, or OG&E could be required to implement expensive mitigation measures.
45
In September 2022, the USFWS published a proposal to list the Tricolored Bat as endangered under the Endangered Species Act. According to the
proposal, the current known range of the Tricolored Bat extends to 36 states, including Oklahoma and Arkansas. A listing decision was expected by
September 2024, however, to date no listing decision has been issued. OG&E is closely monitoring this issue due to possible future impacts; however, it is
unknown at this time what, if any, material impacts will result from the USFWS action.
Waste
OG&E's operations generate wastes that are subject to the Federal Resource Conservation and Recovery Act of 1976 as well as comparable state laws
which impose detailed requirements for the handling, storage, treatment and disposal of waste.
During 2024, approximately 95 percent of the ash from OG&E's River Valley, Muskogee and Sooner facilities was recovered and reused off-site in
various ways, including soil stabilization, landfill cover, road base construction and cement and concrete production. Reusing fly ash reduces the need to
manufacture cement resulting in reductions in greenhouse gas emissions from cement and concrete production. Based on estimates from the American Coal
Ash Association, OG&E fly ash reuse helped avoid over approximately 4 million tons of CO2 emissions in the last 16 years.
OG&E has sought and will continue to seek pollution prevention opportunities and to evaluate the effectiveness of its waste reduction, reuse and
recycling efforts. In 2024, OG&E obtained refunds of $2.5 million from the recycling of scrap metal, salvaged transformers and used transformer oil. This
figure does not include the additional savings gained through the reduction and/or avoidance of disposal costs and the reduction in material purchases due
to the reuse of existing materials. Similar savings are anticipated in future years.
Water
OG&E's operations are subject to the Federal Clean Water Act and comparable state laws and regulations. These laws and regulations impose detailed
requirements and strict controls regarding the discharge of pollutants into state and federal waters.
In 2015, the EPA issued a final rule addressing the effluent limitation guidelines for power plants under the Federal Clean Water Act. The final rule
establishes technology- and performance-based standards that may apply to discharges of six waste streams including bottom ash transport water. In April
2017, the EPA granted a Petition for Reconsideration of the 2015 Rule. On April 25, 2024, the EPA released the final supplemental effluent limitations
guidelines rule. OG&E has completed installation of dry bottom ash handling technology at an affected facility and is evaluating options at another affected
facility to comply with the final rule by the December 31, 2029 compliance date.
Since the purchase of the Redbud facility in 2008, OG&E made investments in the infrastructure that have led to OG&E's average use of approximately
2.4 billion gallons per year of treated municipal effluent for cooling water at Redbud and McClain. This use of treated municipal effluent offsets the need for
fresh water as cooling water, making fresh water available for other beneficial uses like drinking water, irrigation and recreation.
Site Remediation
The Comprehensive Environmental Response, Compensation and Liability Act of 1980 and comparable state laws impose liability, without regard to the
legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. Because OG&E
utilizes various products and generates wastes that are considered hazardous substances for purposes of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, OG&E could be subject to liability for the costs of cleaning up and restoring sites where those substances have been
released to the environment. At this time, it is not anticipated that any associated liability will cause a significant impact to OG&E.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Market risks are, in most cases, risks that are actively traded in a marketplace and have been well studied in regards to quantification. Market risks
include, but are not limited to, changes in interest rates and commodity prices. The Registrants' exposure to changes in interest rates relates primarily to
variable-rate debt, commercial paper and future long-term debt issuances. The
46
Registrants are exposed to commodity prices in their operations to the extent any fuel price changes are not recovered in customer rates.
Risk Oversight Committee
The Registrants manage market risks using a risk committee structure. OGE Energy's Risk Oversight Committee, which consists of the Chief Financial
Officer, other corporate officers and members of management, is responsible for the overall development, implementation and enforcement of strategies
and policies for all significant risk management activities of the Registrants. In 2024, this committee and the Registrants' management applied a holistic
perspective of risk assessment and application of its strategies and policies to manage the Registrants' overall financial performance. The Chief Financial
Officer, acting in his role as the principal financial officer and as a member of the Risk Oversight Committee, reports periodically to the Audit Committee of
OGE Energy's Board of Directors on the Registrants' risk profile affecting anticipated financial results, including any significant risk issues. The Audit
Committee updates the Board of Directors regarding the company's risk management practices and the steps management has taken to monitor and control
applicable risks.
Risk Policies
Management utilizes risk policies to control the amount of market risk exposure. These policies are designed to provide the Audit Committee of OGE
Energy's Board of Directors and senior executives of the Registrants with confidence that the risks taken on by the Registrants' business activities are in
accordance with their expectations for financial returns and that the approved policies and controls related to market risk management are being followed.
Interest Rate Risk
The Registrants' exposure to changes in interest rates primarily relates to variable-rate debt and commercial paper. The Registrants manage their
interest rate exposure by monitoring and limiting the effects of market changes in interest rates. The Registrants may utilize interest rate derivatives to alter
interest rate exposure in an attempt to reduce the effects of these changes. Interest rate derivatives would be used solely to modify interest rate exposure
and not to modify the overall leverage of the debt portfolio, but the Registrants have no intent at this time to utilize interest rate derivatives.
47
The fair value of the Registrants' long-term debt is based on quoted market prices and estimates of current rates available for similar issues with similar
maturities or by calculating the net present value of the monthly payments discounted by the Registrants' current borrowing rate. The following table
presents the Registrants' long-term debt maturities and the weighted-average interest rates by maturity date.
Year Ended December 31
(Dollars in millions)
2025
2026
2027
2028
2029
Thereafter
Total
12/31/24
Fair Value
OGE Energy (holding company)
fixed-rate debt (A):
Principal amount
$
— $
— $
— $
— $
350.0 $
— $
350.0 $
355.7
Weighted-average interest rate
— %
— %
— %
— %
5.45 %
— %
5.45 %
OGE Energy (holding company)
variable-rate debt (A):
Principal amount
$
— $
— $
60.0 $
— $
— $
— $
60.0 $
60.0
Weighted-average interest rate
— %
— %
5.53 %
— %
— %
— %
5.53 %
OG&E fixed-rate debt (A):
Principal amount
$
— $
— $
125.0 $
500.0 $
— $
3,921.7 $
4,546.7 $
4,183.9
Weighted-average interest rate
— %
— %
6.65 %
4.34 %
— %
4.74 %
4.75 %
OG&E variable-rate debt (B):
Principal amount
$
32.4 $
— $
56.0 $
— $
— $
47.0 $
135.4 $
135.4
Weighted-average interest rate
3.75 %
— %
3.65 %
— %
— %
3.65 %
3.67 %
(A)
Prior to or when these debt obligations mature, the Registrants may refinance all or a portion of such debt at then-existing market interest rates which
may be more or less than the interest rates on the maturing debt.
(B)
A hypothetical change of 100 basis points in the underlying variable interest rate incurred by OG&E would change interest expense by $1.4 million
annually.
48
Item 8. Financial Statements and Supplementary Data.
OGE ENERGY CORP.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31 (In millions except per share data)
2024
2023
2022
OPERATING REVENUES
Revenues from contracts with customers
$
2,916.6 $
2,607.3 $
3,304.2
Other revenues
68.7
67.0
71.5
Operating revenues
2,985.3
2,674.3
3,375.7
FUEL, PURCHASED POWER AND DIRECT TRANSMISSION EXPENSE
1,076.4
911.7
1,662.4
OPERATING EXPENSES
Other operation and maintenance
514.4
502.6
501.4
Depreciation and amortization
539.5
506.6
460.9
Taxes other than income
109.7
103.2
101.5
Operating expenses
1,163.6
1,112.4
1,063.8
OPERATING INCOME
745.3
650.2
649.5
OTHER INCOME (EXPENSE)
Allowance for equity funds used during construction
25.5
19.4
6.9
Other net periodic benefit income (expense)
(2.2 )
5.6
(12.9 )
Gain on equity securities (Note 1)
—
—
282.1
Other income
30.6
48.2
74.6
Other expense
(24.1 )
(29.0 )
(44.6 )
Net other income
29.8
44.2
306.1
INTEREST EXPENSE
Interest on long-term debt
228.3
205.0
162.1
Allowance for borrowed funds used during construction
(14.6 )
(7.1 )
(4.0 )
Interest on short-term debt and other interest charges
40.8
23.5
8.2
Interest expense
254.5
221.4
166.3
INCOME BEFORE TAXES
520.6
473.0
789.3
INCOME TAX EXPENSE
79.1
56.2
123.6
NET INCOME
$
441.5 $
416.8 $
665.7
BASIC AVERAGE COMMON SHARES OUTSTANDING
200.8
200.3
200.2
DILUTED AVERAGE COMMON SHARES OUTSTANDING
201.3
200.9
200.8
BASIC EARNINGS PER AVERAGE COMMON SHARE
$
2.20 $
2.08 $
3.33
DILUTED EARNINGS PER AVERAGE COMMON SHARE
$
2.19 $
2.07 $
3.32
The accompanying Combined Notes to Financial Statements are an integral part hereof.
49
OGE ENERGY CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Year Ended December 31 (In millions)
2024
2023
2022
Net income
$
441.5 $
416.8 $
665.7
Other comprehensive income (loss), net of tax:
Pension Plan and Restoration of Retirement Income Plan:
Amortization of prior service cost, net of tax of $0.1, $0.1 and $0.1, respectively
0.2
0.2
0.2
Amortization of deferred net loss, net of tax of $0.1, $0.2 and $0.2, respectively
0.2
0.9
1.4
Net (loss) gain arising during the period, net of tax of $0.0, $1.0 and ($2.4),
respectively
(0.2 )
3.3
(7.6 )
Regulatory classification of certain pension costs, net of tax of $1.2, $0.0 and $0.0,
respectively
3.9
—
—
Settlement cost, net of tax of $0.0, $0.4 and $4.3, respectively
—
1.2
13.6
Postretirement benefit plans:
Amortization of prior service credit, net of tax of $0.0, $0.0 and ($0.1), respectively
—
—
(0.2 )
Amortization of deferred net gain, net of tax of $(0.1), ($0.1) and $0.0, respectively
(0.1 )
(0.1 )
—
Net gain (loss) arising during the period, net of tax of $0.2, ($0.2) and $1.7,
respectively
0.5
(0.8 )
5.5
Other comprehensive income, net of tax
4.5
4.7
12.9
Comprehensive income
$
446.0 $
421.5 $
678.6
The accompanying Combined Notes to Financial Statements are an integral part hereof.
50
OGE ENERGY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 (In millions)
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
441.5 $
416.8 $
665.7
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization
539.5
506.6
460.9
Deferred income taxes and other tax credits, net
15.6
11.6
(154.0 )
Gain on investment in equity securities (Note 1)
—
—
(282.1 )
Allowance for equity funds used during construction
(25.5 )
(19.4 )
(6.9 )
Stock-based compensation expense
11.7
13.1
9.7
Regulatory assets
(52.4 )
(92.1 )
702.2
Regulatory liabilities
(2.8 )
(12.2 )
(9.1 )
Other assets
(16.8 )
—
18.9
Other liabilities
30.6
5.0
(6.6 )
Change in certain current assets and liabilities:
Accounts receivable and accrued unbilled revenues, net
(33.6 )
42.8
(97.0 )
Income taxes receivable
18.2
2.5
(18.1 )
Fuel, materials and supplies inventories
25.7
(122.8 )
(130.1 )
Fuel recoveries
(123.9 )
535.4
(363.0 )
Other current assets
(30.1 )
44.6
(30.2 )
Accounts payable
(14.7 )
(136.3 )
155.4
Other current liabilities
29.8
36.7
36.7
Net cash provided from operating activities
812.8
1,232.3
952.4
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (less allowance for equity funds used during construction)
(1,090.9 )
(1,178.2 )
(1,050.9 )
Proceeds from sales of equity securities
—
—
1,067.2
Cost of removal and other
(70.3 )
(93.9 )
(112.7 )
Net cash used in investing activities
(1,161.2 )
(1,272.1 )
(96.4 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt
706.3
788.3
49.3
Payment of long-term debt
(0.1 )
(1,000.1 )
(0.1 )
(Decrease) increase in short-term debt
(29.9 )
499.2
(486.9 )
Dividends paid on common stock
(338.5 )
(333.2 )
(329.3 )
Cash paid for employee equity-based compensation
(6.1 )
(2.3 )
(0.9 )
Proceeds (costs) from issuance of common stock
17.1
—
—
Net cash provided from (used in) financing activities
348.8
(48.1 )
(767.9 )
NET CHANGE IN CASH AND CASH EQUIVALENTS
0.4
(87.9 )
88.1
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
0.2
88.1
—
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
0.6 $
0.2 $
88.1
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of interest capitalized of $14.6, $7.1 and $4.0, respectively)
$
251.1 $
202.4 $
164.0
Income taxes (net of income tax refunds)
$
36.9 $
41.5 $
276.0
NON-CASH INVESTING AND FINANCING ACTIVITIES
Power plant long-term service agreement
$
6.4 $
0.7 $
0.8
Tinker Air Force Base distribution assets purchase
$
2.6 $
— $
—
The accompanying Combined Notes to Financial Statements are an integral part hereof.
51
OGE ENERGY CORP.
CONSOLIDATED BALANCE SHEETS
December 31 (In millions)
2024
2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
0.6 $
0.2
Accounts receivable, less reserve of $2.0 and $2.2, respectively
240.6
208.8
Accrued unbilled revenues
74.6
72.7
Income taxes receivable
—
18.2
Fuel inventories
148.3
158.5
Materials and supplies, at average cost
229.4
254.3
Fuel clause under recoveries
112.7
—
Other
88.9
58.8
Total current assets
895.1
771.5
OTHER PROPERTY AND INVESTMENTS
Other
124.2
114.0
Total other property and investments
124.2
114.0
PROPERTY, PLANT AND EQUIPMENT
In service
16,254.6
15,588.2
Construction work in progress
814.2
522.2
Total property, plant and equipment
17,068.8
16,110.4
Less: accumulated depreciation
4,982.2
4,809.4
Net property, plant and equipment
12,086.6
11,301.0
DEFERRED CHARGES AND OTHER ASSETS
Regulatory assets
568.1
577.6
Other
42.0
26.6
Total deferred charges and other assets
610.1
604.2
TOTAL ASSETS
$
13,716.0
$
12,790.7
The accompanying Combined Notes to Financial Statements are an integral part hereof.
52
OGE ENERGY CORP.
CONSOLIDATED BALANCE SHEETS (Continued)
December 31 (In millions)
2024
2023
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt
$
469.3 $
499.2
Accounts payable
305.7
276.4
Dividends payable
84.7
83.8
Customer deposits
111.1
103.5
Accrued taxes
58.8
47.6
Accrued interest
63.8
57.4
Accrued compensation
53.0
46.8
Long-term debt due within one year
32.4
—
Fuel clause over recoveries
9.3
20.5
Other
41.7
44.0
Total current liabilities
1,229.8
1,179.2
LONG-TERM DEBT
5,020.9
4,340.5
DEFERRED CREDITS AND OTHER LIABILITIES
Accrued benefit obligations
170.9
172.7
Deferred income taxes
1,371.1
1,300.8
Deferred investment tax credits
10.6
11.3
Regulatory liabilities
1,016.4
1,061.6
Other
255.4
213.0
Total deferred credits and other liabilities
2,824.4
2,759.4
Total liabilities
9,075.1
8,279.1
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDERS' EQUITY
Common stockholders' equity
1,167.9
1,145.1
Retained earnings
3,475.7
3,373.7
Accumulated other comprehensive loss, net of tax
(2.7 )
(7.2 )
Total stockholders' equity
4,640.9
4,511.6
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
13,716.0 $
12,790.7
The accompanying Combined Notes to Financial Statements are an integral part hereof.
53
OGE ENERGY CORP.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
December 31 (In millions except per share data)
2024
2023
STOCKHOLDERS' EQUITY
Common stock, par value $0.01 per share; authorized 450.0 shares; and outstanding 201.0 shares
and 200.3 shares, respectively
$
2.0
$
2.0
Premium on common stock
1,165.9
1,143.1
Retained earnings
3,475.7
3,373.7
Accumulated other comprehensive loss, net of tax
(2.7 )
(7.2 )
Total stockholders' equity
4,640.9
4,511.6
LONG-TERM DEBT
SERIES
DUE DATE
Senior Notes - OGE Energy
5.53% - 6.52%
Term Loan Due May 24, 2027
60.0
50.0
5.45%
Senior Notes, Series Due May 15, 2029
350.0
—
Senior Notes - OG&E
6.65%
Senior Notes, Series Due July 15, 2027
125.0
125.0
6.50%
Senior Notes, Series Due April 15, 2028
100.0
100.0
3.80%
Senior Notes, Series Due August 15, 2028
400.0
400.0
3.30%
Senior Notes, Series Due March 15, 2030
300.0
300.0
3.25%
Senior Notes, Series Due April 1, 2030
300.0
300.0
5.40%
Senior Notes, Series Due January 15, 2033
450.0
450.0
5.75%
Senior Notes, Series Due January 15, 2036
110.0
110.0
6.45%
Senior Notes, Series Due February 1, 2038
200.0
200.0
5.85%
Senior Notes, Series Due June 1, 2040
250.0
250.0
5.25%
Senior Notes, Series Due May 15, 2041
250.0
250.0
3.90%
Senior Notes, Series Due May 1, 2043
250.0
250.0
4.55%
Senior Notes, Series Due March 15, 2044
250.0
250.0
4.00%
Senior Notes, Series Due December 15, 2044
250.0
250.0
4.15%
Senior Notes, Series Due April 1, 2047
300.0
300.0
3.85%
Senior Notes, Series Due August 15, 2047
300.0
300.0
5.60%
Senior Notes, Series Due April 1, 2053
700.0
350.0
3.80%
Tinker Debt, Due August 31, 2062
11.7
9.2
Other Bonds - OG&E
1.90% - 4.75%
Muskogee Industrial Authority, January 1, 2025
32.4
32.4
2.15% - 4.85%
Muskogee Industrial Authority, June 1, 2027
56.0
56.0
2.15% - 4.85%
Garfield Industrial Authority, October 1, 2039
47.0
47.0
Unamortized debt expense
(32.9 )
(27.9 )
Unamortized discount
(5.9 )
(11.2 )
Total long-term debt
5,053.3
4,340.5
Less: long-term debt due within one year
32.4
—
Total long-term debt (excluding long-term debt due within one year)
5,020.9
4,340.5
Total capitalization (including long-term debt due within one year)
$
9,661.8
$
8,852.1
The accompanying Combined Notes to Financial Statements are an integral part hereof.
54
OGE ENERGY CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock
Treasury Stock
Premium
on
Common Retained
Accumulat
ed Other
Comprehe
nsive
(Loss)
(In millions)
Shares
Value
Shares
Value
Stock
Earnings
Income
Total
Balance at December 31, 2021
200.1 $
2.0
— $
(0.1 ) $
1,123.8 $
2,955.4 $
(24.8 ) $
4,056.3
Net income
—
—
—
—
—
665.7
—
665.7
Other comprehensive income, net of
tax
—
—
—
—
—
—
12.9
12.9
Dividends declared on common stock
($1.6482 per share)
—
—
—
—
—
(330.2 )
—
(330.2 )
Stock-based compensation
0.1
—
—
—
8.7
—
—
8.7
Balance at December 31, 2022
200.2 $
2.0
— $
(0.1 ) $
1,132.5 $
3,290.9 $
(11.9 ) $
4,413.4
Net income
—
—
—
—
—
416.8
—
416.8
Other comprehensive income, net of
tax
—
—
—
—
—
—
4.7
4.7
Dividends declared on common stock
($1.6646 per share)
—
—
—
—
—
(334.0 )
—
(334.0 )
Stock-based compensation
0.1
—
—
0.1
10.6
—
—
10.7
Balance at December 31, 2023
200.3 $
2.0
— $
— $
1,143.1 $
3,373.7 $
(7.2 ) $
4,511.6
Net income
—
—
—
—
—
441.5
—
441.5
Other comprehensive income, net of
tax
—
—
—
—
—
—
4.5
4.5
Dividends declared on common stock
($1.6789 per share)
—
—
—
—
(339.5 )
—
(339.5 )
Issuance of common stock
0.5
—
—
—
17.1
—
—
17.1
Stock-based compensation
0.2
—
—
—
5.7
—
—
5.7
Balance at December 31, 2024
201.0 $
2.0
— $
— $ 1,165.9 $ 3,475.7 $
(2.7 ) $
4,640.9
The accompanying Combined Notes to Financial Statements are an integral part hereof.
55
OKLAHOMA GAS AND ELECTRIC COMPANY
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Year Ended December 31 (In millions)
2024
2023
2022
OPERATING REVENUES
Revenues from contracts with customers
$
2,916.6 $
2,607.3 $
3,304.2
Other revenues
68.7
67.0
71.5
Operating revenues
2,985.3
2,674.3
3,375.7
FUEL, PURCHASED POWER AND DIRECT TRANSMISSION EXPENSE
1,076.4
911.7
1,662.4
OPERATING EXPENSES
Other operation and maintenance
514.1
505.0
491.9
Depreciation and amortization
539.5
506.6
460.9
Taxes other than income
109.7
99.4
98.0
Operating expenses
1,163.3
1,111.0
1,050.8
OPERATING INCOME
745.6
651.6
662.5
OTHER INCOME (EXPENSE)
Allowance for equity funds used during construction
25.5
19.4
6.9
Other net periodic benefit income (expense)
(1.6 )
6.5
1.2
Other income
12.5
23.9
6.5
Other expense
(4.5 )
(6.3 )
(3.4 )
Net other income
31.9
43.5
11.2
INTEREST EXPENSE
Interest on long-term debt
212.0
200.4
157.4
Allowance for borrowed funds used during construction
(14.6 )
(7.1 )
(4.0 )
Interest on short-term debt and other interest charges
17.0
6.6
4.4
Interest expense
214.4
199.9
157.8
INCOME BEFORE TAXES
563.1
495.2
515.9
INCOME TAX EXPENSE
93.2
68.8
76.4
NET INCOME
469.9
426.4
439.5
Other comprehensive income, net of tax
—
—
—
COMPREHENSIVE INCOME
$
469.9 $
426.4 $
439.5
The accompanying Combined Notes to Financial Statements are an integral part hereof.
56
OKLAHOMA GAS AND ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
Year Ended December 31 (In millions)
2024
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
469.9 $
426.4 $
439.5
Adjustments to reconcile net income to net cash provided from operating activities:
Depreciation and amortization
539.5
506.6
460.9
Deferred income taxes and other tax credits, net
16.8
15.4
220.5
Allowance for equity funds used during construction
(25.5 )
(19.4 )
(6.9 )
Stock-based compensation expense
11.7
3.1
2.9
Regulatory assets
(52.4 )
(92.1 )
702.2
Regulatory liabilities
(2.8 )
(12.2 )
(9.1 )
Other assets
(9.8 )
4.7
—
Other liabilities
28.0
0.3
(5.6 )
Change in certain current assets and liabilities:
Accounts receivable and accrued unbilled revenues, net
(33.2 )
42.1
(96.6 )
Fuel, materials and supplies inventories
25.7
(122.8 )
(130.1 )
Fuel recoveries
(123.9 )
535.4
(363.0 )
Other current assets
(36.5 )
51.1
(30.1 )
Accounts payable
(0.3 )
(131.1 )
135.8
Income taxes payable - parent
23.8
9.4
8.0
Other current liabilities
30.8
34.6
19.3
Net cash provided from operating activities
861.8
1,251.5
1,347.7
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (less allowance for equity funds used during construction)
(1,090.9 )
(1,178.2 )
(1,050.9 )
Cost of removal
(67.5 )
(91.0 )
(109.3 )
Net cash used in investing activities
(1,158.4 )
(1,269.2 )
(1,160.2 )
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in advances with parent
(53.8 )
229.2
(187.4 )
Proceeds from long-term debt
350.5
788.8
—
Payment of long-term debt
(0.1 )
(500.1 )
(0.1 )
Dividends paid on common stock
—
(500.0 )
—
Net cash provided from (used in) financing activities
296.6
17.9
(187.5 )
NET CHANGE IN CASH AND CASH EQUIVALENTS
—
0.2
—
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
0.2
—
—
CASH AND CASH EQUIVALENTS AT END OF YEAR
$
0.2 $
0.2 $
—
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest (net of interest capitalized of $14.6, $7.1 and $4.0, respectively)
$
206.3 $
180.7 $
154.6
Income taxes (net of income tax refunds)
$
52.0 $
44.2 $
(152.6 )
NON-CASH INVESTING AND FINANCING ACTIVITIES
Power plant long-term service agreement
$
6.4 $
0.7 $
0.8
Tinker Air Force Base distribution assets purchase
$
2.6 $
— $
—
The accompanying Combined Notes to Financial Statements are an integral part hereof.
57
OKLAHOMA GAS AND ELECTRIC COMPANY
BALANCE SHEETS
December 31 (In millions)
2024
2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
0.2 $
0.2
Accounts receivable, less reserve of $2.0 and $2.2, respectively
240.1
208.8
Accrued unbilled revenues
74.6
72.7
Fuel inventories
148.3
158.5
Materials and supplies, at average cost
229.4
254.3
Fuel clause under recoveries
112.7
—
Other
83.2
46.7
Total current assets
888.5
741.2
OTHER PROPERTY AND INVESTMENTS
4.5
4.6
PROPERTY, PLANT AND EQUIPMENT
In service
16,248.5
15,582.1
Construction work in progress
814.2
522.2
Total property, plant and equipment
17,062.7
16,104.3
Less: accumulated depreciation
4,982.2
4,809.4
Net property, plant and equipment
12,080.5
11,294.9
DEFERRED CHARGES AND OTHER ASSETS
Regulatory assets
568.1
577.6
Other
39.7
24.3
Total deferred charges and other assets
607.8
601.9
TOTAL ASSETS
$
13,581.3 $
12,642.6
The accompanying Combined Notes to Financial Statements are an integral part hereof.
58
OKLAHOMA GAS AND ELECTRIC COMPANY
BALANCE SHEETS (Continued)
December 31 (In millions)
2024
2023
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable
$
272.2 $
228.5
Advances from parent
247.6
147.7
Customer deposits
111.1
103.5
Accrued taxes
51.4
47.2
Accrued interest
61.4
56.6
Accrued compensation
53.0
37.0
Long-term debt due within one year
32.4
—
Fuel clause over recoveries
9.3
20.5
Other
41.8
43.6
Total current liabilities
880.2
684.6
LONG-TERM DEBT
4,614.3
4,290.6
DEFERRED CREDITS AND OTHER LIABILITIES
Accrued benefit obligations
102.2
96.2
Deferred income taxes
1,410.7
1,340.8
Deferred investment tax credits
10.6
11.3
Regulatory liabilities
1,016.4
1,061.6
Other
220.5
182.8
Total deferred credits and other liabilities
2,760.4
2,692.7
Total liabilities
8,254.9
7,667.9
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDER'S EQUITY
Common stockholder's equity
1,589.5
1,577.7
Retained earnings
3,736.9
3,397.0
Total stockholder's equity
5,326.4
4,974.7
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$
13,581.3 $
12,642.6
The accompanying Combined Notes to Financial Statements are an integral part hereof.
59
OKLAHOMA GAS AND ELECTRIC COMPANY
STATEMENTS OF CAPITALIZATION
December 31 (In millions except per share data)
2024
2023
STOCKHOLDER'S EQUITY
Common stock, par value $2.50 per share; authorized 100.0 shares; and outstanding 40.4 shares and
40.4 shares, respectively
$
100.9 $
100.9
Premium on common stock
1,488.6
1,476.8
Retained earnings
3,736.9
3,397.0
Total stockholder's equity
5,326.4
4,974.7
LONG-TERM DEBT
SERIES
DUE DATE
Senior Notes
6.65%
Senior Notes, Series Due July 15, 2027
125.0
125.0
6.50%
Senior Notes, Series Due April 15, 2028
100.0
100.0
3.80%
Senior Notes, Series Due August 15, 2028
400.0
400.0
3.30%
Senior Notes, Series Due March 15, 2030
300.0
300.0
3.25%
Senior Notes, Series Due April 1, 2030
300.0
300.0
5.40%
Senior Notes, Series Due January 15, 2033
450.0
450.0
5.75%
Senior Notes, Series Due January 15, 2036
110.0
110.0
6.45%
Senior Notes, Series Due February 1, 2038
200.0
200.0
5.85%
Senior Notes, Series Due June 1, 2040
250.0
250.0
5.25%
Senior Notes, Series Due May 15, 2041
250.0
250.0
3.90%
Senior Notes, Series Due May 1, 2043
250.0
250.0
4.55%
Senior Notes, Series Due March 15, 2044
250.0
250.0
4.00%
Senior Notes, Series Due December 15, 2044
250.0
250.0
4.15%
Senior Notes, Series Due April 1, 2047
300.0
300.0
3.85%
Senior Notes, Series Due August 15, 2047
300.0
300.0
5.60%
Senior Notes, Series Due April 1, 2053
700.0
350.0
3.80%
Tinker Debt, Due August 31, 2062
11.7
9.2
Other Bonds
1.90% - 4.75%
Muskogee Industrial Authority, January 1, 2025
32.4
32.4
2.15% - 4.85%
Muskogee Industrial Authority, June 1, 2027
56.0
56.0
2.15% - 4.85%
Garfield Industrial Authority, October 1, 2039
47.0
47.0
Unamortized debt expense
(29.9 )
(27.8 )
Unamortized discount
(5.5 )
(11.2 )
Total long-term debt
4,646.7
4,290.6
Less: long-term debt due within one year
32.4
—
Total long-term debt (excluding long-term debt due within one year)
4,614.3
4,290.6
Total capitalization (including long-term debt due within one year)
$
9,940.7 $
9,265.3
The accompanying Combined Notes to Financial Statements are an integral part hereof.
60
OKLAHOMA GAS AND ELECTRIC COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
Common Stock
(In millions)
Shares
Outstanding
Value
Premium on
Common Stock
Retained
Earnings
Total
Balance at December 31, 2021
40.4 $
100.9 $
1,470.8 $
3,031.1 $
4,602.8
Net income
—
—
—
439.5
439.5
Stock-based compensation
—
—
2.9
—
2.9
Balance at December 31, 2022
40.4 $
100.9 $
1,473.7 $
3,470.6 $
5,045.2
Net income
—
—
—
426.4
426.4
Dividends declared on common stock
—
—
—
(500.0 )
(500.0 )
Stock-based compensation
—
—
3.1
—
3.1
Balance at December 31, 2023
40.4 $
100.9 $
1,476.8 $
3,397.0 $
4,974.7
Net income
—
—
—
469.9
469.9
Dividends declared on common stock
—
—
—
(130.0 )
(130.0 )
Stock-based compensation
—
—
11.8
—
11.8
Balance at December 31, 2024
40.4 $
100.9 $
1,488.6 $
3,736.9 $
5,326.4
The accompanying Combined Notes to Financial Statements are an integral part hereof.
61
COMBINED NOTES TO FINANCIAL STATEMENTS
Index of Combined Notes to Financial Statements
The Combined Notes to the Financial Statements are a combined presentation for OGE Energy and OG&E. The following table indicates the Registrant(s)
to which each Note applies.
OGE Energy
OG&E
Note 1. Summary of Significant Accounting Policies
X
X
Note 2. Accounting Pronouncements
X
X
Note 3. Revenue Recognition
X
X
Note 4. Leases
X
X
Note 5. Fair Value Measurements
X
X
Note 6. Stock-Based Compensation
X
X
Note 7. Income Taxes
X
X
Note 8. Common Equity
X
X
Note 9. Long-Term Debt
X
X
Note 10. Credit Facilities and Short-Term Debt
X
X
Note 11. Retirement Plans and Postretirement Benefit Plans
X
X
Note 12. Report of Business Segments
X
Note 13. Commitments and Contingencies
X
X
Note 14. Rate Matters and Regulation
X
X
1. Summary of Significant Accounting Policies
Organization
OGE Energy is a holding company whose primary investment provides electricity in Oklahoma and western Arkansas. OGE Energy's electric company
operations are conducted through its wholly-owned subsidiary, OG&E, which generates, transmits, distributes and sells electric energy in Oklahoma and
western Arkansas and are reported through OGE Energy's electric company business segment. OG&E's rates are subject to regulation by the OCC, the APSC
and the FERC. OG&E was incorporated in 1902 under the laws of the Oklahoma Territory and is the largest electric company in Oklahoma, with a franchised
service territory that includes Fort Smith, Arkansas and the surrounding communities. OG&E sold its retail natural gas business in 1928 and is no longer
engaged in the natural gas distribution business.
The accounts of OGE Energy and its wholly-owned subsidiaries, including OG&E, are included in OGE Energy's consolidated financial statements. All
intercompany transactions and balances are eliminated in such consolidation.
During 2022, OGE Energy accounted for its investment in Energy Transfer as an investment in equity securities and reported the Energy Transfer
investment, along with legacy Enable seconded employee pension and postretirement costs, through OGE Energy's natural gas midstream operations
segment. As of the end of September 2022, OGE Energy sold all of its Energy Transfer limited partner units. Therefore, beginning in 2023, OGE Energy no
longer has a natural gas operations reporting segment.
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 electric company, is subject to accounting principles for certain types of rate-regulated activities, which
provide that certain incurred costs that would otherwise be charged to expense can be deferred as regulatory assets, based on the expected recovery from
customers in future rates. Likewise, certain actual or anticipated credits that would otherwise reduce expense can be deferred as regulatory liabilities, based
on the expected flowback to customers in future rates. Management's expected recovery of deferred costs and flowback of deferred credits generally results
from specific decisions by regulators granting such ratemaking treatment.
62
OG&E records certain incurred costs and obligations as regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is
probable that the costs or obligations will be included in amounts allowable for recovery or refund in future rates.
The following table presents a summary of OG&E's regulatory assets and liabilities.
December 31 (In millions)
2024
2023
REGULATORY ASSETS
Current:
Oklahoma fuel clause under recoveries
$
112.7 $
—
Oklahoma Energy Efficiency Rider under recoveries (A)
7.0
3.8
Other (A)
3.8
2.7
Total current regulatory assets
$
123.5 $
6.5
Non-current:
Oklahoma deferred storm expenses
$
244.3 $
261.1
Pension tracker
94.7
91.9
Benefit obligations regulatory asset
90.8
89.4
Arkansas Winter Storm Uri costs
63.0
71.0
Sooner Dry Scrubbers
16.4
17.2
Oklahoma SAP S/4 HANA deferred expenses
14.3
6.0
Arkansas deferred pension expenses
11.0
12.7
Oklahoma vegetation management program deferred costs
6.4
—
Unamortized loss on reacquired debt
6.3
7.2
COVID-19 impacts
5.4
6.8
Arkansas capacity power purchase agreements
3.5
0.6
Other
12.0
13.7
Total non-current regulatory assets
$
568.1 $
577.6
REGULATORY LIABILITIES
Current:
Arkansas fuel clause over recoveries
$
9.3 $
4.9
Oklahoma Investment Tax Credit over recoveries (B)
6.1
—
SPP cost tracker over recoveries (B)
4.1
10.4
Oklahoma fuel clause over recoveries
—
15.6
Other (B)
0.8
2.3
Total current regulatory liabilities
$
20.3 $
33.2
Non-current:
Income taxes refundable to customers, net
$
780.8 $
838.0
Accrued removal obligations, net
231.9
222.0
Other
3.7
1.6
Total non-current regulatory liabilities
$
1,016.4 $
1,061.6
(A)
Included in Other Current Assets in the balance sheets.
(B)
Included in Other Current Liabilities in the balance sheets.
Fuel clause under and over recoveries are generated from OG&E's customers when OG&E's cost of fuel either exceeds or is less than the amount billed
to its customers, respectively. OG&E's fuel recovery clauses are designed to smooth the impact of fuel price volatility on customers' bills. As a result, OG&E
under recovers fuel costs in periods of rising fuel prices above the baseline charge for fuel and over recovers fuel costs when prices decline below the
baseline charge for fuel. Provisions in the fuel clauses are intended to allow OG&E to amortize under and over recovery balances.
OG&E recovers program costs related to the Energy Efficiency Program in Oklahoma through the Energy Efficiency Rider, which operated on a three-
year program cycle. The previous program cycle, which ran through 2024, included recovery of (i) energy efficiency program costs, (ii) lost revenues
associated with certain achieved energy efficiency and demand savings, (iii) performance-based incentives and (iv) costs associated with research and
development investments. A new five year program cycle related to 2025 through 2029 programs was approved on December 10, 2024, as further discussed
in Note 14.
63
OG&E includes in expense any Oklahoma storm-related operation and maintenance expenses up to $2.7 million annually and defers to a regulatory
asset any additional expenses incurred over $2.7 million. OG&E typically recovers the amounts deferred each year over a five- to ten-year period in
accordance with historical practice.
OG&E recovers specific amounts of pension and postretirement medical costs in rates approved in its Oklahoma rate reviews. In accordance with
approved orders, OG&E defers the difference between actual pension and postretirement medical expenses and the amount approved in its last Oklahoma
rate review as a regulatory asset or regulatory liability. These amounts have been recorded in the Pension tracker regulatory asset in the table above and are
being recovered over a 15-year period.
The benefit obligations regulatory asset is comprised of expenses recorded which are probable of future recovery and that have not yet been
recognized as components of net periodic benefit cost, including net loss and prior service cost. These expenses are recorded as a regulatory asset, as OG&E
historically has recovered and currently recovers pension and postretirement benefit plan expense in its electric rates. If, in the future, the regulatory bodies
indicate a change in policy related to the recovery of pension and postretirement benefit plan expenses, this could cause the benefit obligations regulatory
asset balance to be reclassified to accumulated other comprehensive income.
The following table presents a summary of the components of the benefit obligations regulatory asset.
December 31 (In millions)
2024
2023
Pension Plan and Restoration of Retirement Income Plan:
Net loss
$
76.5 $
75.9
Postretirement Benefit Plans:
Net loss
14.3
13.5
Total
$
90.8 $
89.4
As approved by the APSC, OG&E is amortizing the deferred costs related to Winter Storm Uri over 10 years using a weighted average cost of capital as a
carrying charge.
As approved by the OCC, OG&E deferred the non-fuel incremental operation and maintenance expenses, depreciation, debt cost associated with the
capital investment and related ad valorem taxes for the Dry Scrubbers at Sooner Units 1 and 2 as a regulatory asset, and these costs are being recovered over
25 years.
As approved by the OCC, OG&E established a regulatory asset to defer the Oklahoma jurisdictional portion of operation and maintenance costs
associated with OG&E's SAP S/4 HANA enterprise resource planning system project. As approved in the Oklahoma general rate review interim order received
in November 2024, a portion of these costs is being recovered over five years with the remaining portion being included for consideration in a future rate
proceeding.
Arkansas includes a certain level of pension expense in base rates. When the Pension Plan experiences a settlement, which represents an acceleration
of future pension costs, OG&E defers to a regulatory asset the Arkansas jurisdictional portion of each settlement, which historically has been recovered from
customers over the average life of the remaining plan participants. A portion of these settlements is being recovered in current rates, and recovery of
additional amounts will be requested as additional settlements occur. For additional information related to settlements, see Note 11.
As approved in the Oklahoma general rate review interim order received in November 2024, OG&E includes in expense any Oklahoma vegetation
management operation and maintenance expenses up to $38.2 million annually and defers to a regulatory asset up to $7.5 million in additional expenses.
These costs will be included for consideration in a future rate proceeding.
Unamortized loss on reacquired debt is comprised of unamortized debt issuance costs related to the early retirement of OG&E's long-term debt. These
amounts are recorded in interest expense and are being amortized over the term of the long-term debt which replaced the previous long-term debt. The
unamortized loss on reacquired debt is recovered as a part of OG&E's cost of capital.
In response to the COVID-19 pandemic, the OCC and APSC issued orders allowing OG&E to defer certain expenses related to its COVID-19 response,
such as incremental expenses that were related to the suspension of or delay in disconnection of service and additional expenses associated with ensuring
the continuity of electric utility service. As approved by the OCC, OG&E is recovering the Oklahoma jurisdictional portion of these costs over five years.
64
As approved by the APSC, OG&E defers to a regulatory asset the Arkansas jurisdictional portion of capacity costs associated with short-term power
purchase agreements entered into to meet capacity needs in each of the years between 2023 and 2027. For additional information, see Note 14.
OG&E refunds state investment tax credits to its Oklahoma customers through the Oklahoma investment tax credit rider.
OG&E recovers certain SPP costs related to base plan charges from its customers and refunds certain SPP revenues received to its customers in
Oklahoma through the SPP cost tracker and in Arkansas through the transmission cost recovery rider.
Income taxes refundable to customers, net, primarily represents the reduction in accumulated deferred income taxes that resulted from the reduction
in the federal income tax rate as part of the Tax Cuts and Jobs Act of 2017 as well as other state tax rate changes, partially offset by income taxes recoverable
from customers primarily related to the equity component of the allowance for funds used during construction. These net liabilities will be returned to
customers in varying amounts over approximately 80 years, and the assets will be amortized over the estimated remaining life of the assets to which they
relate, as the temporary differences that generated the income tax benefits turn-around.
Accrued removal obligations, net represents asset removal costs previously recovered from ratepayers.
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 or liabilities, which could
have significant financial effects.
Use of Estimates
In preparing the 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 financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Changes to these assumptions and estimates could have a material
effect on the Registrants' financial statements. However, the Registrants believe they have taken reasonable positions where assumptions and estimates are
used in order to minimize the negative financial impact to the Registrants that could result if actual results vary from the assumptions and estimates. In
management's opinion, the areas where the most significant judgment is exercised include the determination of pension and postretirement plan
assumptions, income taxes, contingency reserves, and regulatory assets and liabilities.
Cash and Cash Equivalents
For purposes of the financial statements, the Registrants consider all highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents. These investments are carried at cost, which approximates fair value.
Allowance for Uncollectible Accounts Receivable
Customer balances are generally written off if not collected within six months after the final billing date. The allowance for uncollectible accounts
receivable for OG&E is generally calculated by multiplying the last six months of electric revenue by the provision rate, which is based on a historical average
of actual balances written off and is adjusted for current conditions and supportable forecasts as necessary. To the extent the historical collection rates,
when incorporating forecasted conditions, are not representative of future collections, there could be an effect on the amount of uncollectible expense
recognized. Also, a portion of the uncollectible provision related to fuel within the Oklahoma jurisdiction is being recovered through the fuel adjustment
clause. The allowance for uncollectible accounts receivable is a reduction to Accounts Receivable in the balance sheets and is included in Other Operation
and Maintenance Expense in the statements of income. The allowance for uncollectible accounts receivable was $2.0 million and $2.2 million at December
31, 2024 and 2023, respectively.
New business customers are required to provide a security deposit in the form of cash, bond or irrevocable letter of credit that is refunded when the
account is closed or when certain requirements are met. New residential customers whose outside credit scores indicate an elevated risk are required to
provide a security deposit that is refunded based on customer protection rules defined by the
65
OCC and the APSC. The payment behavior of all existing customers is continuously monitored, and, if the payment behavior indicates sufficient risk within the
meaning of the applicable utility regulation, customers will be required to provide a security deposit.
Fuel Inventories
Fuel inventories for the generation of electricity consist of coal, natural gas, oil and alternative fuel. OG&E uses the weighted-average cost method of
accounting for inventory that is physically added to or withdrawn from storage or stockpiles. OG&E held $148.3 million and $158.5 million of fuel inventory
at December 31, 2024 and 2023, respectively.
Property, Plant and Equipment
All property, plant and equipment is recorded at cost. Newly constructed plant is added to plant balances at cost which includes contracted services,
direct labor, materials, overhead, transportation costs and the allowance for funds used during construction. Replacements of units of property are
capitalized as plant. For assets that belong to a common plant account, the replaced plant is removed from plant balances, and the cost of such property net
of any salvage proceeds is charged to Accumulated Depreciation. For assets that do not belong to a common plant account, the replaced plant is removed
from plant balances with the related accumulated depreciation, and the remaining balance net of any salvage proceeds is recorded as a loss in the
statements of income as Other Expense. Repair and replacement of minor items of property are included in the statements of income as Other Operation
and Maintenance Expense.
The following tables present OG&E's ownership interest in the jointly-owned McClain Plant and the jointly-owned Redbud Plant, and, as disclosed
below, only OG&E's ownership interest is reflected in the property, plant and equipment and accumulated depreciation balances in these tables. The owners
of the remaining interests in the McClain Plant and the Redbud Plant are responsible for providing their own financing of capital expenditures. Also, only
OG&E's proportionate interests of any direct expenses of the McClain Plant and the Redbud Plant, such as fuel, maintenance expense and other operating
expenses, are included in the applicable financial statement captions in the statements of income.
December 31, 2024 (In millions)
Percentage
Ownership
Total Property,
Plant and
Equipment
Accumulated
Depreciation
Net Property,
Plant and
Equipment
McClain Plant (A)
77 % $
244.4 $
75.8 $
168.6
Redbud Plant (A)(B)
51 % $
556.7 $
247.7 $
309.0
(A)
Construction work in progress was $0.8 million and $5.1 million for the McClain and Redbud Plants, respectively.
(B)
This amount includes a plant acquisition adjustment of $148.3 million and accumulated amortization of $89.3 million.
December 31, 2023 (In millions)
Percentage
Ownership
Total Property,
Plant and
Equipment
Accumulated
Depreciation
Net Property,
Plant and
Equipment
McClain Plant (A)
77 % $
265.4 $
129.2 $
136.2
Redbud Plant (A)(B)
51 % $
548.9 $
245.5 $
303.4
(A)
Construction work in progress was $0.3 million and $2.0 million for the McClain and Redbud Plants, respectively.
(B)
This amount includes a plant acquisition adjustment of $148.3 million and accumulated amortization of $83.8 million.
66
The following tables present the Registrants' major classes of property, plant and equipment and related accumulated depreciation.
December 31, 2024 (In millions)
Total Property,
Plant and
Equipment
Accumulated
Depreciation
Net Property,
Plant and
Equipment
OG&E:
Distribution assets
$
6,654.5 $
1,639.8 $
5,014.7
Electric generation assets (A)
5,518.5
2,145.9
3,372.6
Transmission assets (B)
3,432.1
748.5
2,683.6
Intangible plant
752.3
203.7
548.6
Other property and equipment
705.3
244.3
461.0
OG&E property, plant and equipment
17,062.7
4,982.2
12,080.5
Non-OG&E property, plant and equipment
6.1
—
6.1
Total OGE Energy property, plant and equipment
$
17,068.8 $
4,982.2 $
12,086.6
(A)
This amount includes a plant acquisition adjustment of $148.3 million and accumulated amortization of $89.3 million.
(B)
This amount includes a plant acquisition adjustment of $3.3 million and accumulated amortization of $1.2 million.
December 31, 2023 (In millions)
Total Property,
Plant and
Equipment
Accumulated
Depreciation
Net Property,
Plant and
Equipment
OG&E:
Distribution assets
$
6,290.1 $
1,564.3 $
4,725.8
Electric generation assets (A)
5,295.9
2,081.0
3,214.9
Transmission assets (B)
3,306.7
707.6
2,599.1
Intangible plant
568.5
219.8
348.7
Other property and equipment
643.1
236.7
406.4
OG&E property, plant and equipment
16,104.3
4,809.4
11,294.9
Non-OG&E property, plant and equipment
6.1
—
6.1
Total OGE Energy property, plant and equipment
$
16,110.4 $
4,809.4 $
11,301.0
(A)
This amount includes a plant acquisition adjustment of $148.3 million and accumulated amortization of $83.8 million.
(B)
This amount includes a plant acquisition adjustment of $3.3 million and accumulated amortization of $1.1 million.
OG&E's unamortized computer software costs, included in intangible plant above, were $280.9 million and $203.1 million at December 31, 2024 and
2023, respectively. OG&E's amortization expense for computer software costs was $32.7 million, $33.4 million and $23.5 million for the years ended
December 31, 2024, 2023 and 2022, respectively.
Depreciation and Amortization
Depreciation expense was $436.6 million, $421.6 million and $388.5 million for the years ended December 31, 2024, 2023 and 2022, respectively. The
provision for depreciation, which was 2.8 percent, 2.8 percent and 2.7 percent of the average depreciable utility plant for 2024, 2023 and 2022, respectively,
is calculated using the straight-line method over the estimated service life of the associated assets. Depreciation is provided at the unit level for production
plant and at the account or sub-account level for all other plant and is based on the average life group method. In 2025, the provision for depreciation is
projected to be 2.8 percent of the average depreciable utility plant.
Amortization of intangible assets is calculated using the straight-line method. Of the remaining amortizable intangible plant balance at December 31,
2024, 55.30 percent will be amortized over 13.1 years, 44.15 percent will be amortized over 19.5 years, and the remaining 0.55 percent will be amortized
over 23.4 years.
Amortization of plant acquisition adjustments is provided on a straight-line basis over the estimated remaining service life of the acquired assets. Plant
acquisition adjustments include $148.3 million for the Redbud Plant, which is being amortized over a 27-year life, and $3.3 million for certain transmission
substation facilities in OG&E's service territory, which is being amortized over a 37- to 59-year period.
67
Asset Retirement Obligations
OG&E has asset retirement obligations primarily associated with the removal of company-owned wind turbines on leased land, as well as the removal of
asbestos from certain power generating stations. OG&E has recorded asset retirement obligations that are being accreted over their respective lives ranging
from three to 68 years. Asset retirement obligations are included in Other Deferred Credits and Other Liabilities in the Registrants' balance sheets.
The following table presents changes to OG&E's asset retirement obligations during the years ended December 31, 2024 and 2023.
(In millions)
2024
2023
Balance at January 1
$
81.3 $
78.3
Accretion expense
0.9
0.7
Liabilities settled (A)
(0.2 )
—
Revisions in estimated cash flows (B)
2.6
2.3
Balance at December 31
$
84.6 $
81.3
(A)
Asset retirement obligations were settled for asbestos removal at OG&E's generating facilities.
(B)
Assumptions changed due to new removal estimates related to asbestos abatement at two of OG&E's generating facilities in 2023, and wind turbine
removal at three of OG&E's wind farms in 2024.
Accruals for environmental costs are recognized when it is probable that a liability has been incurred and the amount of the liability can be reasonably
estimated. Costs are charged to expense or deferred as a regulatory asset based on expected recovery from customers in future rates, if they relate to the
remediation of conditions caused by past operations or if they are not expected to mitigate or prevent contamination from future operations. Where
environmental expenditures relate to facilities currently in use, such as pollution control equipment, the costs may be capitalized and depreciated over the
future service periods. Estimated remediation costs are recorded at undiscounted amounts, independent of any insurance or rate recovery, based on prior
experience, assessments and current technology. Accrued obligations are regularly adjusted as environmental assessments and estimates are revised and
remediation efforts proceed. For sites where OG&E has been designated as one of several potentially responsible parties, the amount accrued represents
OG&E's estimated share of the cost. OG&E had $30.2 million and $27.5 million in accrued environmental liabilities at December 31, 2024 and 2023,
respectively, which are included in OG&E's asset retirement obligations.
Allowance for Funds Used During Construction
Allowance for funds used during construction, a non-cash item, is reflected as an increase to Net Other Income and a reduction to Interest Expense in
the statements of income and as an increase to Construction Work in Progress in the balance sheets. Allowance for funds used during construction is
calculated according to the FERC requirements for the imputed cost of equity and borrowed funds. Allowance for funds used during construction rates,
compounded semi-annually, were 7.1 percent, 7.0 percent and 4.8 percent for the years ended December 31, 2024, 2023 and 2022, respectively.
Collection of Sales Tax
In the normal course of its operations, OG&E collects sales tax from its customers. OG&E records a current liability for sales taxes when it bills its
customers and eliminates this liability when the taxes are remitted to the appropriate governmental authorities. OG&E excludes the sales tax collected from
its operating revenues.
68
Revenue Recognition
General
OG&E recognizes revenue from electric sales when power is delivered to customers. The performance obligation to deliver electricity is generally
created and satisfied simultaneously, and the provisions of the regulatory-approved tariff determine the charges OG&E may bill the customer, payment due
date and other pertinent rights and obligations of both parties. OG&E measures its customers' metered usage and sends bills to its customers throughout
each month. As a result, there is a significant amount of customers' electricity consumption that has not been billed at the end of each month. OG&E accrues
an estimate of the revenues for electric sales delivered since the latest billings. Unbilled revenue is presented in Accrued Unbilled Revenues in the balance
sheets and in Revenues from Contracts with Customers in the statements of income based on estimates of usage and prices during the period. The estimates
that management uses in this calculation could vary from the actual amounts to be paid by customers.
Integrated Market and Transmission
OG&E currently owns and operates transmission and generation facilities as part of a vertically integrated utility. OG&E is a member of the SPP regional
transmission organization and has transferred operational authority, but not ownership, of OG&E's transmission facilities to the SPP. The SPP has
implemented FERC-approved regional day-ahead and real-time markets for energy and operating services, as well as associated transmission congestion
rights. Collectively, the three markets operate together under the global name, SPP Integrated Marketplace. OG&E represents owned and contracted
generation assets and customer load in the SPP Integrated Marketplace for the sole benefit of its customers. OG&E has not participated in the SPP Integrated
Marketplace for any speculative trading activities.
OG&E records the SPP Integrated Marketplace transactions as sales or purchases per FERC Order 668, which requires that purchases and sales be
recorded on a net basis for each settlement period of the SPP Integrated Marketplace. Purchases and sales are based on the fixed transaction price
determined by the market at the time of the purchase or sale and the MWh quantity purchased or sold. These results are reported as Revenues from
Contracts with Customers or Fuel, Purchased Power and Direct Transmission Expense in the statements of income. OG&E's revenues, expenses, assets and
liabilities may be adversely affected by changes in the organization, operating and regulation by the FERC or the SPP.
OG&E's transmission revenues are generated by the use of OG&E's transmission network by the SPP, which operates the network, on behalf of other
transmission owners. OG&E recognizes revenue on the sale of transmission service to its customers over time as the service is provided in the amount OG&E
has a right to invoice. Transmission service to the SPP is billed monthly based on a fixed transaction price determined by OG&E's FERC-approved formula
transmission rates along with other SPP-specific charges and the megawatt quantity reserved.
Other Revenues
Other Revenues in the statements of income is comprised of certain rider revenue that includes alternative revenue measures as defined in ASC 980,
"Regulated Operations," which details two types of alternative revenue programs. The first type adjusts billings for the effects of weather abnormalities or
broad external factors or to compensate OG&E for demand-side management initiatives (i.e., no-growth plans and similar conservation efforts). The second
type provides for additional billings (i.e., incentive awards) for the achievement of certain objectives, such as reducing costs, reaching specified milestones or
demonstratively improving customer service. Once the specific events permitting billing of the additional revenues under either program type have been
completed, OG&E recognizes the additional revenues if (i) the program is established by an order from OG&E's regulatory commission that allows for
automatic adjustment of future rates; (ii) the amount of additional revenues for the period is objectively determinable and is probable of recovery; and (iii)
the additional revenues will be collected within 24 months following the end of the annual period in which they are recognized.
Fuel Adjustment Clauses
The actual cost of fuel used in electric generation and certain purchased power costs are generally recoverable from OG&E's customers through fuel
adjustment clauses. The fuel adjustment clauses are subject to periodic review by the OCC and the APSC.
69
Leases
The Registrants evaluate all contracts under ASC 842 to determine if the contract is or contains a lease and to determine classification as an operating or
finance lease. If a lease is identified, the Registrants recognize a right-of-use asset and a lease liability in their balance sheets. The Registrants recognize and
measure a lease liability when they conclude the contract contains an identified asset that the Registrants control through having the right to obtain
substantially all of the economic benefits and the right to direct the use of the identified asset. The liability is equal to the present value of lease payments,
and the asset is based on the liability, subject to adjustment, such as for initial direct costs. Further, the Registrants utilize an incremental borrowing rate for
purposes of measuring lease liabilities, if the discount rate is not implicit in the lease. To calculate the incremental borrowing rate, the Registrants start with
a current pricing report for their senior unsecured notes, which indicates rates for periods reflective of the lease term, and adjust for the effects of collateral
to arrive at the secured incremental borrowing rate. As permitted by ASC 842, the Registrants made an accounting policy election to not apply the balance
sheet recognition requirements to short-term leases and to not separate lease components from non-lease components when recognizing and measuring
lease liabilities. For income statement purposes, the Registrants record operating lease expense on a straight-line basis.
Income Taxes
OGE Energy files consolidated income tax returns in the U.S. federal jurisdiction and various state jurisdictions. OG&E is a part of the consolidated tax
return of OGE Energy. Income taxes are generally allocated to each company in the affiliated group, including OG&E, based on its stand-alone taxable income
or loss. Federal investment tax credits previously claimed on electric company property have been deferred and will be amortized to income over the life of
the related property. The Registrants use the asset and liability method of accounting for income taxes. Under this method, a deferred tax asset or liability is
recognized for the estimated future tax effects attributable to temporary differences between the financial statement basis and the tax basis of assets and
liabilities as well as tax credit carry forwards and net operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period of the change. The Registrants recognize interest related to unrecognized tax benefits
in Interest Expense and recognize penalties in Other Expense in the statements of income. Deferred tax assets are evaluated for future realization and
reduced by a valuation allowance to the extent the Registrants believe they will not be realized.
Accrued Vacation
The Registrants accrue vacation pay monthly by establishing a liability for vacation earned. Vacation may be taken as earned and is charged against the
liability. At the end of each year, the liability represents the amount of vacation earned but not taken.
Related Party Transactions
OGE Energy charges operating costs to OG&E based on several factors, and operating costs directly related to OG&E are assigned as such. Operating
costs incurred for the benefit of OG&E are allocated either as overhead based primarily on labor costs or using the "Distrigas" method, which is a three-factor
formula that uses an equal weighting of payroll, net operating revenues and gross property, plant and equipment. OGE Energy adopted this method as a
result of a recommendation by the OCC Staff and believes this method provides a reasonable basis for allocating common expenses.
OGE Energy charged operating costs to OG&E of $148.3 million and $135.5 million during the years ended December 31, 2023 and 2022, respectively.
As a result of OGE Energy's exit of its former midstream business and becoming primarily an electric company, all employees are directly employed by OG&E
beginning in 2024. In 2024 and 2023, OG&E declared $130.0 million and $500.0 million of dividends, respectively, to OGE Energy. In 2022, OG&E declared no
dividends to OGE Energy.
Accumulated Other Comprehensive Income (Loss)
The following table presents changes in the components of accumulated other comprehensive income (loss) attributable to OGE Energy during 2024
and 2023. All amounts below are presented net of tax.
70
Pension Plan and
Restoration of Retirement
Income Plan
Postretirement
Benefit Plans
(In millions)
Net Gain
(Loss)
Prior Service
Cost (Credit) Net Gain (Loss)
Total
Balance at December 31, 2022
$
(17.5 ) $
(1.0 ) $
6.6 $
(11.9 )
Other comprehensive income (loss) before reclassifications
3.3
—
(0.8 )
2.5
Amounts reclassified from accumulated other comprehensive income (loss)
0.9
0.2
(0.1 )
1.0
Settlement cost
1.2
—
—
1.2
Net current period other comprehensive income (loss)
5.4
0.2
(0.9 )
4.7
Balance at December 31, 2023
(12.1 )
(0.8 )
5.7
(7.2 )
Other comprehensive income (loss) before reclassifications
(0.2 )
—
0.5
0.3
Amounts reclassified from accumulated other comprehensive income (loss)
0.2
0.2
(0.1 )
0.3
Regulatory classification of certain pension costs
3.9
—
—
3.9
Net current period other comprehensive income (loss)
3.9
0.2
0.4
4.5
Balance at December 31, 2024
$
(8.2 ) $
(0.6 ) $
6.1 $
(2.7 )
The following table presents significant amounts reclassified out of accumulated other comprehensive income (loss) attributable to OGE Energy by the
respective line items in net income during the years ended December 31, 2024 and 2023.
Details about Accumulated Other Comprehensive Income (Loss)
Components
Amount Reclassified from
Accumulated Other Comprehensive
Income (Loss)
Affected Line Item in
OGE Energy's Statements of Income
Year Ended December 31,
(In millions)
2024
2023
Amortization of Pension Plan and Restoration of Retirement Income Plan
items:
Actuarial losses
$
(0.3 ) $
(1.1 ) (A)
Prior service cost
(0.3 )
(0.3 ) (A)
Settlement cost
—
(1.6 ) (A)
(0.6 )
(3.0 ) Income Before Taxes
(0.2 )
(0.7 ) Income Tax Expense
$
(0.4 ) $
(2.3 ) Net Income
Amortization of postretirement benefit plans items:
Actuarial gains
$
0.2 $
0.2 (A)
0.2
0.2 Income Before Taxes
0.1
0.1 Income Tax Expense
$
0.1 $
0.1 Net Income
Total reclassifications for the period, net of tax
$
(0.3 ) $
(2.2 ) Net Income
(A)
These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (see Note 11 for
additional information).
Investment in Equity Securities of Energy Transfer
For the period of January 1, 2022 through September 30, 2022, OGE Energy accounted for its investment in Energy Transfer's equity securities as an
equity investment with a readily determinable fair value under ASC 321, "Investments – Equity Securities." As of the end of September 2022, OGE Energy sold
all of its 95.4 million Energy Transfer limited partner units, resulting in pre-tax net
71
proceeds of $1,067.2 million. Prior to exiting its Energy Transfer investment, OGE Energy presented realized gains and losses of the equity securities, as well
as dividend income from the investment, within the Other Income (Expense) section in its 2022 consolidated statement of income. During the year ended
December 31, 2022, OGE Energy recognized a gain of $282.1 million related to its investment in Energy Transfer's equity securities. Due to OGE Energy's sale
of all Energy Transfer limited partner units, at December 31, 2022, there was no unrecognized gain or loss related to the investment. During the year ended
December 31, 2022, OGE Energy received distributions of $34.0 million from Energy Transfer, which are presented within Other Income in OGE Energy's 2022
consolidated statement of income.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentation.
2. Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board issued ASU 2023-07, "Segment Reporting (Topic 280) Improvements to Reportable
Segment Disclosures." The amendments in this update improve financial reporting by requiring disclosure of incremental segment information on an annual
and interim basis. OGE Energy adopted this standard beginning with the 2024 Form 10-K with no material changes to disclosures. See Note 12 for OGE
Energy's segment disclosures.
In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, "Income Taxes (Topic 740) Improvements to Income Tax Disclosures."
The amendments in this update require public entities on an annual basis to (i) disclose specific categories in the rate reconciliation and (ii) provide additional
information for reconciling items that meet a quantitative threshold. Further, the amendments require entities to disclose on an annual basis income taxes
paid (net of refunds received) disaggregated by federal (national), state and foreign taxes and to disaggregate the information by jurisdiction based on a
quantitative threshold. The Registrants adopted this standard effective January 1, 2025 and do not believe it will have a material impact on their financial
statement disclosures.
In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures." The amendments in this update improve financial reporting by requiring disclosure of additional information about specific
expense categories in the notes to financial statements on an annual and interim basis. This standard is effective for fiscal years beginning after December
15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted. The Registrants are evaluating the impact of this standard and
do not believe it will have a material impact on their financial statement disclosures.
The Registrants believe that other recently adopted and recently issued accounting standards that are not yet effective do not appear to have a material
impact on the Registrants' financial position, results of operations or cash flows upon adoption.
3. Revenue Recognition
The following table presents OG&E's revenues from contracts with customers disaggregated by customer classification. OG&E's operating revenues
disaggregated by customer classification can be found in "OG&E (Electric Company) Results of Operations" within "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Year Ended December 31,
(In millions)
2024
2023
2022
Residential
$
1,116.4 $
1,008.6 $
1,272.6
Commercial
816.5
666.7
796.4
Industrial
248.6
235.2
322.1
Oilfield
225.7
210.0
306.3
Public authorities and street light
255.5
228.6
291.7
System sales revenues
2,662.7
2,349.1
2,989.1
Provision for rate refund and tax refund
(3.0 )
2.0
(1.2 )
Integrated market
74.5
71.6
163.8
Transmission
152.9
143.0
131.7
Other
29.5
41.6
20.8
Revenues from contracts with customers
$
2,916.6 $
2,607.3 $
3,304.2
72
4. Leases
Based on their evaluation of all contracts under ASC 842, as described in Note 1, the Registrants concluded they have operating lease obligations as
described below.
OG&E Railcar Lease Agreement
Effective February 1, 2024, OG&E renewed its railcar lease agreement for 770 rotary gondola railcars to transport coal from Wyoming to OG&E's coal-
fired generation units. Rental payments are charged to fuel expense and are recoverable through OG&E's fuel adjustment clauses. On February 1, 2029,
OG&E has the option to either purchase the railcars at a stipulated fair market value or renew the lease. If OG&E chooses not to purchase the railcars or
renew the lease agreement, it would be responsible for the difference between the actual fair value of the railcars and the stipulated fair market value, up to
a maximum of $3.2 million. OG&E holds an additional railcar lease agreement for 135 rotary gondola railcars to transport coal with a term of October 1, 2022
to December 31, 2025.
OG&E Wind Farm Land Lease Agreements
OG&E has operating leases related to land for OG&E's Centennial, OU Spirit and Crossroads wind farms with terms of eight to 12 years remaining,
depending on the lease. The Centennial lease has rent escalations which increase annually based on the Consumer Price Index. While lease liabilities are not
remeasured as a result of changes to the Consumer Price Index, changes to the Consumer Price Index are treated as variable lease payments and recognized
in the period in which the obligation for those payments was incurred. The OU Spirit and Crossroads leases each have rent escalations which increase after
five and 10 years. Although the leases are cancellable, OG&E is required to make annual lease payments as long as the wind turbines are located on the land.
OG&E does not expect to terminate the leases until the wind turbines reach the end of their useful life.
Financial Statement Information and Maturity Analysis of Lease Liabilities
The following tables present amounts recognized for operating leases in the Registrants' statements of income, statements of cash flows and balance
sheets and supplemental information related to those amounts recognized.
OGE Energy
OG&E
Year Ended December 31,
Year Ended December 31,
(In millions)
2024
2023
2022
2024
2023
2022
Operating lease cost
$
4.7 $
6.4 $
5.9 $
4.7 $
6.4 $
5.9
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows for operating leases
$
4.5 $
5.2 $
5.3 $
4.5 $
5.2 $
5.3
Right-of-use assets obtained in exchange for new operating
lease liabilities
$
5.7 $
— $
1.5 $
5.7 $
— $
1.5
OGE Energy
OG&E
(Dollars in millions)
December 31,
2024
December 31,
2023
December 31,
2024
December 31, 2023
Right-of-use assets at period end (A)
$
28.3 $
25.9 $
28.3 $
25.9
Operating lease liabilities at period end (B)
$
32.7 $
30.5 $
32.7 $
30.5
Operating lease weighted-average remaining lease term (in
years)
9.7
11.4
9.7
11.4
Operating lease weighted-average discount rate
4.2 %
4.0 %
4.2 %
4.0 %
(A)
Included in Property, Plant and Equipment in the Registrants' balance sheets.
(B)
Included in Other Deferred Credits and Other Liabilities in the Registrants' balance sheets.
73
The following table presents a maturity analysis of the Registrants' operating lease liabilities.
Future minimum operating lease payments as of December 31:
OGE Energy
OG&E
(In millions)
2025
$
4.9 $
4.9
2026
4.3
4.3
2027
4.3
4.3
2028
4.3
4.3
2029
3.2
3.2
Thereafter
19.5
19.5
Total future minimum lease payments
40.5
40.5
Less: Imputed interest
7.8
7.8
Present value of net minimum lease payments
$
32.7 $
32.7
5. Fair Value Measurements
The classification of the Registrants' fair value measurements requires judgment regarding the degree to which market data is observable or
corroborated by observable market data. GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value based on observable
and unobservable data. The hierarchy categorizes the inputs into three levels, with the highest priority given to quoted prices in active markets for identical
unrestricted assets or liabilities (Level 1) and the lowest priority given to unobservable inputs (Level 3). Financial assets and liabilities are classified in their
entirety based on the lowest level of input that is significant to the fair value measurement. The three levels defined in the fair value hierarchy are as follows:
Level 1 inputs are quoted prices in active markets for identical unrestricted assets or liabilities that are accessible at the measurement date.
Level 2 inputs are inputs other than quoted prices in active markets included within Level 1 that are either directly or indirectly observable at the
reporting date for the asset or liability for substantially the full term of the asset or liability. Level 2 inputs include quoted prices for similar assets or liabilities
in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3 inputs are prices or valuation techniques for the asset or liability that require inputs that are both significant to the fair value measurement and
unobservable (i.e., supported by little or no market activity). Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that
market participants would use in pricing the asset or liability (including assumptions about risk).
The Registrants had no financial instruments measured at fair value on a recurring basis at December 31, 2024 and 2023. The following table presents
the carrying amount and fair value of the Registrants' financial instruments at December 31, 2024 and 2023, as well as the classification level within the fair
value hierarchy.
2024
2023
December 31 (In millions)
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Classification
Long-term Debt (including Long-term Debt due within one
year):
OGE Energy Senior Notes
$
346.9 $
355.7 $
— $
—
Level 2
OGE Energy Term Loan
$
59.7 $
60.0 $
49.9 $
50.0
Level 2
OG&E Senior Notes
$
4,499.6 $
4,174.9 $
4,146.0 $
3,922.3
Level 2
OG&E Industrial Authority Bonds
$
135.4 $
135.4 $
135.4 $
135.4
Level 2
OG&E Tinker Debt
$
11.7 $
9.0 $
9.2 $
7.1
Level 3
6. Stock-Based Compensation
In 2022, OGE Energy adopted, and its shareholders approved, the 2022 Stock Incentive Plan. The 2022 Stock Incentive Plan replaced the 2013 Stock
Incentive Plan, and no further awards will be granted under the 2013 Stock Incentive Plan; however, as noted below, outstanding awards under the 2013
Stock Incentive Plan were settled in 2022, 2023, and 2024. Under the 2022 Stock Incentive
74
Plan, restricted stock, restricted stock units, stock options, stock appreciation rights and performance units may be granted to officers, directors and other
key employees of OGE Energy and its subsidiaries, including OG&E. OGE Energy has authorized the issuance of up to 8,417,755 shares under the 2022 Stock
Incentive Plan.
The tables designated as "OGE Energy" within this Note 6 include the OG&E standalone activity, as OGE Energy represents consolidated results.
The following table presents the Registrants' pre-tax compensation expense and related income tax benefit for the years ended December 31, 2024,
2023 and 2022 related to performance units and restricted stock units for the Registrants' employees. As a result of OGE Energy's exit of its former
midstream business and becoming primarily an electric company, all employees are directly employed by OG&E beginning in 2024.
OGE Energy
OG&E
Year Ended December 31 (In millions)
2024
2023
2022
2024
2023
2022
Performance units
$
7.9 $
9.3 $
7.2 $
7.9 $
2.2 $
2.2
Restricted stock units
3.8
3.8
2.5
3.8
0.9
0.7
Total compensation expense
$
11.7 $
13.1 $
9.7 $
11.7 $
3.1 $
2.9
Income tax benefit
$
2.8 $
3.2 $
2.3 $
2.8 $
0.7 $
0.7
During the year ended December 31, 2022, OGE Energy issued 27,278 shares of new common stock pursuant to OGE Energy's 2013 Stock Incentive Plan
and issued an immaterial amount of treasury stock to satisfy payouts of restricted stock unit grants to the Registrants' employees.
During the year ended December 31, 2023, OGE Energy issued 82,321 shares of new common stock pursuant to OGE Energy's 2013 Stock Incentive Plan
and issued 2,371 shares of treasury stock to satisfy payouts of earned performance units and restricted stock unit grants to the Registrants' employees.
During the year ended December 31, 2024, OGE Energy issued 255,578 shares of new common stock pursuant to OGE Energy's 2013 Stock Incentive
Plan to satisfy payouts of earned performance units and restricted stock unit grants to the Registrants' employees.
Performance Units
Under the Stock Incentive Plan, OGE Energy has issued performance units which represent the value of one share of OGE Energy's common stock. The
performance units provide for accelerated vesting if there is a change in control (as defined in the Stock Incentive Plan). Each performance unit is subject to
forfeiture if the recipient terminates employment with OGE Energy or a subsidiary prior to the end of the primarily three-year award cycle for any reason
other than death, disability or retirement. In the event of death, disability or retirement, a participant will receive a prorated payment based on such
participant's number of full months of service during the award cycle, further adjusted based on the achievement of the performance goals during the award
cycle. The Registrants estimate expected forfeitures in accounting for performance unit compensation expense.
The performance units granted are contingently awarded and will be payable in shares of OGE Energy's common stock subject to the condition that the
number of performance units, if any, earned by the employees upon the expiration of a primarily three-year award cycle (i.e., three-year cliff vesting period)
is dependent on OGE Energy's total shareholder return ranking relative to a peer group of companies. These performance units are classified as equity in the
balance sheets. If there is no or only a partial payout for the performance units at the end of the award cycle, the unearned performance units are cancelled.
Payout requires approval of the Compensation Committee of OGE Energy's Board of Directors. Payouts, if any, are all made in common stock and are
considered made when the payout is approved by the Compensation Committee.
The fair value of the performance units was estimated on the grant date using a lattice-based valuation model that factors in information, including the
expected dividend yield, expected price volatility, risk-free interest rate and the probable outcome of the market condition, over the expected life of the
performance units. Compensation expense for the performance units is a fixed amount determined at the grant date fair value and is recognized over the
primarily three-year award cycle regardless of whether performance units are awarded at the end of the award cycle. Dividends are accrued on a quarterly
basis pending achievement of payout criteria and are included in the fair value calculations. Expected price volatility is based on the historical volatility of
OGE Energy's common
75
stock for the past three years and is simulated using the Geometric Brownian Motion process. The risk-free interest rate for the performance unit grants is
based on the three-year U.S. Treasury yield curve in effect at the time of the grant. The expected life of the units is based on the non-vested period since
inception of the award cycle. There are no post-vesting restrictions related to OGE Energy's performance units. The following table presents the number of
performance units granted and the assumptions used to calculate the grant date fair value of the performance units.
OGE Energy
OG&E
2024
2023
2022
2024
2023
2022
Number of units granted
275,499
213,442
216,437
275,499
65,069
60,923
Fair value of units granted
$
35.86 $
43.74 $
41.10 $
35.86 $
43.74 $
41.10
Expected dividend yield
5.1 %
4.2 %
4.8 %
5.1 %
4.2 %
4.8 %
Expected price volatility
19.9 %
31.0 %
9.0 %
19.9 %
31.0 %
29.0 %
Risk-free interest rate
4.41 %
4.47 %
1.71 %
4.41 %
4.47 %
1.71 %
Expected life of units (in years)
2.86
2.85
2.85
2.86
2.85
2.85
Restricted Stock Units
Under the Stock Incentive Plan, OGE Energy has issued restricted stock units to certain existing non-officer employees as well as other executives upon
hire to attract and retain individuals to be competitive in the marketplace. The restricted stock units vest primarily in a three-year award cycle (i.e., three-
year cliff vesting period). Prior to vesting, each restricted stock unit is subject to forfeiture if the recipient ceases to render substantial services to OGE Energy
or a subsidiary. These restricted stock units may not be sold, assigned, transferred or pledged and are subject to a risk of forfeiture.
The fair value of the restricted stock units was based on the closing market price of OGE Energy's common stock on the grant date. Compensation
expense for the restricted stock units is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over
a primarily three-year vesting period. Also, for those restricted stock units that vest in one-third annual increments over a three-year cycle, OGE Energy treats
its restricted stock units as multiple separate awards by recording compensation expense separately for each tranche whereby a substantial portion of the
expense is recognized in the earlier years in the requisite service period.
Dividends will only be paid on restricted stock unit awards that vest; therefore, only the present value of dividends expected to vest are included in the
fair value calculations. The expected life of the restricted stock units is based on the non-vested period since inception of the primarily three-year award
cycle. There are no post-vesting restrictions related to OGE Energy's restricted stock units. The following table presents the number of restricted stock units
granted and the grant date fair value.
OGE Energy
OG&E
2024
2023
2022
2024
2023
2022
Restricted stock units granted
148,345
114,926
116,539
148,345
35,034
32,804
Fair value of restricted stock units granted
$
32.74 $
37.52 $
35.72 $
32.74 $
37.52 $
35.72
Performance Units and Restricted Stock Units Activity
The following tables present a summary of the activity for the Registrants' performance units and restricted stock units for the year ended December
31, 2024.
OGE Energy
Performance Units
Restricted Stock Units
(Dollars in millions)
Number
of Units
Aggregate Intrinsic
Value
Number
of Shares
Aggregate Intrinsic
Value
Units/shares outstanding at 12/31/23
652,118
223,146
Granted
275,499
(A)
148,345
Converted
(234,672 ) (B) $
12.7
N/A
Vested
N/A
(101,130 )
$
4.2
Forfeited
(46,753 )
(26,307 )
Units/shares outstanding at 12/31/24
646,192
$
42.5
244,054
$
10.1
Units/shares fully vested at 12/31/24
191,918
(C) $
12.5
N/A
N/A
76
OG&E
Performance Units
Restricted Stock Units
(Dollars in millions)
Number
of Units
Aggregate Intrinsic
Value
Number
of Shares
Aggregate Intrinsic
Value
Units/shares outstanding at 12/31/23
183,837
64,244
Granted
275,499
(A)
148,345
Converted
(234,672 ) (B) $
12.7
N/A
Vested
N/A
(101,130 )
$
4.2
Forfeited
(46,753 )
(26,307 )
Employee migration
468,281
(D)
158,902 (D)
Units/shares outstanding at 12/31/24
646,192
$
42.5
244,054
$
10.1
Units/shares fully vested at 12/31/24
191,918
(C) $
12.5
N/A
N/A
(A)
For performance units, this represents the target number of performance units granted. Actual number of performance units earned, if any, is
dependent upon performance and may range from zero percent to 200 percent of the target.
(B)
These amounts represent performance units that vested at December 31, 2023, which were settled in February 2024.
(C)
These amounts represent performance units that vested at December 31, 2024. Actual expected amounts to be paid out in 2025 will differ based on the
percentage at which the performance metric was met and are dependent upon Compensation Committee approval.
(D)
As a result of OGE Energy's exit of its former midstream business and becoming primarily an electric company, all employees are directly employed by
OG&E beginning in 2024.
The following tables present a summary of the activity for the Registrants' non-vested performance units and restricted stock units for the year ended
December 31, 2024.
OGE Energy
Performance Units
Restricted Stock Units
Number
of Units
Weighted-Average
Grant Date
Fair Value
Number
of Shares
Weighted-Average
Grant Date
Fair Value
Units/shares non-vested at 12/31/23
417,446
$
42.44
223,146
$
36.64
Granted
275,499
(A) $
35.86
148,345
$
32.74
Vested
(191,918 )
$
41.10
(101,130 )
$
41.29
Forfeited
(46,753 )
$
39.85
(26,307 )
$
35.13
Units/shares non-vested at 12/31/24
454,274
$
39.28
244,054
$
34.81
OG&E
Performance Units
Restricted Stock Units
Number
of Units
Weighted-Average
Grant Date
Fair Value
Number
of Shares
Weighted-Average
Grant Date
Fair Value
Units/shares non-vested at 12/31/23
120,331
$
42.49
64,244
$
36.68
Granted
275,499
(A) $
35.86
148,345
$
32.74
Vested
(191,918 )
$
41.10
(101,130 )
$
41.29
Forfeited
(46,753 )
$
39.85
(26,307 )
$
35.13
Employee migration
297,115
(B) $
42.42
158,902
(B) $
36.62
Units/shares non-vested at 12/31/24
454,274
$
39.28
244,054
$
34.81
(A)
For performance units, this represents the target number of performance units granted. Actual number of performance units earned, if any, is
dependent upon performance and may range from zero percent to 200 percent of the target.
(B)
As a result of OGE Energy's exit of its former midstream business and becoming primarily an electric company, all employees are directly employed by
OG&E beginning in 2024.
77
Fair Value of Vested Performance Units and Restricted Stock Units
The following table presents a summary of the Registrants' fair value for vested performance units and restricted stock units.
OGE Energy
OG&E
Year Ended December 31 (In millions)
2024
2023
2022
2024
2023
2022
Performance units
$
7.9 $
9.0 $
6.2 $
7.9 $
2.4 $
1.7
Restricted stock units
$
3.6 $
2.4 $
2.1 $
3.6 $
0.6 $
0.5
Unrecognized Compensation Cost
The following table presents a summary of the Registrants' unrecognized compensation cost for non-vested performance units and restricted stock
units and the weighted-average periods over which the compensation cost is expected to be recognized.
OGE Energy
OG&E
December 31, 2024
Unrecognized
Compensation
Cost
(In millions)
Weighted
Average
to be
Recognized
(In years)
Unrecognized
Compensation
Cost
(In millions)
Weighted
Average
to be
Recognized
(In years)
Performance units
$
8.3
1.67 $
8.3
1.67
Restricted stock units
3.9
1.68
3.9
1.68
Total unrecognized compensation cost
$
12.2
$
12.2
7. Income Taxes
Income Tax Expense (Benefit)
The following table presents the components of income tax expense (benefit).
OGE Energy
OG&E
Year Ended December 31 (In millions)
2024
2023
2022
2024
2023
2022
Provision (benefit) for current income taxes:
Federal
$
62.0 $
46.1 $
250.8 $
72.7 $
48.9 $
(141.2 )
State
0.8
(2.2 )
28.8
3.0
3.7
(0.9 )
Total provision (benefit) for current income taxes
62.8
43.9
279.6
75.7
52.6
(142.1 )
Provision (benefit) for deferred income taxes, net:
Federal
8.0
18.1
(110.8 )
9.0
18.8
219.9
State
8.3
(5.8 )
(45.2 )
8.5
(2.6 )
(1.4 )
Total provision (benefit) for deferred income taxes, net
16.3
12.3
(156.0 )
17.5
16.2
218.5
Total income tax expense
$
79.1 $
56.2 $
123.6 $
93.2 $
68.8 $
76.4
OGE Energy files consolidated income tax returns in the U.S. federal jurisdiction and various state jurisdictions. OG&E is a part of the consolidated
income tax return of OGE Energy. With few exceptions, the Registrants are no longer subject to U.S. federal tax or state and local examinations by tax
authorities for years prior to 2021. Income taxes are generally allocated to each company in the affiliated group, including OG&E, based on its stand-alone
taxable income or loss. Federal investment tax credits previously claimed on electric utility property have been deferred and will be amortized to income
over the life of the related property. Oklahoma investment tax credits are also earned on investments at electric generating facilities which further reduce
OG&E's effective tax rate.
78
The following table presents a reconciliation of the statutory tax rates to the effective income tax rate.
OGE Energy
OG&E
Year Ended December 31
2024
2023
2022
2024
2023
2022
Statutory federal tax rate
21.0 %
21.0 %
21.0 %
21.0 %
21.0 %
21.0 %
State income taxes, net of federal income tax
benefit
1.3
(1.3 )
(1.0 )
1.5
0.3
(0.4 )
Stock-based compensation
(0.3 )
0.1
—
(0.1 )
—
—
Executive compensation limitation
0.2
0.2
0.1
0.1
—
—
Amortization of net unfunded deferred taxes
(6.3 )
(7.0 )
(3.2 )
(5.8 )
(6.7 )
(5.0 )
Remeasurement of state deferred tax liabilities
—
—
(0.6 )
—
—
—
401(k) dividends
(0.2 )
(0.3 )
(0.2 )
—
—
—
Other
(0.5 )
(0.8 )
(0.4 )
(0.1 )
(0.7 )
(0.8 )
Effective income tax rate
15.2 %
11.9 %
15.7 %
16.6 %
13.9 %
14.8 %
The deferred tax provisions are recognized as costs in the ratemaking process by the commissions having jurisdiction over the rates charged by OG&E.
The following table presents the components of Deferred Income Taxes at December 31, 2024 and 2023.
OGE Energy
OG&E
December 31 (In millions)
2024
2023
2024
2023
Deferred income tax liabilities, net:
Accelerated depreciation and other property related differences
$
1,809.5 $
1,753.8 $
1,809.5 $
1,753.8
Regulatory assets
65.6
67.6
65.6
67.6
Pension Plan
22.0
21.8
38.6
37.9
Corporate owned life insurance
2.8
2.6
—
—
Bond redemption-unamortized costs
1.2
1.4
1.2
1.4
Income taxes recoverable from customers, net
(188.6 )
(202.7 )
(188.6 )
(202.7 )
State tax credits
(223.8 )
(228.8 )
(208.5 )
(213.5 )
Regulatory liabilities
(57.3 )
(54.4 )
(57.3 )
(54.4 )
Asset retirement obligations
(20.9 )
(19.7 )
(20.9 )
(19.7 )
Postretirement medical and life insurance benefits
(19.1 )
(20.8 )
(12.6 )
(14.0 )
Accrued liabilities
(15.7 )
(13.2 )
(9.8 )
(5.5 )
Deferred federal investment tax credits
(2.5 )
(2.7 )
(2.5 )
(2.7 )
Accrued vacation
(1.9 )
(1.4 )
(1.9 )
(1.4 )
Uncollectible accounts
(0.5 )
(0.5 )
(0.5 )
(0.4 )
Other
0.3
(2.2 )
(1.6 )
(5.6 )
Total deferred income tax liabilities, net
$
1,371.1 $
1,300.8 $
1,410.7 $
1,340.8
As of December 31, 2024, the Registrants have classified $14.7 million of unrecognized tax benefits as a reduction of deferred tax assets recorded.
Management is currently unaware of any issues under review that could result in significant additional payments, accruals or other material deviation from
this amount.
The following table presents a reconciliation of the Registrants' total gross unrecognized tax benefits as of the years ended December 31, 2024, 2023
and 2022.
(In millions)
2024
2023
2022
Balance at January 1
$
28.6 $
20.7 $
22.4
Tax positions related to current year:
Additions
—
7.9
—
Reductions
—
—
(1.7 )
Balance at December 31
$
28.6 $
28.6 $
20.7
79
The Registrants recognize tax benefits from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination
by taxing authorities based on the technical merits of the position. The tax benefits in the financial statements from such positions are then measured based
on the largest benefit that has a greater than 50 percent likelihood of being realized on settlement. In 2023, the Registrants recorded a $7.9 million reserve
related to a state tax position taken associated with the sale of Energy Transfer units.
Where applicable, the Registrants classify income tax-related interest and penalties as interest expense and other expense, respectively. With regard to
uncertain tax positions, there were $0.6 million in income tax-related interest and no penalties recorded during the year ended December 31, 2024, and no
interest or penalties recorded during the years ended December 31, 2023 and 2022.
As of December 31, 2024, 2023 and 2022, there were $22.6 million, $22.6 million and $16.4 million, respectively, of unrecognized tax benefits that, if
recognized, would affect the annual effective tax rate.
The following table presents a summary of the Registrants' tax credits carried forward as deferred tax assets. Under current law, the Registrants expect
future taxable income will be sufficient to utilize all credits before they begin to expire after 2030.
OGE Energy
OG&E
(In millions)
Carry
Forward
Amount
Deferred Tax
Asset
Carry
Forward
Amount
Deferred Tax
Asset
Earliest
Expiration
Date
State tax credits:
Oklahoma investment tax credits
$
264.3 $
208.8 $
245.0 $
193.5
N/A
Oklahoma capital investment board credits
$
12.8 $
12.8 $
12.8 $
12.8
N/A
Oklahoma zero emission tax credits
$
4.2 $
2.2 $
4.2 $
2.2
2030
N/A - not applicable
8. Common Equity
OGE Energy
Automatic Dividend Reinvestment and Stock Purchase Plan
OGE Energy issued 479,470 new shares of common stock under its Automatic Dividend Reinvestment and Stock Purchase Plan in 2024 and received
proceeds of $17.1 million. OGE Energy 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. or have shares purchased on the open market. At December 31, 2024, there were 4,322,596 shares of
unissued common stock reserved for issuance under OGE Energy's Automatic Dividend Reinvestment and Stock Purchase Plan.
80
Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to OGE Energy by the weighted-average number of OGE Energy's common
shares outstanding during the period. In the calculation of diluted earnings per share, weighted-average shares outstanding are increased for additional
shares that would be outstanding if potentially dilutive securities were converted to common stock. Potentially dilutive securities for OGE Energy consist of
performance units and restricted stock units. The following table presents the calculation of basic and diluted earnings per share for OGE Energy.
(In millions except per share data)
2024
2023
2022
Net income
$
441.5 $
416.8 $
665.7
Average common shares outstanding:
Basic average common shares outstanding
200.8
200.3
200.2
Effect of dilutive securities:
Contingently issuable shares (performance and restricted stock units)
0.5
0.6
0.6
Diluted average common shares outstanding
201.3
200.9
200.8
Basic earnings per average common share
$
2.20 $
2.08 $
3.33
Diluted earnings per average common share
$
2.19 $
2.07 $
3.32
Anti-dilutive shares excluded from earnings per share calculation
—
—
—
Dividend Restrictions
OGE Energy's Certificate of Incorporation places restrictions on the amount of common stock dividends it can pay when preferred stock is outstanding.
Before OGE Energy can pay any dividends on its common stock, the holders of any of its preferred stock that may be outstanding are entitled to receive their
dividends at the respective rates as may be provided for the shares of their series. As there is no preferred stock outstanding, that restriction did not place
any effective limit on OGE Energy's ability to pay dividends to its shareholders. OGE Energy utilizes dividends from OG&E to pay dividends to its shareholders.
Pursuant to the leverage restriction in OGE Energy's revolving credit agreement, OGE Energy must maintain a percentage of debt to total capitalization
at a level that does not exceed 70 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 $1.2 billion of OGE Energy's retained earnings from being paid out in dividends. Accordingly, approximately
$2.3 billion of OGE Energy's retained earnings as of December 31, 2024 are unrestricted for the payment of dividends.
OG&E
There were no new shares of OG&E common stock issued in 2024, 2023 or 2022.
Dividend Restrictions
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 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 $913.3 million of OG&E's retained earnings from being paid out in dividends. Accordingly, approximately $2.8 billion of
OG&E's retained earnings as of December 31, 2024 are unrestricted for the payment of dividends.
9. Long-Term Debt
A summary of the Registrants' long-term debt is included in the statements of capitalization. At December 31, 2024, the Registrants were in compliance
with all of their debt agreements.
Maturities of OGE Energy's consolidated long-term debt during the next five years consist of $32.4 million in 2025, $241.0 million in 2027, $500.0 million
in 2028 and $350.0 million in 2029. Maturities of OG&E's long-term debt during the next five years consist of $32.4 million in 2025, $181.0 million in 2027
and $500.0 million in 2028. All other long-term debt of the Registrants matures after 2029.
81
The Registrants have previously incurred costs related to debt refinancing. Unamortized loss on reacquired debt is classified as a Non-Current
Regulatory Asset in the balance sheets. Unamortized debt expense and unamortized premium and discount on long-term debt are classified as Long-Term
Debt in the balance sheets and are being amortized over the life of the respective debt.
In June 2024, OGE Energy entered into a $120.0 million floating rate unsecured three-year credit agreement, of which $60.0 million is considered a
revolving loan and $60.0 million is considered a term loan. For the year ended December 31, 2024, OGE Energy had drawn $60.0 million on the term loan
under this credit agreement at a weighted-average interest rate of 6.26 percent. For additional information related to this credit agreement, see Note 10.
OG&E Industrial Authority Bonds
OG&E has tax-exempt pollution control bonds with optional redemption provisions that allow the holders to request repayment of the bonds on any
business day. The following table presents information about these bonds, which can be tendered at the option of the holder during the next 12 months.
Series
Date Due
Amount
(In millions)
1.90%
—
4.75%
Muskogee Industrial Authority, January 1, 2025
$
32.4
2.15%
—
4.85%
Muskogee Industrial Authority, June 1, 2027
56.0
2.15%
—
4.85%
Garfield Industrial Authority, October 1, 2039
47.0
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 or as Long-Term Debt
Due within One Year, as appropriate, in the balance sheets. OG&E believes that it has sufficient liquidity to meet these obligations.
On October 2, 2024, OG&E caused the refinancing of its Garfield industrial authority bonds, series due January 1, 2025. The $47.0 million in bonds are
now due October 1, 2039, and will continue to be remarketed on a weekly basis.
Issuance of Long-Term Debt
On May 9, 2024, OGE Energy issued $350.0 million of 5.45 percent senior notes due May 15, 2029. The proceeds from this issuance were added to OGE
Energy's general funds to be used for general corporate purposes and to repay short-term debt.
On August 15, 2024, OG&E issued $350.0 million of 5.60 percent senior notes due April 1, 2053, bringing the aggregate total principal amount of this
series of senior notes to $700.0 million. The proceeds from this issuance were added to OG&E's general funds to be used for repayment of short-term debt
and borrowings under OG&E's revolving credit agreement, and to fund OG&E's capital investment program and working capital needs.
10. Credit Facilities and Short-Term Debt
The Registrants borrow, as necessary, by the issuance of commercial paper and by borrowings under their revolving credit agreements.
82
The following table presents information regarding the Registrants' revolving credit agreements at December 31, 2024.
Entity
Aggregate
Commitment
Amount Outstanding
(A)
Weighted-Average
Interest Rate
Expiration
(In millions)
OGE Energy (B)
$
550.0 $
469.3
4.84 % (F)
December 18, 2029 (G)
OGE Energy (C)
60.0
—
— (F)
May 24, 2027
OG&E (D)(E)
550.0
0.4
1.20 % (F)
December 18, 2029 (G)
Total
$
1,160.0 $
469.7
4.84 %
(A)
Includes direct borrowings under the revolving credit agreements, commercial paper borrowings and letters of credit at December 31, 2024.
(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)
OGE Energy has a $120.0 million floating rate unsecured three-year credit agreement, of which $60.0 million is considered a revolving loan, which is
included in the table above, and $60.0 million is considered a term loan. The credit agreement, under certain circumstances, may be increased to a
maximum commitment limit of $155.0 million and includes a maximum leverage ratio of 0.70 to 1.0. The other covenants under this credit agreement
are substantially the same as OGE Energy's existing $550.0 million revolving credit agreement.
(D)
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.
(E)
OG&E has an intercompany borrowing agreement with OGE Energy whereby OG&E has access to up to $450.0 million of OGE Energy's revolving credit
amount. This agreement has a termination date of December 18, 2029. At December 31, 2024, there was $0.2 million intercompany borrowings under
this agreement. At December 31, 2024, OG&E had $247.6 million in advances from parent.
(F)
Represents the weighted-average interest rate for the outstanding borrowings under the revolving credit agreements, commercial paper borrowings
and letters of credit.
(G)
In December 2022, the Registrants entered into an amendment to their credit facility that gave each of the Registrants the option of extending such
commitments for up to two additional one-year periods. On December 18, 2024, the Registrants utilized the second extension option for an additional
one-year period extending the term until December 2029.
OGE Energy's credit facility has a financial covenant requiring that OGE Energy maintains a maximum debt to capitalization ratio of 70 percent, as
defined in such facility. OG&E's credit facility has a financial covenant requiring that OG&E maintains a maximum debt to capitalization ratio of 65 percent, as
defined in such facility. The Registrants' facilities each also contain covenants which restrict the respective borrower and certain of its subsidiaries in respect
of, among other things, mergers and consolidations, sales of all or substantially all assets, incurrence of liens and transactions with affiliates. The Registrants'
facilities are each subject to acceleration upon the occurrence of any default, including, among others, payment defaults on such facilities, breach of
representations, warranties and covenants, acceleration of indebtedness (other than intercompany and non-recourse indebtedness) of $100.0 million or
more in the aggregate, change of control (as defined in each such facility), nonpayment of uninsured judgments in excess of $100.0 million and the
occurrence of certain Employee Retirement Income Security Act and bankruptcy events, subject where applicable to specified cure periods.
The Registrants' ability to access the commercial paper market could be adversely impacted by a credit ratings downgrade or major market disruptions.
Pricing grids associated with the Registrants' credit facilities could cause annual fees and borrowing rates to increase if an adverse rating impact occurs. The
impact of any future downgrade could include an increase in the costs of the Registrants' short-term borrowings, but a reduction in the Registrants' credit
ratings would not result in any defaults or accelerations. Any future downgrade could also lead to higher long-term borrowing costs and, if below investment
grade, would require the Registrants to post collateral or letters of credit.
OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur
up to $1.0 billion in short-term borrowings at any one time for a two-year period beginning January 1, 2025 and ending December 31, 2026.
83
11. Retirement Plans and Postretirement Benefit Plans
OGE Energy sponsors defined benefit pension plans, 401(k) savings plans and other postretirement plans covering certain employees of the Registrants.
The columns and table designated as "OGE Energy" within this Note 11 include the OG&E standalone activity, as OGE Energy represents consolidated results.
Pension Plan and Restoration of Retirement Income Plan
OGE Energy periodically makes contributions to the Pension Plan considering information such as net periodic pension expense and funded status from
OGE Energy's actuarial consultants. Such contributions are intended to provide not only for benefits attributed to service to date but also for those expected
to be earned in the future. OGE Energy made a $10.0 million contribution to its Pension Plan in 2024 and did not make a contribution in 2023. OGE Energy
expects to contribute $10.0 million to its Pension Plan in 2025, of which $5.0 million was contributed in January 2025. Any additional contribution to the
Pension Plan during 2025 would be a discretionary contribution, anticipated to be in the form of cash, and is not required to satisfy the minimum regulatory
funding requirement specified by the Employee Retirement Income Security Act of 1974, as amended. OGE Energy could be required to make additional
contributions if the value of its pension trust and postretirement benefit plan trust assets are adversely impacted by a major market disruption in the future.
In accordance with ASC Topic 715, "Compensation - Retirement Benefits," a one-time settlement charge is required to be recorded by an organization
when lump sum payments or other settlements that relieve the organization from the responsibility for the pension benefit obligation during the plan year
exceed the service cost and interest cost components of the organization's net periodic pension cost. During 2023 and 2022, the Registrants experienced an
increase in both the number of employees electing to retire and the amount of lump sum payments paid to such employees upon retirement, which resulted
in the Registrants recording pension plan settlement charges as presented in the Pension Plan net periodic benefit cost tables below. The pension settlement
charges did not require a cash outlay by the Registrants and did not increase total pension expense over time, as the charges were an acceleration of costs
that otherwise would be recognized as pension expense in future periods.
OGE Energy provides a Restoration of Retirement Income Plan to those participants in OGE Energy's Pension Plan whose benefits are subject to certain
limitations of the Code. Participants in the Restoration of Retirement Income Plan receive the same benefits that they would have received under OGE
Energy's Pension Plan in the absence of limitations imposed by the federal tax laws. The Restoration of Retirement Income Plan is intended to be an
unfunded plan.
OG&E's employees participate in OGE Energy's Pension Plan and Restoration of Retirement Income Plan.
Obligations and Funded Status
The details of the funded status of OGE Energy's Pension Plan, the Restoration of Retirement Income Plan and the postretirement benefit plans and the
amounts included in the balance sheets for 2024 and 2023 are included in the following tables. These amounts have been recorded in Accrued Benefit
Obligations with the offset in Accumulated Other Comprehensive Loss (except OG&E's portion, which is recorded as a regulatory asset as discussed in Note 1)
in the balance sheets. The amounts in Accumulated Other Comprehensive Loss and those recorded as a regulatory asset represent a net periodic benefit cost
to be recognized in the statements of income in future periods. The benefit obligation for OGE Energy's Pension Plan and the Restoration of Retirement
Income Plan represents the projected benefit obligation, while the benefit obligation for the postretirement benefit plans represents the accumulated
postretirement benefit obligation. The accumulated postretirement benefit obligation for OGE Energy's Pension Plan and Restoration of Retirement Income
Plan differs from the projected benefit obligation in that the former includes no assumption about future compensation levels.
84
OGE Energy
OG&E
Pension Plan
Restoration of
Retirement
Income Plan
Pension Plan
Restoration of Retirement
Income Plan
December 31 (In millions)
2024
2023
2024
2023
2024
2023
2024
2023
Change in benefit obligation
Beginning obligations
$
303.7 $
358.5 $
5.5 $
5.8 $
238.6 $
288.5 $
— $
0.5
Service cost
5.3
5.4
1.0
1.0
5.3
4.4
0.1
—
Interest cost
15.6
15.9
0.3
0.3
13.4
12.6
0.1
—
Plan settlements
—
(62.8 )
—
(1.4 )
—
(57.7 )
—
(0.7 )
Regulatory classification of certain
pension costs
—
—
—
—
23.9
—
1.1
—
Actuarial losses (gains)
(2.9 )
0.8
0.2
(0.2 )
(2.2 )
2.7
0.1
0.2
Benefits paid
(18.6 )
(14.1 )
—
—
(15.1 )
(11.9 )
—
—
Ending obligations
$
303.1 $
303.7 $
7.0 $
5.5 $
263.9 $
238.6 $
1.4 $
—
Change in plans' assets
Beginning fair value
$
243.7 $
293.0 $
— $
— $
191.4 $
238.9 $
— $
—
Actual return on plans' assets
11.8
27.6
—
—
10.1
22.1
—
—
Employer contributions
10.0
—
—
1.4
10.0
—
—
0.7
Regulatory classification of certain
pension costs
—
—
—
—
15.2
—
—
—
Plan settlements
—
(62.8 )
—
(1.4 )
—
(57.7 )
—
(0.7 )
Benefits paid
(18.6 )
(14.1 )
—
—
(15.1 )
(11.9 )
—
—
Ending fair value
$
246.9 $
243.7 $
— $
— $
211.6 $
191.4 $
— $
—
Funded status at end of year $
(56.2 ) $
(60.0 ) $
(7.0 ) $
(5.5 ) $
(52.3 ) $
(47.2 ) $
(1.4 ) $
—
Accumulated postretirement
benefit obligation
$
289.4 $
289.5 $
6.8 $
4.9 $
250.2 $
226.5 $
1.4 $
—
For the year ended December 31, 2024, Pension Plan actuarial gains were primarily due to an increased discount rate, partially offset by an increased
interest crediting rate. For the year ended December 31, 2023, Pension Plan actuarial losses were primarily due to more lump sum payouts expected,
partially offset by demographic experience.
85
OGE Energy
OG&E
Postretirement Benefit Plans
Postretirement Benefit Plans
December 31 (In millions)
2024
2023
2024
2023
Change in benefit obligation
Beginning obligations
$
103.3 $
101.9 $
77.3 $
76.4
Service cost
0.1
0.1
0.1
0.1
Interest cost
5.2
5.2
3.9
3.9
Participants' contributions
3.5
3.4
2.4
2.4
Actuarial losses (gains)
(3.1 )
4.9
(2.1 )
4.0
Regulatory classification of certain pension costs
—
—
1.4
—
Benefits paid
(10.9 )
(12.2 )
(8.3 )
(9.5 )
Ending obligations
$
98.1 $
103.3 $
74.7 $
77.3
Change in plans' assets
Beginning fair value
$
32.7 $
32.8 $
29.6 $
29.8
Actual return on plans' assets
(1.6 )
1.9
(1.4 )
1.7
Employer contributions
6.3
6.8
4.9
5.2
Participants' contributions
3.5
3.4
2.4
2.4
Benefits paid
(10.9 )
(12.2 )
(8.3 )
(9.5 )
Ending fair value
$
30.0 $
32.7 $
27.2 $
29.6
Funded status at end of year
$
(68.1 ) $
(70.6 ) $
(47.5 ) $
(47.7 )
Net Periodic Benefit Cost
The following tables present the net periodic benefit cost components, before consideration of capitalized amounts, of OGE Energy's Pension Plan,
Restoration of Retirement Income Plan and postretirement benefit plans that are included in the financial statements. Service cost is presented within Other
Operation and Maintenance Expense, and the remaining net periodic benefit cost components as listed in the following tables are presented within Other
Net Periodic Benefit Income (Expense) in the statements of income. OG&E recovers specific amounts of pension and postretirement medical costs in rates
approved in its Oklahoma rate reviews. In accordance with approved orders, OG&E defers the difference between actual pension and postretirement
medical expenses and the amount approved in its last Oklahoma rate review as a regulatory asset or regulatory liability. These amounts have been recorded
in the Pension tracker in the regulatory assets and liabilities table in Note 1 and within Other Net Periodic Benefit Income (Expense) in the statements of
income.
OGE Energy
Pension Plan
Restoration of Retirement
Income Plan
Year Ended December 31
(In millions)
2024
2023
2022
2024
2023
2022
Service cost
$
5.3 $
5.4 $
7.6 $
1.0 $
1.0 $
1.1
Interest cost
15.6
15.9
15.7
0.3
0.3
0.2
Expected return on plan assets
(16.5 )
(16.2 )
(25.4 )
—
—
—
Amortization of net loss
6.5
8.0
8.9
—
—
0.2
Amortization of unrecognized prior service
cost (A)
—
—
—
0.3
0.3
0.2
Settlement cost
—
21.8
30.6
—
0.5
0.3
Net periodic benefit cost
$
10.9 $
34.9 $
37.4 $
1.6 $
2.1 $
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.
86
OG&E
Pension Plan
Restoration of Retirement
Income Plan
Year Ended December 31
(In millions)
2024
2023
2022
2024
2023
2022
Service cost
$
5.3 $
4.4 $
6.2 $
0.1 $
— $
—
Interest cost
13.4
12.6
12.1
0.1
—
—
Expected return on plan assets
(14.0 )
(12.9 )
(19.6 )
—
—
—
Amortization of net loss
6.2
6.9
7.4
—
—
—
Settlement cost
—
20.4
12.9
—
0.4
—
Total net periodic benefit cost
10.9
31.4
19.0
0.2
0.4
—
Plus: Amount allocated from OGE Energy
—
3.0
5.2
1.4
1.7
1.5
Net periodic benefit cost
$
10.9 $
34.4 $
24.2 $
1.6 $
2.1 $
1.5
In addition to the net periodic benefit cost amounts recognized, as presented in the table above, for the Pension and Restoration of Retirement Income
Plans in 2024, 2023 and 2022, the Registrants recognized the following:
Year Ended December 31 (In millions)
2024
2023
2022
Change in pension expense to maintain allowed recoverable amount in Oklahoma
jurisdiction (A)
$
5.8 $
33.3 $
15.2
Deferral of pension expense related to pension settlement charges included in the above
line item:
Oklahoma jurisdiction (A)
$
— $
20.1 $
15.4
Arkansas jurisdiction (A)
$
— $
1.9 $
1.4
(A)
Included in the pension regulatory asset in each jurisdiction, as indicated in the regulatory assets and liabilities table in Note 1.
OGE Energy
OG&E
Postretirement Benefit Plans
Postretirement Benefit Plans
Year Ended December 31 (In millions)
2024
2023
2022
2024
2023
2022
Service cost
$
0.1 $
0.1 $
0.2 $
0.1 $
0.1 $
0.1
Interest cost
5.2
5.2
3.5
3.9
3.9
2.7
Expected return on plan assets
(1.6 )
(1.7 )
(1.8 )
(1.4 )
(1.6 )
(1.6 )
Amortization of net loss (gain)
(0.2 )
(0.2 )
1.5
—
—
1.5
Amortization of unrecognized prior service cost (A)
—
—
(3.8 )
—
—
(3.6 )
Total net periodic benefit cost (income)
3.5
3.4
(0.4 )
2.6
2.4
(0.9 )
Plus: Amount allocated from OGE Energy
0.5
0.5
—
Net periodic benefit cost (income)
$
3.5 $
3.4 $
(0.4 ) $
3.1 $
2.9 $
(0.9 )
(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.
In addition to the net periodic benefit cost or income amounts recognized, as presented in the table above, for the postretirement benefit plans in
2024, 2023 and 2022, the Registrants recognized the following:
Year Ended December 31 (In millions)
2024
2023
2022
Change in postretirement expense to maintain allowed recoverable amount in Oklahoma jurisdiction (A)
$
2.3 $
4.4 $
0.6
(A)
Included in the pension regulatory asset, as indicated in the regulatory assets and liabilities table in Note 1.
The following table presents the amount of net periodic benefit cost capitalized and attributable to each of the Registrants for OGE Energy's Pension
Plan and postretirement benefit plans in 2024, 2023 and 2022.
OGE Energy
OG&E
(In millions)
2024
2023
2022
2024
2023
2022
Capitalized portion of net periodic pension benefit cost
$
2.2 $
2.2 $
3.0 $
2.2 $
1.9 $
2.5
Capitalized portion of net periodic postretirement benefit cost $
0.1 $
0.1 $
0.2 $
0.1 $
0.1 $
0.1
87
Rate Assumptions
Pension Plan and
Restoration of Retirement Income Plan
Postretirement
Benefit Plans
Year Ended December 31
2024
2023
2022
2024
2023
2022
Assumptions to determine benefit obligations:
Discount rate
5.70 %
5.40 %
5.45 %
5.70 %
5.35 %
5.40 %
Rate of compensation increase
4.20 %
4.20 %
4.20 %
N/A
N/A
N/A
Interest crediting rate
4.25 %
3.50 %
3.50 %
N/A
N/A
N/A
Assumptions to determine net periodic benefit cost:
Discount rate
5.40 %
5.45 %
4.01 %
5.35 %
5.40 %
2.80 %
Expected return on plan assets
7.00 %
7.00 %
7.00 %
4.00 %
4.00 %
4.00 %
Rate of compensation increase
4.20 %
4.20 %
4.20 %
N/A
N/A
N/A
Interest crediting rate
3.50 %
3.50 %
3.50 %
N/A
N/A
N/A
N/A - not applicable
The discount rate used to compute the present value of plan liabilities is based generally on rates of high-grade corporate bonds with maturities similar
to the average period over which benefits will be paid. The discount rate used to determine net benefit cost for the current year is the same discount rate
used to determine the benefit obligation as of the previous year's balance sheet date, unless a plan settlement occurs during the current year that requires
an updated discount rate for net periodic cost measurement. For 2024 and 2023, the Pension Plan discount rates used to determine net periodic benefit cost
are disclosed on a weighted-average basis.
The overall expected rate of return on plan assets assumption is used in determining net periodic benefit cost. The rate of return on plan assets
assumption is the average long-term rate of earnings expected on the funds currently invested and to be invested for the purpose of providing benefits
specified by the Pension Plan or postretirement benefit plans. This assumption is reexamined at least annually and updated as necessary. The rate of return
on plan assets assumption reflects a combination of historical return analysis, forward-looking return expectations and the plans' current and expected asset
allocation.
The assumed health care cost trend rates have a significant effect on the amounts reported for postretirement medical benefit plans. Future health care
cost trend rates are assumed to be 6.50 percent in 2025 with the rates trending downward to 4.50 percent by 2033.
Pension Plan
Pension Plan Investments, Policies and Strategies
The Pension Plan assets are held in a trust which follows an investment policy and strategy designed to reduce the funded status volatility of the Plan by
utilizing liability driven investing. The purpose of liability-driven investing is to structure the asset portfolio to more closely resemble the pension liability and
thereby more effectively hedge against changes in the liability. The investment policy follows a glide path approach that shifts a higher portfolio weighting to
fixed income as the Plan's funded status increases. The following table presents the targeted fixed income and equity allocations at different funded status
levels.
Projected Benefit Obligation Funded Status
Thresholds
<90%
95%
100%
105%
110%
115%
120%
Fixed income
50%
58%
65%
73%
80%
85%
90%
Equity
50%
42%
35%
27%
20%
15%
10%
Total
100%
100%
100%
100%
100%
100%
100%
88
Within the portfolio's overall allocation to equities, the funds are allocated according to the guidelines in the following table.
Asset Class
Target Allocation
Minimum
Maximum
Domestic Large Cap Equity
40%
35%
60%
Domestic Mid-Cap Equity
15%
5%
25%
Domestic Small-Cap Equity
25%
5%
30%
International Equity
20%
10%
30%
OGE Energy has retained an investment consultant responsible for the general investment oversight, analysis, monitoring investment guideline
compliance and providing quarterly reports to certain of the Registrants' members and OGE Energy's Investment Committee. The various investment
managers used by the trust operate within the general operating objectives as established in the investment policy and within the specific guidelines
established for each investment manager's respective portfolio.
The portfolio is rebalanced at least on an annual basis to bring the asset allocations of various managers in line with the target asset allocation listed
above. More frequent rebalancing may occur if there are dramatic price movements in the financial markets which may cause the trust's exposure to any
asset class to exceed or fall below the established allowable guidelines.
To evaluate the progress of the portfolio, investment performance is reviewed quarterly. It is, however, expected that performance goals will be met
over a full market cycle, normally defined as a three- to five-year period. Analysis of performance is within the context of the prevailing investment
environment and the advisors' investment style. The goal of the trust is to provide a rate of return consistently from three percent to five percent over the
rate of inflation (as measured by the national Consumer Price Index) on a fee adjusted basis over a typical market cycle of no less than three years and no
more than five years. Each investment manager is expected to outperform its respective benchmark.
89
The following table presents a list of each asset class utilized with appropriate comparative benchmark(s) each manager is evaluated against and the
focus of the asset class.
Asset Class
Comparative Benchmark(s)
Focus of Asset Class
Active Duration Fixed Income (A)
(B)
Bloomberg Barclays Aggregate
- Maximize risk-adjusted performance while providing long
bond exposure managed according to the manager's
forecast on interest rates.
- All invested assets must reach at or above Baa3 or BBB-
investment grade.
- Limited five percent exposure to any single issuer, except the
U.S. Government or affiliates.
Long Duration Fixed Income (A)(B) Duration blended Barclays Long
Government/Credit & Barclays Universal
- Maximize risk-adjusted performance.
- At least 75 percent of invested assets must reach at or
above Baaa3 or BBB- investment grade.
- Limited five percent exposure to any single issuer, except the
U.S. Government or affiliates.
- May invest up to 10 percent of the market value in
convertible bonds as long as quality guidelines are met.
- May invest up to 15 percent of the market value in private
placement, including 144A securities with or without
registration rights and allow for futures to be traded in the
portfolio.
Equity Index (B)(C)
Standard & Poor's 500 Index
- Focus on replicating the performance of the S&P 500 Index.
Mid-Cap Equity (B)(C)
Small-Cap Equity (B)(C)
Russell Midcap Index
Russell Midcap Value Index
Russell 2000 Index
Russell 2000 Value Index
- Focus on undervalued stocks expected to earn average
return and pay out higher than average dividends.
- Invest in companies with market capitalizations lower than
average company on public exchanges:
- Price/earnings ratio at or near referenced
- Small dividend yield and return on equity at or near
referenced index; and
- Earnings per share growth rate at or near referenced
index.
International Equity (D)
Morgan Stanley Capital International ACWI ex-
U.S.
- Invest in non-dollar denominated equity securities.
- Diversify the overall trust investments.
(A)
Investment grades are by Moody's Investors Service, S&P Global Ratings or Fitch Ratings.
(B)
The purchase of any of OGE Energy's equity, debt or other securities is prohibited.
(C)
No more than five percent can be invested in any one stock at the time of purchase and no more than 10 percent after accounting for price
appreciation. Options or financial futures may not be purchased unless prior approval from OGE Energy's Investment Committee is received. The
purchase of securities on margin, securities lending, private placement purchases and venture capital purchases are prohibited. The aggregate positions
in any company may not exceed one percent of the fair market value of its outstanding stock.
(D)
The manager of this asset class is required to operate under certain restrictions including regional constraints, diversification requirements and
percentage of U.S. securities. All securities are freely traded on a recognized stock exchange, and there are no over-the-counter derivatives. The
following investment categories are excluded: options (other than traded currency options), commodities, futures (other than currency futures or
currency hedging), short sales/margin purchases, private placements, unlisted securities and real estate (but not real estate shares).
90
Pension Plan Investments
The following tables present the Pension Plan's investments that are measured at fair value on a recurring basis at December 31, 2024 and 2023. There
were no Level 3 investments held by the Pension Plan at December 31, 2024 and 2023.
(In millions)
December 31, 2024
Level 1
Level 2
Net Asset
Value (A)
Common stocks
$
55.7 $
55.7 $
— $
—
U.S. Treasury notes and bonds (B)
49.3
49.3
—
—
Mortgage- and asset-backed securities
23.9
—
23.9
—
Corporate fixed income and other securities
50.3
—
50.3
—
Commingled fund (C)
13.4
—
—
13.4
Foreign government bonds
0.3
—
0.3
—
U.S. municipal bonds
0.1
—
0.1
—
Money market fund
0.9
—
—
0.9
Mutual funds
62.0
62.0
—
—
Preferred stocks
0.5
0.5
—
—
U.S. Treasury futures:
Cash collateral
0.1
0.1
—
—
Forward contracts:
Receivable (foreign currency)
0.1
—
0.1
—
Total Pension Plan investments
256.6 $
167.6 $
74.7 $
14.3
Interest and dividends receivable
1.5
Receivable from broker for securities sold
9.1
Payable to broker for securities purchased
(20.3 )
Total OGE Energy Pension Plan assets
$
246.9
Pension Plan investments attributable to affiliates
(35.3 )
Total OG&E Pension Plan assets
$
211.6
(In millions)
December 31, 2023
Level 1
Level 2
Net Asset Value
(A)
Common stocks
$
56.9 $
56.9 $
— $
—
U.S. Treasury notes and bonds (B)
42.4
42.4
—
—
Mortgage- and asset-backed securities
22.0
—
22.0
—
Corporate fixed income and other securities
54.6
—
54.6
—
Commingled fund (C)
13.8
—
—
13.8
Foreign government bonds
0.2
—
0.2
—
U.S. municipal bonds
0.3
—
0.3
—
Money market fund
1.3
—
—
1.3
Mutual fund
55.3
55.3
—
—
Preferred stocks
1.0
1.0
—
—
U.S. Treasury futures:
Cash collateral
0.3
0.3
—
—
Forward contracts:
Receivable (foreign currency)
0.1
—
0.1
—
Total Pension Plan investments
248.2 $
155.9 $
77.2 $
15.1
Interest and dividends receivable
1.4
Receivable from broker for securities sold
8.3
Payable to broker for securities purchased
(14.2 )
Total OGE Energy Pension Plan assets
$
243.7
Pension Plan investments attributable to affiliates
(52.3 )
Total OG&E Pension Plan assets
$
191.4
(A)
GAAP allows the measurement of certain investments that do not have a readily determinable fair value at the net asset value. These investments do
not consider the observability of inputs; therefore, they are not included within the fair value hierarchy.
91
(B)
This category represents U.S. Treasury notes and bonds with a Moody's Investors Service rating of Aaa and Government Agency Bonds with a Moody's
Investors Service rating of A1 or higher.
(C)
This category represents units of participation in a commingled fund that primarily invested in stocks of international companies and emerging markets.
As defined in the fair value hierarchy, Level 1 inputs are quoted prices in active markets for identical unrestricted assets or liabilities that are accessible
by the Pension Plan 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 Plan's own assumptions about the assumptions that market
participants would use in pricing the asset or liability (including assumptions about risk).
Expected Benefit Payments
The following table presents the benefit payments the Registrants expect to pay related to the Pension Plan and Restoration of Retirement Income Plan.
These expected benefits are based on the same assumptions used to measure the Registrants' benefit obligation at the end of the year and include benefits
attributable to estimated future employee service.
(In millions)
OGE Energy
OG&E
2025
$
44.9 $
40.4
2026
$
29.7 $
26.3
2027
$
35.4 $
24.9
2028
$
28.9 $
24.9
2029
$
27.4 $
24.9
2030-2034
$
127.1 $
110.5
Postretirement Benefit Plans
In addition to providing pension benefits, OGE Energy provides certain medical and life insurance benefits for eligible retired members. Regular, full-
time, active employees hired prior to February 1, 2000 whose age and years of credited service total or exceed 80 or have attained at least age 55 with 10 or
more years of service at the time of retirement are entitled to postretirement medical benefits, while employees hired on or after February 1, 2000 are not
entitled to postretirement medical benefits. Eligible retirees must contribute such amount as OGE Energy specifies from time to time toward the cost of
coverage for postretirement benefits. The benefits are subject to deductibles, co-payment provisions and other limitations. OG&E charges postretirement
benefit costs to expense and includes an annual amount as a component of the cost-of-service in future ratemaking proceedings.
OGE Energy's contribution to the medical costs for pre-65 aged eligible retirees are fixed at the 2011 level, and OGE Energy covers future annual
medical inflationary cost increases up to five percent. Increases in excess of five percent annually are covered by the pre-65 aged retiree in the form of
premium increases. OGE Energy provides Medicare-eligible retirees and their Medicare-eligible spouses an annual fixed contribution to an OGE Energy-
sponsored health reimbursement arrangement. Medicare-eligible retirees are able to purchase individual insurance policies supplemental to Medicare
through a third-party administrator and use their health reimbursement arrangement funds for reimbursement of medical premiums and other eligible
medical expenses.
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Postretirement Plans Investments
The following tables present the postretirement benefit plans' investments that are measured at fair value on a recurring basis at December 31, 2024
and 2023. There were no Level 2 investments held by the postretirement benefit plans at December 31, 2024 and 2023.
(In millions)
December 31,
2024
Level 1
Level 3
Group retiree medical insurance contract
$
13.6 $
— $
13.6
Mutual funds
16.4
16.4
—
Total OGE Energy plan investments
$
30.0 $
16.4 $
13.6
Plan investments attributable to affiliates
(2.8 )
Total OG&E plan investments
$
27.2
(In millions)
December 31,
2023
Level 1
Level 3
Group retiree medical insurance contract
$
16.8 $
— $
16.8
Mutual funds
15.9
15.9
—
Total OGE Energy plan investments
$
32.7 $
15.9 $
16.8
Plan investments attributable to affiliates
(3.1 )
Total OG&E plan investments
$
29.6
The group retiree medical insurance contract invests in a pool of common stocks, bonds and money market accounts, of which a significant portion is
comprised of mortgage-backed securities. The unobservable input included in the valuation of the contract includes the approach for determining the
allocation of the postretirement benefit plans' pro-rata share of the total assets in the contract.
The following table presents a reconciliation of the postretirement benefit plans' investments that are measured at fair value on a recurring basis using
significant unobservable inputs (Level 3).
Year Ended December 31 (In millions)
2024
Group retiree medical insurance contract:
Beginning balance
$
16.8
Claims paid
(4.1 )
Realized losses
(1.5 )
Investment fees
(0.1 )
Interest income
0.6
Net unrealized gains related to instruments held at the reporting date
1.9
Ending balance
$
13.6
Medicare Prescription Drug, Improvement and Modernization Act of 2003
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 expanded coverage for prescription drugs. The following table presents
the gross benefit payments the Registrants expect to pay related to the postretirement benefit plans, including prescription drug benefits.
(In millions)
OGE Energy
OG&E
2025
$
13.9 $
10.5
2026
$
11.3 $
8.4
2027
$
10.3 $
7.7
2028
$
9.4 $
7.1
2029
$
8.7 $
6.6
2030-2034
$
35.6 $
27.6
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401(k) Plan
OGE Energy provides a 401(k) Plan, and each regular full-time employee of OGE Energy or a participating affiliate is eligible to participate in the 401(k)
Plan immediately upon hire. All other employees of OGE Energy or a participating affiliate are eligible to become participants in the 401(k) Plan after
completing one year of service as defined in the 401(k) Plan. Participants may contribute each pay period any whole percentage between two percent and 75
percent of their compensation, as defined in the 401(k) Plan, for that pay period. Participants who have reached age 50 before the close of a year are allowed
to make additional contributions referred to as "Catch-Up Contributions," subject to certain limitations of the Code. Participants may designate, at their
discretion, all or any portion of their contributions as: (i) a before-tax contribution under Section 401(k) of the Code subject to the limitations thereof, (ii) a
contribution made on a non-Roth after-tax basis or (iii) a Roth contribution. The 401(k) Plan also includes an eligible automatic contribution arrangement and
provides for a qualified default investment alternative consistent with the U.S. Department of Labor regulations. Participants may elect, in accordance with
the 401(k) Plan procedures, to have their future salary deferral rate to be automatically increased annually on a date and in an amount as specified by the
participant in such election. For employees hired or rehired on or after December 1, 2009, OGE Energy contributes to the 401(k) Plan, on behalf of each
participant, 200 percent of the participant's contributions up to five percent of compensation.
No OGE Energy contributions are made with respect to a participant's rollover contributions or with respect to a participant's contributions based on
overtime payments, pay-in-lieu of overtime for exempt personnel, special lump-sum recognition awards and lump-sum merit awards included in
compensation for determining the amount of participant contributions. Once made, OGE Energy's contribution may be directed to any available investment
option in the 401(k) Plan. OGE Energy match contributions vest over a three-year period. After two years of service, participants become 20 percent vested in
their OGE Energy contribution account and become fully vested on completing three years of service. In addition, participants fully vest when they are
eligible for normal or early retirement under the Pension Plan requirements, in the event of their termination due to death or permanent disability or upon
attainment of age 65 while employed by OGE Energy or its affiliates. OGE Energy contributed $21.4 million, $19.6 million and $17.1 million in 2024, 2023 and
2022, respectively, to the 401(k) Plan, of which $21.4 million, $16.0 million and $13.9 million, respectively, related to OG&E.
Deferred Compensation Plan
OGE Energy provides a nonqualified deferred compensation plan which is intended to be an unfunded plan. The plan's primary purpose is to provide a
tax-deferred capital accumulation vehicle for a select group of management, highly compensated employees and non-employee members of OGE Energy's
Board of Directors and to supplement such employees' 401(k) Plan contributions as well as offering this plan to be competitive in the marketplace.
Eligible employees who enroll in the plan have the following deferral options: (i) eligible employees may elect to defer up to a maximum of 70 percent
of base salary and 100 percent of annual bonus awards or (ii) eligible employees may elect a deferral percentage of base salary and bonus awards based on
the deferral percentage elected for a year under the 401(k) Plan with such deferrals to start when maximum deferrals to the qualified 401(k) Plan have been
made because of limitations in that plan. Eligible directors who enroll in the plan may elect to defer up to a maximum of 100 percent of directors' meeting
fees and annual retainers. OGE Energy matches employee (but not non-employee director) deferrals to make up for any match lost in the 401(k) Plan
because of deferrals to the deferred compensation plan and to allow for a match that would have been made under the 401(k) Plan on that portion of either
the first six percent of total compensation or the first five percent of total compensation, depending on prior participant elections, deferred that exceeds the
limits allowed in the 401(k) Plan. Matching credits vest based on years of service, with full vesting after three years or, if earlier, on retirement, disability,
death, a change in control of OGE Energy or termination of the plan. Deferrals, plus any OGE Energy match, are credited to a recordkeeping account in the
participant's name. Earnings on the deferrals are indexed to the assumed investment funds selected by the participant. In 2024, those investment options
included an OGE Energy Common Stock fund, whose value was determined based on the stock price of OGE Energy's Common Stock. OGE Energy accounts
for the contributions related to its executive officers in this plan as Accrued Benefit Obligations and accounts for the contributions related to OGE Energy's
directors in this plan as Other Deferred Credits and Other Liabilities in the balance sheets. The investment associated with these contributions is accounted
for as Other Property and Investments in the balance sheets. The appreciation of these investments is accounted for as Other Income, and the increase in the
liability under the plan is accounted for as Other Expense in the statements of income.
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Supplemental Executive Retirement Plan
OGE Energy provides a supplemental executive retirement plan in order to attract and retain lateral hires or other executives designated by the
Compensation Committee of OGE Energy's Board of Directors who may not otherwise qualify for a sufficient level of benefits under OGE Energy's Pension
Plan and Restoration of Retirement Income Plan. The supplemental executive retirement plan is intended to be an unfunded plan and not subject to the
benefit limitations of the Code. For the actuarial equivalence calculations, the supplemental executive retirement plan provides that (i) mortality rates shall
be based on the unisex mortality table issued under Internal Revenue Service Notice 2018-02 for purposes of determining the minimum present value under
Code Section 417(e)(3) for distributions with annuity starting dates that occur during stability periods beginning in the 2019 calendar year and (ii) the interest
rate shall be five percent.
12. Report of Business Segments
OGE Energy reports its operations primarily through a single segment, captioned "electric company," which is engaged in the generation, transmission,
distribution and sale of electric energy. The "other operations" caption primarily includes the operations of the holding company and other energy-related
investments. Intersegment revenues would be recorded at prices comparable to those of unaffiliated customers and could be affected by regulatory
considerations. In accordance with ASC Topic 280, “Segment Reporting,” the Registrants have identified their Chief Executive Officer as the “chief operating
decision maker.” The Chief Executive Officer uses net income as the measure of reportable segment profit or loss to make operating decisions, allocate
resources, and assess performance. The following tables, which include significant segment expenses, present the results of OGE Energy's business segments
for the years ended December 31, 2024, 2023 and 2022.
2024
Electric
Company
Other
Operations
Eliminations
Total
(In millions)
Operating revenues
$
2,985.3 $
— $
— $
2,985.3
Fuel, purchased power and direct transmission expense
1,076.4
—
—
1,076.4
Other operation and maintenance
514.1
0.3
—
514.4
Depreciation and amortization
539.5
—
—
539.5
Taxes other than income
109.7
—
—
109.7
Operating income (loss)
745.6
(0.3 )
—
745.3
Other income
31.9
2.4
(4.5 )
29.8
Interest expense
214.4
44.6
(4.5 )
254.5
Income tax expense (benefit)
93.2
(14.1 )
—
79.1
Net income (loss)
$
469.9 $
(28.4 ) $
— $
441.5
Total assets
$
13,581.3 $
402.9 $
(268.2 ) $
13,716.0
Capital expenditures
$
1,090.9 $
— $
— $
1,090.9
2023
Electric
Company
Other
Operations
Eliminations
Total
(In millions)
Operating revenues
$
2,674.3 $
— $
— $
2,674.3
Fuel, purchased power and direct transmission expense
911.7
—
—
911.7
Other operation and maintenance
505.0
(2.4 )
—
502.6
Depreciation and amortization
506.6
—
—
506.6
Taxes other than income
99.4
3.8
—
103.2
Operating income (loss)
651.6
(1.4 )
—
650.2
Other income
43.5
8.1
(7.4 )
44.2
Interest expense
199.9
28.9
(7.4 )
221.4
Income tax expense (benefit)
68.8
(12.6 )
—
56.2
Net income (loss)
$
426.4 $
(9.6 ) $
— $
416.8
Total assets
$
12,642.6 $
301.1 $
(153.0 ) $
12,790.7
Capital expenditures
$
1,178.2 $
— $
— $
1,178.2
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2022
Electric
Company
Natural Gas
Midstream
Operations
(A)
Other
Operations
Eliminations
Total
(In millions)
Operating revenues
$
3,375.7 $
— $
— $
— $
3,375.7
Fuel, purchased power and direct transmission expense
1,662.4
—
—
—
1,662.4
Other operation and maintenance
491.9
12.6
(3.1 )
—
501.4
Depreciation and amortization
460.9
—
—
—
460.9
Taxes other than income
98.0
0.1
3.4
—
101.5
Operating income (loss)
662.5
(12.7 )
(0.3 )
—
649.5
Gain on equity securities
—
282.1
—
—
282.1
Other income
11.2
10.0
4.9
(2.1 )
24.0
Interest expense
157.8
—
10.6
(2.1 )
166.3
Income tax expense (benefit)
76.4
48.1
(0.9 )
—
123.6
Net income (loss)
$
439.5 $
231.3 $
(5.1 ) $
— $
665.7
Total assets
$
12,410.5 $
1.2 $
683.7 $
(550.7 ) $
12,544.7
Capital expenditures
$
1,050.9 $
— $
— $
— $
1,050.9
(A) During 2022, OGE Energy held an investment in Energy Transfer's equity securities and reported the investment's activity, as well as Enable legacy
pension and postretirement costs, through the natural gas midstream operations segment. As of the end of September 2022, OGE Energy sold all of Energy
Transfer's limited partner units; therefore, beginning in 2023, OGE Energy no longer has a natural gas midstream operations segment.
13. Commitments and Contingencies
Purchase Obligations and Commitments
The following table presents the Registrants' future purchase obligations and commitments estimated for the next five years.
(In millions)
2025
2026
2027
2028
2029
Total
Purchase obligations and commitments:
Minimum purchase commitments
$
138.6 $
82.2 $
74.7 $
63.7 $
63.8 $
423.0
Estimated wind power purchase commitments
56.9
57.3
57.8
58.4
58.6
289.0
Capacity commitments
33.0
40.2
41.4
—
—
114.6
Long-term service agreement commitments
35.7
43.8
17.7
3.0
3.1
103.3
Generation capacity construction commitments
141.7
33.8
—
—
—
175.5
Total purchase obligations and commitments
$
405.9 $
257.3 $
191.6 $
125.1 $
125.5 $
1,105.4
OG&E Minimum Purchase Commitments
OG&E has coal contracts for purchases through December 31, 2027. OG&E may also purchase coal through spot purchases on an as-needed basis. As a
participant in the SPP Integrated Marketplace, OG&E purchases its natural gas supply through short-term agreements. OG&E relies on a combination of
natural gas base load agreements and call 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 Integrated Marketplace.
OG&E has natural gas transportation service contracts with Energy Transfer, ONEOK, Inc. and Southern Star, which grant these companies the
responsibility of delivering natural gas to OG&E's generating facilities. The contracts with Energy Transfer end in December 2034, December 2038 and
September 2045; the contracts with ONEOK, Inc. end in August 2037 and December 2045; and the contract with Southern Star ends in December 2034.
OG&E also has natural gas storage agreements with ONEOK, Inc. for firm storage which ends in December 2027 and the Energy Transfer agreement for park
and loan service ends in April 2027.
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OG&E Estimated Wind Power Purchase Commitments
The following table presents OG&E's wind purchased power contracts.
Company
Location
Original Term of
Contract
Expiration of
Contract
MWs
CPV Keenan
Woodward County, OK
20 years
2030
152.0
Edison Mission Energy
Dewey County, OK
20 years
2031
130.0
NextEra Energy
Blackwell, OK
20 years
2032
60.0
The following table presents a summary of OG&E's wind power purchases for the years ended December 31, 2024, 2023 and 2022.
Year Ended December 31 (In millions)
2024
2023
2022
CPV Keenan
$
25.4 $
23.0 $
25.8
Edison Mission Energy
23.3
20.5
24.9
NextEra Energy
5.6
5.3
7.3
Total wind power purchased
$
54.3 $
48.8 $
58.0
OG&E Capacity Commitments
In 2022, the SPP approved an increase in the planning reserve margin from 12 percent to 15 percent. Due to near-term generation requirements, in
2023, OG&E entered into short-term power purchase agreements to meet the additional capacity needs in each of the years through 2027.
OG&E Long-Term Service Agreement Commitments
OG&E has a long-term parts and service maintenance contract for the upkeep of the McClain Plant. In May 2013, a new contract was signed that is
expected to run for the earlier of 128,000 factored-fired hours or 4,800 factored-fired starts. Based on historical usage and current expectations for future
usage, this contract is expected to run until 2035. The contract requires payments based on both a fixed and variable cost component, depending on how
much the McClain Plant is used.
OG&E has a long-term parts and service maintenance contract for the upkeep of the Redbud Plant. In March 2013, the contract was amended to extend
the contract coverage for an additional 24,000 factored-fired hours resulting in a maximum of the earlier of 144,000 factored-fired hours or 4,500 factored-
fired starts. Based on historical usage and current expectations for future usage, this contract is expected to run until 2032. The contract requires payments
based on both a fixed and variable cost component, depending on how much the Redbud Plant is used.
OG&E Generation Capacity Construction Commitments
OG&E has generation capacity construction projects at its existing Horseshoe Lake generating facility to install two combustion turbines totaling 448
MWs and at Tinker Air Force Base to install 96 MWs of combustion turbines. The new generating units are expected to be placed into service in late 2026.
Environmental Laws and Regulations
The activities of OG&E are subject to numerous stringent and complex federal, state and local laws and regulations governing environmental protection.
These laws and regulations can change, restrict or otherwise impact the Registrants' business activities in many ways, including the handling or disposal of
waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and
operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative,
civil and criminal penalties, the imposition
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of remedial requirements and the issuance of orders enjoining future operations. Management believes that all of the Registrants' operations are in
substantial compliance with current federal, state and local environmental standards.
Environmental regulation can increase the cost of planning, design, initial installation and operation of OG&E's facilities. Management continues to
evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a
competitive market.
Other
In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to
lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to
assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the
appropriate accounting entries are reflected in the financial statements. If the assessment indicates that a potential loss is not probable but reasonably
possible, the nature of the contingent matter, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. At
the present time, based on currently available information, except as discussed below, the Registrants believe that any reasonably possible losses in excess of
accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to their financial statements and would not
have a material adverse effect on their financial position, results of operations or cash flows.
In July 2023, OG&E was named, along with its contractor, as a defendant in a lawsuit filed by an apartment owner and its insurance companies seeking
in excess of $60.0 million in damages related to a fire at an apartment building under construction in Oklahoma City. Several additional defendants have also
been named. OG&E disputes the claims in the lawsuit and intends to vigorously defend this action. If OG&E is ultimately deemed liable for damages in
connection with this incident, OG&E believes its existing insurance policies will cover its costs, in excess of a required retention (the amount of which is not
material), to satisfy any liability it may have. Due to the uncertain and preliminary nature of this litigation, the outcome cannot be predicted, and OG&E is
unable to provide a range of possible loss in this matter.
14. Rate Matters and Regulation
Regulation and Rates
OG&E's retail electric tariffs are regulated by the OCC in Oklahoma and by the APSC in Arkansas. The issuance of certain securities by OG&E is also
regulated by the OCC and the APSC. OG&E's transmission activities, short-term borrowing authorization and accounting practices are subject to the
jurisdiction of the FERC. The Secretary of the U.S. Department of Energy has jurisdiction over some of OG&E's facilities and operations. In 2024, 87 percent of
OG&E's electric revenue was subject to the jurisdiction of the OCC, eight percent to the APSC and five percent to the FERC.
The OCC and the APSC require that, among other things, (i) OGE Energy permits the OCC and the APSC access to the books and records of OGE Energy
and its affiliates relating to transactions with OG&E; (ii) OGE Energy employ accounting and other procedures and controls to protect against subsidization of
non-utility activities by OG&E's customers; and (iii) OGE Energy refrain from pledging OG&E assets or income for affiliate transactions. In addition, the FERC
has access to the books and records of OGE Energy and its affiliates as the FERC deems relevant to costs incurred by OG&E or necessary or appropriate for
the protection of utility customers with respect to the FERC jurisdictional rates.
Completed Regulatory Matters
Integrated Resource Plans
On March 29, 2024, OG&E issued its final 2024 IRP to the OCC and APSC. This 2024 IRP identified capacity needs of 556 MWs, 431 MWs and 1,096 MWs
in 2026, 2027 and 2028, respectively. The IRP assumes that Horseshoe Lake unit 7 will be retired in 2024, Tinker units 5A and 5B will be retired in 2025, and
Horseshoe Lake unit 8 will be retired in 2027. As provided in the IRP, in May 2024, OG&E issued requests for proposals for resources to meet the capacity
needs identified in the IRP while maintaining affordability and reliability for OG&E's customers. OG&E is currently evaluating the proposals submitted in this
process. Independent evaluators have been hired on behalf of the OCC and Oklahoma Attorney General to oversee the process.
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APSC Proceedings
2023 Formula Rate Plan Filing
On March 7, 2024, the APSC issued a final order approving the uncontested settlement agreement between OG&E and the APSC Staff related to OG&E's
final evaluation report under its Formula Rate Plan. The settlement agreement included an annual electric revenue increase of $3.5 million. New rates
became effective April 1, 2024.
Arkansas 2024 Generation Construction Notice Filing
On January 19, 2024, OG&E filed an application seeking APSC approval to begin construction of 96 MWs of combustion turbines at Tinker Air Force
Base. On July 24, 2024, the APSC issued an order which states that OG&E has complied with applicable Arkansas law and may commence construction of the
generating units at Tinker Air Force Base. OG&E will be required to seek a prudence determination prior to its next general rate review.
Arkansas Winter Storm Uri
In February 2021, Winter Storm Uri resulted in record winter peak demand for electricity and extremely high natural gas and purchased power prices in
OG&E's service territory. In January 2023, the APSC issued an order authorizing OG&E to amortize the regulatory asset balance related to the extraordinary
fuel costs incurred by OG&E over ten years using a pre-tax weighted average cost of capital of 6.49 percent as a carrying charge beginning March 2021.
On February 2, 2023, the APSC issued an order to initiate hearings with all Arkansas jurisdictional electric and gas utilities regarding the review of Winter
Storm Uri cost prudence and allocation. On August 15, 2024, a unanimous settlement was reached between OG&E and intervenors, and the APSC issued the
final order on September 6, 2024, approving all costs as prudent and authorizing OG&E to continue collecting its costs at the previously approved allocation
and ten-year amortization period.
Capacity Power Purchase Agreement Cost Recovery
On October 4, 2023, OG&E filed an application with the APSC seeking approval of a methodology for recovery of capacity costs associated with short-
term power purchase agreements entered into to meet capacity needs in each of the years between 2023 and 2027. On December 29, 2023, the
Administrative Law Judge issued an order authorizing OG&E to defer to a regulatory asset its capacity costs associated with short-term power purchase
agreements for 2023, along with a carrying charge at the commission-approved customer deposit interest rate. The order required OG&E and the parties to
address treatment for any expenses beyond the calendar year 2023, and on November 5, 2024, the APSC approved a settlement agreement between OG&E
and the APSC Staff and the Arkansas Attorney General which provides that OG&E will be able to defer these capacity costs in 2024 and beyond in the same
manner as 2023.
OCC Proceedings
2022 Oklahoma Fuel Prudency
In June 2023, the Public Utility Division Staff filed their application initiating the review of the 2022 fuel adjustment clause and prudence review. The
OCC issued an order on April 11, 2024 finding that OG&E's 2022 fuel costs and generation operations were prudent.
Oklahoma Demand Portfolio Filing
Pursuant to OCC rules, OG&E is required to propose, implement and administer a portfolio of demand and energy efficiency programs once every five
years. On July 1, 2024, OG&E filed its proposed demand program five-year portfolio for the 2025 through 2029 program cycle, requesting recovery of (i)
energy efficiency program costs, (ii) lost revenues associated with certain achieved energy efficiency and demand savings, (iii) performance-based incentives
and (iv) costs associated with research and development investments. OG&E also requested an increase in the number of energy efficiency programs offered
to customers and expansion of the programs to include additional opportunities for customers to achieve demand and energy savings. On October 17, 2024,
OG&E entered into an uncontested settlement agreement authorizing its demand and energy efficiency programs, as proposed. On
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December 10, 2024, the OCC issued an order approving the settlement and OG&E’s five-year demand portfolio in the manner proposed by OG&E in its July
2024 request.
SPP Proceedings
Planning Reserve Margin
On August 6, 2024, the SPP Regional State Committee and Board of Directors approved increases to the summer-season and winter-season planning
reserve margins that each load serving entity, such as OG&E, must maintain. The summer-season and winter-season planning reserve margins increased to
16 percent and 36 percent, respectively, from the 15 percent that previously applied to both seasons. These changes will be effective for the summer of 2026
and winter of 2026/2027. As a result, OG&E is currently evaluating the impact to its capacity needs brought about by this policy change.
Pending Regulatory Matters
Various proceedings pending before state or federal regulatory agencies are described below. Unless stated otherwise, the Registrants cannot predict
when the regulatory agency will act or what action the regulatory agency will take. The Registrants' financial results are dependent in part on timely and
constructive decisions by the regulatory agencies that set OG&E's rates.
APSC Proceedings
Arkansas Prudence of Horseshoe Lake and Tinker Generation Facilities
On December 30, 2024, pursuant to orders in the generation construction notice filings, OG&E filed an application requesting a determination of
prudence of action and initial contract costs for the generating units being constructed at Horseshoe Lake and Tinker Air Force Base.
FERC Proceedings
Order for Sponsored Transmission Upgrades within SPP
Under Attachment Z2 of the SPP Open Access Transmission Tariff, costs of participant-funded, or "sponsored," transmission upgrades may be recovered
from other SPP customers whose transmission service depends on capacity enabled by the upgrade. The SPP tariff required the SPP to charge for these
upgrades beginning in 2008, but the SPP did not begin charging its customers for these upgrades until 2016 due to information system limitations. The FERC
approved a waiver of a time limitation in the SPP tariff to allow the SPP to bill after this delay for the 2008 through 2015 period, and the SPP then both billed
OG&E as a user and credited OG&E as a sponsor for Z2 charges during the period. OG&E refunded most of the net credits to customers through its various
rate riders that include SPP activity with the remaining amounts retained by OG&E.
Net payers of Z2 credits challenged the waiver, and the FERC ultimately reversed itself, denied the waiver and ordered the SPP to refund the payments
made for 2008 through 2015 charges. OG&E and other net creditors challenged this reversal, but the U.S. Court of Appeals for the D.C. Circuit upheld the
reversal in August 2021. Meanwhile, OG&E and other creditors filed complaints with the FERC against the SPP, contending that the SPP and not OG&E should
bear the cost of any refunds resulting from the SPP's tariff violations and that SPP’s actions also violated its contracts. In June 2023, the FERC issued a final
order granting the complaints in part but awarding no relief. OG&E and other complainants appealed this order to the U.S. Court of Appeals for the Eighth
Circuit, which heard arguments on March 14, 2024 and on September 16, 2024, the U.S. Court of Appeals for the Eighth Circuit denied relief and upheld the
FERC's decision.
If the FERC proceeds to order refunds in full, OG&E estimates it would be required to refund $14.0 million, which is net of amounts paid to other utilities
for upgrades, plus interest at the FERC-approved rate. Payment of refunds would shift recovery of these upgrade credits to future periods. The SPP has
submitted filings to the FERC outlining a refund process but stating some issues need the FERC's clarification before refunds can proceed. OG&E and other
parties have commented on the filings and the matter remains pending before the FERC. Of the $14.0 million, the Registrants would be impacted by $4.0
million in expense that initially benefited the Registrants in 2016, and OG&E customers would incur a net impact of $10.0 million in expense through rider
mechanisms or the FERC formula rate. As of December 31, 2024, the Registrants have reserved $14.0 million plus estimated interest for a potential refund.
100
Effective July 1, 2020, the FERC approved an SPP proposal to eliminate Attachment Z2 revenue crediting and replace it with a different rate mechanism
that would provide project sponsors, such as OG&E, the same level of recovery. This elimination of the Attachment Z2 revenue crediting would only
prospectively impact OG&E and its recovery of any future upgrade costs that it may incur as a project sponsor subsequent to July 2020. All of the existing
projects that are eligible to receive revenue credits under Attachment Z2 will remain eligible, which includes the $14.0 million related to the refunds.
OCC Proceedings
Oklahoma Retail Electric Supplier Certified Territory Act Causes
As previously disclosed, several rural electric cooperative electricity suppliers filed complaints with the OCC alleging that OG&E, because it was
providing service to large loads in another supplier's territory, had violated the Oklahoma Retail Electric Supplier Certified Territory Act. OG&E believes it is
lawfully serving customers under specific exemptions under this act that allow it to serve customers having a load of one MW or greater. There were five
complaint cases initiated at the OCC, and the OCC issued decisions on each of them. The OCC ruled in favor of the electric cooperatives in three of those
cases under statutory interpretation and ruled in favor of OG&E in two of those cases under injunctive theory. All five of those cases were appealed to the
Oklahoma Supreme Court.
On April 4, 2023, the Oklahoma Supreme Court issued its opinion which vacated the OCC's injunctions with respect to four of the cases and held that
the Oklahoma Retail Electric Supplier Certified Territory Act does not limit the mechanism by which OG&E may provide service to large loads in another
supplier's territory pursuant to the one MW exception. The one pending legal issue left for the Oklahoma Supreme Court to resolve is a statutory
interpretation on how a supplier calculates "connected load for initial full operation" for purposes of the exemption under the act. If the Oklahoma Supreme
Court ultimately were to find that the customers being served in this single case are not exempted from the Oklahoma Retail Electric Supplier Certified
Territory Act, OG&E would have to evaluate the recoverability of some plant investments made to serve these customers and may also be required to
reimburse the certified territory supplier in this case for an amount of lost revenue. Such amounts would not be expected to be material to the Registrants'
results of operations.
2023 Oklahoma General Rate Review
In December 2023, OG&E filed a general rate review in Oklahoma seeking a rate increase of $332.5 million and a 10.5 percent return on equity based on
a common equity percentage of 53.50 percent. The rate review sought recovery of $1.3 billion of capital investment since the last general rate review. Prior
to the hearing on the merits, on June 12, 2024, OG&E entered into an uncontested settlement agreement, which was also executed by the OCC Public Utility
Division Staff, the Oklahoma Attorney General, the OG&E Shareholders Association, Oklahoma Industrial Energy Consumers and other intervenors. This
settlement agreement resulted in an annual revenue requirement increase of $126.7 million. OG&E had the right to implement interim rates subject to
refund beginning July 1, 2024 (180 days after the filing of its application on December 29, 2023). On July 1, 2024, OG&E implemented an annual interim rate
increase in line with the settlement agreement, subject to refund based on final approval by the OCC.
On November 26, 2024, the OCC issued an interim order approving the settlement agreement. In addition to the annual base rate revenue increase of
126.7 million, other key terms of the uncontested settlement agreement, as approved in the interim order by the OCC, include, among others:
•
All recorded plant-in-service through March 31, 2024 is prudent and should be included in rate base;
•
There will be no change in OG&E's current return on equity of 9.5 percent, and OG&E's requested capital structure based on a common equity
percentage of 53.50 percent would be approved;
•
OG&E will utilize depreciation rates based on the recommendations of the Federal Executive Agencies for production plant accounts, the Public
Utility Division for transmission plant accounts, Oklahoma Industrial Energy Consumers for intangible plant accounts, and no change to existing
rates for distribution and general plant accounts;
•
OG&E will include in expense any Oklahoma vegetation management operation and maintenance expenses up to $38.2 million annually and defer
to a regulatory asset or liability the total level of expense less than or greater than the $38.2 million annual base level of expense. The regulatory
asset will be up to $7.5 million in excess of the base rate level and no carrying charge will accrue on the regulatory asset/liability. The costs booked
to the regulatory asset or liability will be subject to a prudence review in OG&E’s next general rate review; and
101
•
The one MW competitive load issues were litigated before the OCC, and the resolution of the one MW competitive load issue could impact the
cost of service study, revenue allocation and OG&E’s tariffs.
Due to the November 26, 2024 OCC interim order approving the settlement agreement, no refund of interim rates was deemed necessary. OG&E is
awaiting conclusion from the OCC regarding the one MW issue that is being separately addressed.
2023 Oklahoma Fuel Prudency
On June 10, 2024, the Public Utility Division Staff filed their application initiating the review of the 2023 fuel adjustment clause prudence review. OG&E
filed its minimum filing requirements and direct testimony on August 9, 2024. The OCC Staff filed testimony on February 4, 2025 recommending that the OCC
find OG&E's fuel costs prudent.
SPP Proceedings
Resource Capacity Accreditation
In July 2022, the SPP Board of Directors approved a new unit accreditation methodology for conventional generation which requires submittal to and
approval from the FERC prior to becoming effective. On March 2, 2023, the FERC rejected the SPP’s proposed capacity accreditation methodology for wind
and solar generators. Following the FERC’s rejection, the SPP began an extensive review of both the methodology proposed for thermal resources which had
not yet been submitted to the FERC, and the accreditation methodology for wind and solar generators. These methodologies were reviewed and approved
by both the Regional State Committee and the SPP Board of Directors in late October 2023 and were submitted to the FERC for approval on February 23,
2024. On January 16, 2025, the FERC accepted the SPP's proposed tariff revisions for each accreditation methodology to become effective October 1, 2025.
OG&E is evaluating the impact of the FERC's acceptance of these accreditation methods, which may contribute to OG&E’s capacity needs.
102
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of OGE Energy Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets and consolidated statements of capitalization of OGE Energy Corp. (the Company) as of
December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a)
(collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal
control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2025, expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion
on the critical audit matter or on the accounts or disclosures to which it relates.
103
Regulatory Assets and Liabilities
Description of the
Matter
As discussed in Note 1 to the consolidated financial statements, the Company conducts its electric utility operations through
Oklahoma Gas & Electric Company (OG&E). OG&E is a regulated utility subject to accounting principles for rate-regulated activities.
As such, certain incurred costs that would otherwise be charged to expense are 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 are deferred as regulatory liabilities, based on the expected refund to customers in future rates. OG&E records items as
regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is probable that the costs or obligations
will be included in amounts allowable for recovery or refund in future rates.
Auditing regulatory assets and liabilities is complex as it requires specialized knowledge of rate-regulated activities and judgments as
to matters that could affect the recording or updating of regulatory assets and liabilities.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's
accounting for regulatory assets and liabilities, including, among others, controls over management's assessment of the likelihood of
approval by regulators for any new matters and controls over the evaluation of filings with regulatory bodies on existing regulatory
assets and liabilities, including factors that may affect the timing or nature of recoverability.
We performed audit procedures that included, among others, reviewing evidence of correspondence with regulatory bodies to test
that the Company appropriately evaluated information obtained from regulatory rulings. For example, we assessed the recoverability,
considering information obtained from regulatory rulings, of various regulatory assets. In addition, we tested that amortization of
regulatory assets and liabilities corresponded to relevant regulatory rulings. For example, we tested whether the regulatory assets
and liabilities were appropriately amortized through the Company's rates charged to customers based on rulings from regulatory
bodies.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2002.
Oklahoma City, Oklahoma
February 18, 2025
104
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder and the Board of Directors of Oklahoma Gas and Electric Company
Opinion on the Financial Statements
We have audited the accompanying balance sheets and statements of capitalization of Oklahoma Gas and Electric Company (the Company) as of December
31, 2024 and 2023, the related statements of income and comprehensive income, changes in stockholder's equity and cash flows for each of the three years
in the period ended December 31, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as
the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December
31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with
U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal
control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 18, 2025, expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical
audit matter or on the accounts or disclosures to which it relates.
105
Regulatory Assets and Liabilities
Description of the
Matter
As discussed in Note 1 to the financial statements, OG&E is a regulated utility subject to accounting principles for rate-regulated
activities. As such, certain incurred costs that would otherwise be charged to expense are 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 are deferred as regulatory liabilities, based on the expected refund to customers in future rates. OG&E records items as
regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is probable that the costs or obligations will
be included in amounts allowable for recovery or refund in future rates.
Auditing regulatory assets and liabilities is complex as it requires specialized knowledge of rate-regulated activities and judgments as
to matters that could affect the recording or updating of regulatory assets and liabilities.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of internal controls over the Company's
accounting for regulatory assets and liabilities, including, among others, controls over management's assessment of the likelihood of
approval by regulators for any new matters and controls over the evaluation of filings with regulatory bodies on existing regulatory
assets and liabilities, including factors that may affect the timing or nature of recoverability.
We performed audit procedures that included, among others, reviewing evidence of correspondence with regulatory bodies to test
that the Company appropriately evaluated information obtained from regulatory rulings. For example, we assessed the recoverability,
considering information obtained from regulatory rulings, of various regulatory assets. In addition, we tested that amortization of
regulatory assets and liabilities corresponded to relevant regulatory rulings. For example, we tested whether the regulatory assets
and liabilities were appropriately amortized through the Company's rates charged to customers based on rulings from regulatory
bodies.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2002.
Oklahoma City, Oklahoma
February 18, 2025
106
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
The Registrants maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Registrants in
reports that they file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission rules and forms. In addition, the disclosure controls and procedures ensure that information required to be
disclosed is accumulated and communicated to management, including the chief executive officer and chief financial officer, allowing timely decisions
regarding required disclosure. As of the end of the period covered by this report, based on an evaluation carried out under the supervision and with the
participation of the Registrants' management, including the chief executive officer and chief financial officer, of the effectiveness of the Registrants'
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934), the chief executive
officer and chief financial officer have concluded that the Registrants' disclosure controls and procedures are effective.
No change in the Registrants' internal control over financial reporting has occurred during the most recently completed fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Registrants' internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934).
Management's Report on Internal Control Over Financial Reporting
The management of the Registrants is responsible for establishing and maintaining adequate internal control over financial reporting. The Registrants'
internal control systems were designed to provide reasonable assurance to management and OGE Energy's Board of Directors regarding the preparation and
fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even
those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
The Registrants' management assessed the effectiveness of their internal control over financial reporting as of December 31, 2024. In making this
assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated
Framework (2013). Based on our assessment, we believe that, as of December 31, 2024, the Registrants' internal control over financial reporting is effective
based on those criteria.
The Registrants' independent auditors have issued an attestation report on the Registrants' internal control over financial reporting. This report appears
on the following page.
/s/ Sean Trauschke
/s/ Sarah R. Stafford
Sean Trauschke, Chairman of the Board, President
Sarah R. Stafford, Controller
and Chief Executive Officer
and Chief Accounting Officer
/s/ Charles B. Walworth
Charles B. Walworth
Chief Financial Officer and Treasurer
107
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of OGE Energy Corp.
Opinion on Internal Control Over Financial Reporting
We have audited OGE Energy Corp.'s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our
opinion, OGE Energy Corp. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets and consolidated statements of capitalization of the Company as of December 31, 2024 and 2023, the related consolidated statements of
income, comprehensive income, changes in stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024, and the
related notes and financial statement schedule listed in the Index at Item 15(a) and our report dated February 18, 2025 expressed an unqualified opinion
thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Oklahoma City, Oklahoma
February 18, 2025
108
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholder and the Board of Directors of Oklahoma Gas and Electric Company
Opinion on Internal Control Over Financial Reporting
We have audited Oklahoma Gas and Electric Company's internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), (the COSO
criteria). In our opinion, Oklahoma Gas and Electric Company (the Company) maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets and
statements of capitalization of the Company as of December 31, 2024 and 2023, the related statements of income and comprehensive income, changes in
stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2024, and the related notes and financial statement
schedule listed in the Index at Item 15(a) and our report dated February 18, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Oklahoma City, Oklahoma
February 18, 2025
109
Item 9B. Other Information.
During the three months ended December 31, 2024, no director or officer of the Registrants adopted or terminated a “Rule 10b5-1 trading
arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
110
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Code of Ethics Policy
OGE Energy maintains a code of ethics for our chief executive officer and senior financial officers, including the chief financial officer and chief
accounting officer, which is available for public viewing on OGE Energy's website at www.oge.com/governance. The code of ethics will be provided, free of
charge, upon request. OGE Energy intends to satisfy the disclosure requirements under Section 5, Item 5.05 of Form 8-K regarding an amendment to, or
waiver from, a provision of the code of ethics by posting such information on its website at the location specified above. OGE Energy will also include in its
proxy statement information regarding the Audit Committee financial experts.
OGE Energy maintains insider trading policies and procedures governing the purchase, sale, and/or other dispositions of OGE Energy’s securities by
directors, officers and employees that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing
standards applicable to OGE Energy. It is also the policy of OGE Energy that it will not engage in transactions in OGE Energy securities while in possession of
material non-public information relating to OGE Energy or its securities. A copy of OGE Energy's Insider Trading Policy is filed as Exhibit 19.01 to this Form 10-
K.
OGE Energy. Information regarding OGE Energy's executive officers is set forth in "Part I, Item 1. Business - Information About the Registrants' Executive
Officers." As permitted by General Instruction G of Form 10-K, the information required by Item 10, other than information regarding the executive officers,
the Code of Ethics, and the insider trading policies and procedures will be set forth in OGE Energy's definitive proxy statement for the 2025 Annual Meeting
of Shareholders, which is expected to be filed with the Securities and Exchange Commission on or about April 1, 2025. Such proxy statement is incorporated
herein by reference.
OG&E. Under the reduced disclosure format permitted by General Instruction I(2)(c) of Form 10-K, the information otherwise required by Item 10 for
OG&E has been omitted.
Item 11. Executive Compensation
OGE Energy. As permitted by General Instruction G of Form 10-K, the information required by Item 11 will be set forth in OGE Energy's definitive proxy
statement for the 2025 Annual Meeting of Shareholders, which is expected to be filed with the Securities and Exchange Commission on or about April 1,
2025. Such proxy statement is incorporated herein by reference.
OG&E. Under the reduced disclosure format permitted by General Instruction I(2)(c) of Form 10-K, the information otherwise required by Item 11 for
OG&E has been omitted.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
OGE Energy. As permitted by General Instruction G of Form 10-K, the information required by Item 12 will be set forth in OGE Energy's definitive proxy
statement for the 2025 Annual Meeting of Shareholders, which is expected to be filed with the Securities and Exchange Commission on or about April 1,
2025. Such proxy statement is incorporated herein by reference.
OG&E. Under the reduced disclosure format permitted by General Instruction I(2)(c) of Form 10-K, the information otherwise required by Item 12 for
OG&E has been omitted.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
OGE Energy. As permitted by General Instruction G of Form 10-K, the information required by Item 13 will be set forth in OGE Energy's definitive proxy
statement for the 2025 Annual Meeting of Shareholders, which is expected to be filed with the Securities and Exchange Commission on or about April 1,
2025. Such proxy statement is incorporated herein by reference.
OG&E. Under the reduced disclosure format permitted by General Instruction I(2)(c) of Form 10-K, the information otherwise required by Item 13 for
OG&E has been omitted.
111
Item 14. Principal Accountant Fees and Services.
The following discussion relates to the audit fees paid by OGE Energy to its principal independent accountants for the services provided to OGE Energy
and its subsidiaries, including OG&E.
Fees for Principal Independent Accountants
Year Ended December 31
2024
2023
Integrated audit of OGE Energy and its subsidiaries financial statements and internal control over
financial reporting
$
1,718,060
$
1,476,500
Services in support of debt and stock offerings
198,600
62,000
Other (A)
337,720
358,375
Total audit fees (B)
2,254,380
1,896,875
Employee benefit plan audits
169,200
144,000
Other compliance services
40,370
79,530
Total audit-related fees
209,570
223,530
Assistance with examinations and other return issues
205,823
229,383
Review of federal and state tax returns
36,366
54,400
Total tax preparation and compliance fees
242,189
283,783
Total tax fees
242,189
283,783
Total fees
$
2,706,139
$
2,404,188
(A)
Includes reviews of the financial statements included in the Registrants' Quarterly Reports on Form 10-Q, audits of OGE Energy's subsidiaries, agreed-
upon procedures and fees for consulting with the Registrants' executives regarding accounting issues.
(B)
The aggregate audit fees include fees billed for the audit of the Registrants' annual financial statements and for the reviews of the financial statements
included in the Registrants' Quarterly Reports on Form 10-Q. For 2024, this amount includes estimated billings for the completion of the 2024 audit,
which services were rendered after year-end.
All Other Fees
There were no other fees billed by the principal independent accountants to OGE Energy in 2024 and 2023 for other services.
Audit Committee Pre-Approval Procedures
Rules adopted by the Securities and Exchange Commission in order to implement requirements of the Sarbanes-Oxley Act of 2002 require public
company audit committees to pre-approve audit and non-audit services. OGE Energy's Audit Committee follows procedures pursuant to which audit, audit-
related and tax services, and all permissible non-audit services are pre-approved by category of service. The fees are budgeted, and actual fees versus the
budget are monitored throughout the year. During the year, circumstances may arise when it may become necessary to engage the principal independent
accountants for additional services not contemplated in the original pre-approval. In those instances, OGE Energy will obtain the specific pre-approval of the
Audit Committee before engaging the principal independent accountants. The procedures require the Audit Committee to be informed of each service, and
the procedures do not include any delegation of the Audit Committee's responsibilities to management. The Audit Committee may delegate pre-approval
authority to one or more of its members. The member to whom such authority is delegated will report any pre-approval decisions to the Audit Committee at
its next scheduled meeting.
For 2024, 100 percent of the audit fees, audit-related fees and tax fees were pre-approved by the Audit Committee or the Chairman of the Audit
Committee pursuant to delegated authority.
112
PART IV
Item 15. Exhibit and Financial Statement Schedules.
(a) 1. Financial Statements
(i)
The following financial statements are included in Part II, Item 8 of this Annual Report:
OGE Energy
•
Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022
•
Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022
•
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
•
Consolidated Balance Sheets at December 31, 2024 and 2023
•
Consolidated Statements of Capitalization at December 31, 2024 and 2023
•
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 2024, 2023 and 2022
•
Notes to Consolidated Financial Statements
•
Report of Independent Registered Public Accounting Firm (Audit of Financial Statements)
•
Management's Report on Internal Control Over Financial Reporting
•
Report of Independent Registered Public Accounting Firm (Audit of Internal Control over Financial Reporting)
OG&E
•
Statements of Income for the years ended December 31, 2024, 2023 and 2022
•
Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022
•
Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022
•
Balance Sheets at December 31, 2024 and 2023
•
Statements of Capitalization at December 31, 2024 and 2023
•
Statements of Changes in Stockholder's Equity for the years ended December 31, 2024, 2023 and 2022
•
Notes to Financial Statements
•
Report of Independent Registered Public Accounting Firm (Audit of Financial Statements)
•
Management's Report on Internal Control Over Financial Reporting
•
Report of Independent Registered Public Accounting Firm (Audit of Internal Control over Financial Reporting)
The reports of the Registrants' independent registered public accounting firm (PCAOB ID:42) with respect to the above-referenced financial
statements and their reports on internal control over financial reporting are included in Item 8 and Item 9A of this Form 10-K. Their consents for
each Registrant appear as Exhibit 23.01 and Exhibit 23.02 of this Form 10-K.
2. Financial Statement Schedule (included in Part IV)
•
Schedule II - Valuation and Qualifying Accounts
All other schedules have been omitted since the required information is not applicable or is not material, or because the information required is
included in the respective financial statements or notes thereto.
113
3. Exhibits
Exhibit No.
Description
OGE Energy
OG&E
3.01
Copy of Restated OGE Energy Corp. Certificate of Incorporation. (Filed as Exhibit 3.01 to OGE Energy's
Form 10-Q for the quarter ended June 30, 2013 (File No. 1-12579) and incorporated by reference herein).
X
3.02
Copy of Amended OGE Energy Corp. By-laws dated February 22, 2017. (Filed as Exhibit 3.01 to OGE
Energy's Form 8-K filed February 23, 2017 (File No. 1-12579) and incorporated by reference herein).
X
3.03
Copy of Restated Oklahoma Gas and Electric Company Certificate of Incorporation. (Filed as Exhibit 3.01
to OG&E's Form 8-K filed May 19, 2011 (File No. 1-1097) and incorporated by reference herein).
X
3.04
Copy of Amended Oklahoma Gas and Electric Company By-laws dated November 30, 2015. (Filed as
Exhibit 3.02 to OGE Energy's Form 8-K filed November 30, 2015 (File No. 1-12579) and incorporated by
reference herein).
X
4.01
Trust Indenture dated October 1, 1995, from OG&E to Boatmen's First National Bank of Oklahoma,
Trustee. (Filed as Exhibit 4.02 to OG&E's Form 8-K filed October 24, 1995 and incorporated by reference
herein).
X
X
4.02
Supplemental Indenture No. 2, dated as of July 1, 1997, being a supplemental instrument to Exhibit 4.01
hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed July 17, 1997 (File No. 33-1532) and incorporated
by reference herein).
X
X
4.03
Supplemental Indenture No. 3, dated as of April 1, 1998, being a supplemental instrument to Exhibit 4.01
hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed April 16, 1998 (File No. 33-1532) and incorporated
by reference herein).
X
X
4.04
Supplemental Indenture No. 5 dated as of October 24, 2001, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.06 to OG&E's Registration Statement No. 333-104615 and incorporated by
reference herein).
X
X
4.05
Supplemental Indenture No. 6 dated as of August 1, 2004, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.02 to OG&E's Form 8-K filed August 6, 2004 (File No 1-1097) and
incorporated by reference herein).
X
X
4.06
Supplemental Indenture No. 7 dated as of January 1, 2006, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.02 to OG&E's Form 8-K filed January 6, 2006 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.07
Supplemental Indenture No. 8 dated as of January 15, 2008, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed January 31, 2008 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.08
Supplemental Indenture No. 9 dated as of September 1, 2008, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed September 9, 2008 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.09
Supplemental Indenture No. 10 dated as of December 1, 2008, being a supplemental instrument to
Exhibit 4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed December 11, 2008 (File No. 1-1097)
and incorporated by reference herein).
X
X
4.10
Supplemental Indenture No. 11 dated as of June 1, 2010, being a supplemental instrument to Exhibit 4.01
hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed June 8, 2010 (File No. 1-1097) and incorporated by
reference herein).
X
X
4.11
Supplemental Indenture No. 12 dated as of May 15, 2011, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed May 27, 2011 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.12
Supplemental Indenture No. 13 dated as of May 1, 2013, being a supplemental instrument to Exhibit 4.01
hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed May 13, 2013 (File No. 1-1097) and incorporated
by reference herein).
X
X
4.13
Supplemental Indenture No. 14 dated as of March 15, 2014, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed March 25, 2014 (File No. 1-1097) and
incorporated by reference herein).
X
X
114
4.14
Supplemental Indenture No. 15 dated as of December 1, 2014, being a supplemental instrument to
Exhibit 4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed December 11, 2014 (File No. 1-1097)
and incorporated by reference herein).
X
X
4.15
Supplemental Indenture No. 16 dated as of March 15, 2017, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed March 31, 2017 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.16
Supplemental Indenture No. 17 dated as of August 1, 2017, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed August 11, 2017 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.17
Supplemental Indenture No. 18 dated as of April 26, 2018, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.21 to OG&E's Registration Statement on Form S-3ASR filed May 18, 2018
(File No. 333-225030-01) and incorporated by reference herein).
X
X
4.18
Supplemental Indenture No. 19 dated as of August 15, 2018, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed August 17, 2018 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.19
Supplemental Indenture No. 20 dated as of June 1, 2019, being a supplemental instrument to Exhibit 4.01
hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed June 7, 2019 (File No. 1-1097) and incorporated by
reference herein).
X
X
4.20
Supplemental Indenture No. 21 dated as of April 1, 2020, being a supplemental instrument to Exhibit 4.01
hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed April 1, 2020 (File No. 1-1097) and incorporated by
reference herein).
X
X
4.21
Supplemental Indenture No. 22 dated as of May 27, 2021, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.02 to OG&E's Form 8-K filed May 27, 2021 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.22
Supplemental Indenture No. 23 dated as of January 5, 2023, being a supplemental instrument to Exhibit
4.01 hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed January 5, 2023 (File No. 1-1097) and
incorporated by reference herein).
X
X
4.23
Supplemental Indenture No. 24 dated as of April 3, 2023, being a supplemental instrument to Exhibit 4.01
hereto. (Filed as Exhibit 4.01 to OG&E's Form 8-K filed April 3, 2023 (File No. 1-1097) and incorporated by
reference herein).
X
X
4.24
Indenture dated as of November 1, 2004 between OGE Energy Corp. and UMB Bank, N.A., as trustee.
(Filed as Exhibit 4.01 to OGE Energy's Form 8-K filed November 12, 2004 (File No. 1-12579) and
incorporated by reference herein).
X
4.25
Supplemental Indenture No. 2 dated as of November 24, 2014 between OGE Energy and UMB Bank, N.A,
as trustee, creating the Senior Notes. (Filed as Exhibit 4.01 to OGE Energy's Form 8-K filed November 24,
2014 (File No. 1-12579) and incorporated by reference herein).
X
4.26
Supplemental Indenture No. 3 dated as of April 26, 2018, being a supplemental instrument to Exhibit 4.24
hereto. (Filed as Exhibit 4.04 to OGE Energy's Registration Statement on Form S-3ASR filed May 18, 2018
(File No. 333-225030) and incorporated by reference herein).
X
4.27
Supplemental Indenture No. 4 dated as of May 27, 2021, being a supplemental instrument to Exhibit 4.24
hereto. (Filed as Exhibit 4.01 to OGE Energy's Form 8-K filed May 27, 2021 (File No. 1-12579) and
incorporated by reference herein).
X
4.28
Supplemental Indenture No. 5 dated as of May 9, 2024, being a supplemental instrument to Exhibit 4.24
hereto. (Filed as Exhibit 4.01 to OGE Energy's Form 8-K filed May 9, 2024 (File No. 1-12579) and
incorporated by reference herein).
X
4.29+
Description of Capital Stock.
X
10.01
Amended and Restated Facility Operating Agreement for the McClain Generating Facility dated as of July
9, 2004 between OG&E and the Oklahoma Municipal Power Authority. (Filed as Exhibit 10.03 to OGE
Energy's Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12579) and incorporated by reference
herein).
X
X
10.02
Amended and Restated Ownership and Operation Agreement for the McClain Generating Facility dated
as of July 9, 2004 between OG&E and the Oklahoma Municipal Power
X
X
115
Authority. (Filed as Exhibit 10.04 to OGE Energy's Form 10-Q for the quarter ended June 30, 2004 (File No.
1-12579) and incorporated by reference herein).
10.03
Operating and Maintenance Agreement for the Transmission Assets of the McClain Generating Facility
dated as of August 25, 2003 between OG&E and the Oklahoma Municipal Power Authority. (Filed as
Exhibit 10.05 to OGE Energy's Form 10-Q for the quarter ended June 30, 2004 (File No. 1-12579) and
incorporated by reference herein).
X
X
10.04*
Form of Split Dollar Agreement. (Filed as Exhibit 10.32 to OGE Energy's Form 10-K for the year ended
December 31, 2004 (File No. 1-12579) and incorporated by reference herein).
X
X
10.05*
OGE Energy Supplemental Executive Retirement Plan, as amended and restated. (Filed as Exhibit 10.01 to
OGE Energy's Form 10-Q for the quarter ended September 30, 2019 (File No. 1-12579) and incorporated
by reference herein).
X
X
10.06*
Amendment No. 1 to the OGE Energy Corp. Supplemental Executive Retirement Plan. (Filed as Exhibit
10.01 to OGE Energy's Form 10-Q for the quarter ended June 30, 2021 (File No. 1-12579) and
incorporated by reference herein).
X
X
10.07*
OGE Energy Restoration of Retirement Income Plan, as amended and restated. (Filed as Exhibit 10.04 to
OGE Energy's Form 10-Q for the quarter ended March 31, 2008 (File No. 1-12579) and incorporated by
reference herein).
X
X
10.08*
Amendment No. 1 to OGE Energy's Restoration of Retirement Income Plan. (Filed as Exhibit 10.40 to OGE
Energy's Form 10-K for the year ended December 31, 2009 (File No. 1-12579) and incorporated by
reference herein).
X
X
10.09*
Form of Employment Agreement for all existing and future officers of OGE Energy relating to change of
control. (Filed as Exhibit 10.28 to OGE Energy's Form 10-K for the year ended December 31, 2011 (File No.
1-12579) and incorporated by reference herein).
X
X
10.10*+
OGE Energy's Director Compensation.
X
X
10.11*+
OGE Energy's Executive Officer Compensation.
X
X
10.12*
OGE Energy's 2022 Stock Incentive Plan. (Filed as Appendix B to OGE Energy's Proxy Statement for the
2022 Annual Meeting of Shareholder (File No. 1-12579) and incorporated by reference herein).
X
X
10.13*
OGE Energy's 2023 Annual Executive Incentive Compensation Plan. (Filed as Exhibit 10.14 to OGE Energy's
Form 10-K for the year ended December 31, 2022 (File No. 1-12579) and incorporated by reference
herein).
X
X
10.14*
Form of Performance Unit Agreement under OGE Energy's 2022 Stock Incentive Plan. (Filed as Exhibit
10.17 to OGE Energy's Form 10-K for the year ended December 31, 2022 (File No. 1-12579) and
incorporated by reference herein).
X
X
10.15*
Form of Restricted Stock Unit Agreement under OGE Energy's 2022 Stock Incentive Plan. (Filed as Exhibit
10.18 to OGE Energy's Form 10-K for the year ended December 31, 2022 (File No. 1-12579) and
incorporated by reference herein).
X
X
10.16*
OGE Energy Corp. Deferred Compensation Plan (As amended and restated effective October 1, 2016).
(Filed as Exhibit 10.37 to OGE Energy's Form 10-K for the year ended December 31, 2016 (File No. 1-
12579) and incorporated by reference herein).
X
X
10.17
Copy of the Settlement Agreement filed with the APSC on April 20, 2017. (Filed as Exhibit 99.02 to OGE
Energy's Form 8-K filed May 24, 2017 (File No. 1-12579) and incorporated by reference herein).
X
X
10.18
Amended and Restated Credit Agreement dated as of December 17, 2021 by and among OGE Energy
Corp. and Wells Fargo Bank, National Association, as Agent, JPMorgan Chase Bank, N.A. and Mizuho Bank,
Ltd., as Co-Syndication Agents, MUFG Union Bank, N.A., Royal Bank of Canada and U.S. Bank National
Association, as Co-Documentation Agents, and the lenders from time to time parties thereto. (Filed as
Exhibit 99.01 to OGE Energy's Form 8-K filed December 21, 2021 (File No. 1-12579) and incorporated by
reference herein).
X
10.19
First Amendment dated as of December 19, 2022, to Amended and Restated Credit Agreement dated as
of December 17, 2021, by and among OGE Energy, the Lenders thereto, Wells Fargo Bank, National
Association, as Agent, JPMorgan Chase Bank, N.A. and Mizuho Bank, Ltd., as Co-Syndication Agents, and
MUFG Bank, Ltd., Royal Bank of Canada and U.S. Bank National Association, as Co-Documentation Agents.
(Filed as Exhibit 10.01
X
116
to OGE Energy's Form 8-K filed December 19, 2022 (File No. 1-12579) and incorporated by reference
herein).
10.20
Amended and Restated Credit Agreement dated as of December 17, 2021 by and among Oklahoma Gas
and Electric Company and Wells Fargo Bank, National Association, as Agent, JPMorgan Chase Bank, N.A.
and Mizuho Bank, Ltd., as Co-Syndication Agents, MUFG Union Bank, N.A., Royal Bank of Canada and U.S.
Bank National Association, as Co-Documentation Agents, and the lenders from time to time parties
thereto. (Filed as Exhibit 99.02 to OG&E's Form 8-K filed December 21, 2021 (File No. 1-1097) and
incorporated by reference herein).
X
X
10.21
First Amendment dated as of December 19, 2022, to Amended and Restated Credit Agreement dated as
of December 17, 2021, by and among OG&E, the Lenders thereto, Wells Fargo Bank, National Association,
as Agent, JPMorgan Chase Bank, N.A. and Mizuho Bank, Ltd., as Co-Syndication Agents, and MUFG Bank,
Ltd., Royal Bank of Canada and U.S. Bank National Association, as Co-Documentation Agents. (Filed as
Exhibit 10.02 to OG&E's Form 8-K filed December 19, 2022 (File No. 1-1097) and incorporated by
reference herein).
X
X
10.22
Letter of extension dated as of December 18, 2023 for OGE Energy's and OG&E's credit agreements dated
as of December 17, 2021, as amended, by and among OGE Energy and OG&E, for their respective credit
facility, the Lenders thereto, Wells Fargo Bank, National Association, as Agent, JPMorgan Chase Bank, N.A.
and Mizuho Bank, Ltd., as Co-Syndication Agents, and MUFG Bank, Ltd., Royal Bank of Canada and U.S.
Bank National Association, as Co-Documentation Agents. (Filed as Exhibit 10.01 to OGE Energy's Form 8-K
filed December 20, 2023 (File No. 1-12579) and incorporated by reference herein).
X
X
10.23
Letter of extension dated as of December 18, 2024 for OGE Energy's and OG&E's credit agreements dated
as of December 17, 2021, as amended, by and among OGE Energy and OG&E, for their respective credit
facility, the Lenders thereto, Wells Fargo Bank, National Association, as Agent, JPMorgan Chase Bank, N.A.
and Mizuho Bank, Ltd., as Co-Syndication Agents, and MUFG Bank, Ltd., Royal Bank of Canada and U.S.
Bank National Association, as Co-Documentation Agents. (Filed as Exhibit 10.01 to OGE Energy's Form 8-K
filed December 18, 2024 (File No. 1-12579) and incorporated by reference herein).
X
X
19.01+
OGE Energy Insider Trading Policy.
X
X
21.01+
Subsidiaries of OGE Energy.
X
23.01+
Consent of Ernst & Young LLP.
X
23.02+
Consent of Ernst & Young LLP.
X
24.01+
Power of Attorney.
X
24.02+
Power of Attorney.
X
31.01+
Certifications Pursuant to Rule 13a-14(a)/15d-14(a) As Adopted Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
X
31.02+
Certifications Pursuant to Rule 13a-14(a)/15d-14(a) As Adopted Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
X
32.01+
Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
X
32.02+
Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
X
97.01
Executive Compensation Clawback Policy. (Filed as Exhibit 97.01 to OGE Energy's Form 10-K for the year
ended December 31, 2023 (File No. 1-12579) and incorporated by reference herein).
X
X
99.01
Credit Agreement dated as of June 26, 2024 by and among OGE Energy Corp., the Lenders and BOKF NA,
dba Bank of Oklahoma as Sole Administrative Agent, Sole Syndication Agent, Lead Arranger and Sole
Bookrunner (Filed as Exhibit 99.01 to OGE Energy's Form 10-Q for the quarter ended June 30, 2024 (File
No. 1-12579) and incorporated by reference herein).
X
X
99.02
Copy of the APSC Settlement Agreement approval dated May 18, 2017. (Filed as Exhibit 99.01 to OGE
Energy's Form 8-K filed May 24, 2017 (File No. 1-12579) and incorporated by reference herein).
X
X
117
99.03
Copy of the Settlement Agreement filed with the OCC on June 12, 2024. (Filed as Exhibit 99.01 to OGE
Energy's Form 8-K filed June 13, 2024 (File No. 1-12579) and incorporated by reference herein).
X
X
101.INS
Inline XBRL Instance Document - the instance document does not appear in the interactive data file
because its XBRL tags are embedded within the Inline XBRL document.
X
X
101.SCH
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents.
X
X
104
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL
document (included in Exhibit 101).
X
X
* Represents executive compensation plans and arrangements.
+ Represents exhibits filed herewith. All exhibits not so designated are incorporated by reference to a
prior filing, as indicated.
118
OGE ENERGY CORP.
OKLAHOMA GAS AND ELECTRIC COMPANY
SCHEDULE II - Valuation and Qualifying Accounts
Additions
Description
Balance at
Beginning of
Period
Charged to
Costs and
Expenses
Deductions (A)
Balance at End
of Period
(In millions)
Balance at December 31, 2022
Reserve for Uncollectible Accounts
$
2.4 $
2.8 $
3.3 $
1.9
Balance at December 31, 2023
Reserve for Uncollectible Accounts
$
1.9 $
5.7 $
5.4 $
2.2
Balance at December 31, 2024
Reserve for Uncollectible Accounts
$
2.2 $
4.0 $
4.2 $
2.0
(A)
Uncollectible accounts receivable written off, net of recoveries.
Item 16. Form 10-K Summary.
None.
119
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Oklahoma City, and State of Oklahoma on February 18th, 2025.
OGE ENERGY CORP.
(Registrant)
By /s/ Sean Trauschke
Sean Trauschke
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Sean Trauschke
Sean Trauschke
Principal Executive
Officer and Director;
February 18, 2025
/s/ Charles B. Walworth
Charles B. Walworth
Principal Financial Officer;
February 18, 2025
/s/ Sarah R. Stafford
Sarah R. Stafford
Principal Accounting Officer;
February 18, 2025
Frank A. Bozich
Director;
Peter D. Clarke
Director;
Cathy R. Gates
Director;
David L. Hauser
Director;
Luther C. Kissam, IV
Director;
Judy R. McReynolds
Director;
David E. Rainbolt
Director;
J. Michael Sanner
Director;
Sheila G. Talton
Director;
/s/ Sean Trauschke
By Sean Trauschke (attorney-in-fact)
February 18, 2025
120
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Oklahoma City, and State of Oklahoma on February 18th, 2025.
OKLAHOMA GAS AND ELECTRIC COMPANY
(Registrant)
By /s/ Sean Trauschke
Sean Trauschke
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Sean Trauschke
Sean Trauschke
Principal Executive
Officer and Director;
February 18, 2025
/s/ Charles B. Walworth
Charles B. Walworth
Principal Financial Officer;
February 18, 2025
/s/ Sarah R. Stafford
Sarah R. Stafford
Principal Accounting Officer;
February 18, 2025
Frank A. Bozich
Director;
Peter D. Clarke
Director;
Cathy R. Gates
Director;
David L. Hauser
Director;
Luther C. Kissam, IV
Director;
Judy R. McReynolds
Director;
David E. Rainbolt
Director;
J. Michael Sanner
Director;
Sheila G. Talton
Director;
/s/ Sean Trauschke
By Sean Trauschke (attorney-in-fact)
February 18, 2025
Exhibit 4.29
DESCRIPTION OF SECURITIES
The following description of the common stock of OGE Energy Corp., an Oklahoma corporation, is a summary of the general terms thereof and is
qualified in its entirety by the provisions of our certificate of incorporation, as amended and restated (the "Restated Certificate of Incorporation"), and
bylaws, as amended and restated (the "Bylaws"), copies of both of which have been filed as exhibits to our most recent Annual Report on Form 10-K filed
with the Securities and Exchange Commission, and the laws of the state of Oklahoma.
Authorized Shares
Under our Restated Certificate of Incorporation, we are authorized to issue 450,000,000 shares of common stock, par value $0.01 per share, of
which 201,148,883 shares were outstanding on January 31, 2025. We are also authorized to issue 5,000,000 shares of preferred stock, par value $0.01 per
share. No shares of preferred stock are currently outstanding. Our common stock is our only security registered under Section 12 of the Securities Exchange
Act of 1934.
Without shareholder approval, we may issue preferred stock in the future in such series as may be designated by our board of directors. In
creating any such series, our board of directors has the authority to fix the rights and preferences of each series with respect to, among other things, the
dividend rate, redemption provisions, liquidation preferences, sinking fund provisions, conversion rights and voting rights. The terms of any series of
preferred stock that we may issue in the future may provide the holders of such preferred stock with rights that are senior to the rights of the holders of our
common stock.
Dividend Rights
Before we can pay any dividends on our common stock, the holders of our preferred stock that may be outstanding are entitled to receive their
dividends at the respective rates as may be provided for the shares of their series. Currently, there are no shares of our preferred stock outstanding. Because
we are a holding company and conduct all of our operations through our subsidiary, our cash flow and ability to pay dividends will be dependent on the
earnings and cash flow of our subsidiary and the distribution or other payment of those earnings to us in the form of dividends. We expect to derive
principally all of the funds required by us to enable us to pay dividends on our common stock from dividends paid by Oklahoma Gas and Electric Company
("OG&E") on its common stock. Our ability to receive dividends on OG&E's common stock is subject to the prior rights of the holders of any OG&E preferred
stock that may be outstanding, any covenants of OG&E's certificate of incorporation and OG&E's debt instruments limiting the ability of OG&E to pay
dividends and the ability of public utility commissions that regulate OG&E to effectively restrict the payment of dividends by OG&E.
Voting Rights
Each holder of common stock is entitled to one vote per share upon all matters upon which shareowners have the right to vote and generally will
vote together as one class. Our board of directors has the authority to fix conversion and voting rights for any new series of preferred stock (including the
right to elect directors upon a failure to pay dividends), provided that no share of preferred stock can have more than one vote per share.
Our Restated Certificate of Incorporation also contains "fair price" provisions, which require the approval by the holders of at least 80 percent of
the voting power of our outstanding voting stock as a condition for mergers, consolidations, sales of substantial assets, issuances of capital stock and certain
other business combinations and transactions involving us and any substantial (10 percent or more) holder of our voting stock unless the transaction is either
approved by a majority of the members of our board of directors who are unaffiliated with the substantial holder or specified minimum price and procedural
requirements are met. The provisions summarized in the foregoing sentence may be amended only by the approval of the holders of at least 80 percent of
the voting power of our outstanding voting stock. Our voting stock consists of all outstanding shares entitled to vote generally in the election of directors and
currently consists of our common stock.
Our voting stock does not have cumulative voting rights for the election of directors. Our Restated Certificate of Incorporation and By-Laws
currently contain provisions stating that: (1) directors may be removed only with the approval of the holders of at least a majority of the voting power of our
shares generally entitled to vote; (2) any vacancy on the board of directors will be filled only by the remaining directors then in office, though less than a
quorum; (3) advance notice of introduction by shareowners of business at annual shareowner meetings and of shareowner nominations for the election of
directors must be given and that certain information must be provided with respect to such matters; (4) shareowner action may be taken only at an annual
meeting of shareowners or a
special meeting of shareowners called by the President or the board of directors; and (5) the foregoing provisions may be amended only by the approval of
the holders of at least 80 percent of the voting power of the shares generally entitled to vote. These provisions, along with the "fair price" provisions
discussed above, the business combination and control share acquisition provision discussed below, may deter attempts to cause a change in control of our
company (by proxy contest, tender offer or otherwise) and will make more difficult a change in control that is opposed by our board of directors.
Liquidation Rights
Subject to possible prior rights of holders of preferred stock that may be issued in the future, in the event of our liquidation, dissolution or winding
up, whether voluntary or involuntary, the holders of our common stock are entitled to receive the remaining assets and funds pro rata, according to the
number of shares of common stock held.
Other Provisions
Oklahoma has enacted legislation aimed at regulating takeovers of corporations and restricting specified business combinations with interested
shareholders. Under the Oklahoma General Corporation Act, a shareowner who acquires more than 15 percent of the outstanding voting shares of a
corporation subject to the statute, but less than 85 percent of such shares, is prohibited from engaging in specified “business combinations” with the
corporation for three years after the date that the shareowner became an interested stockholder. This provision does not apply if (1) before the acquisition
date the corporation's board of directors has approved either the business combination or the transaction in which the shareowner became an interested
shareowner or (2) the corporation's board of directors approves the business combination and at least two- thirds of the outstanding voting stock of the
corporation not owned by the interested shareowner vote to authorize the business combination. The term “business combination” encompasses a wide
variety of transactions with or caused by an interested shareowner in which the interested shareowner receives or could receive a benefit on other than a
pro rata basis with other shareowners, including mergers, specified asset sales, specified issuances of additional shares to the interested shareowner,
transactions with the corporation that increase the proportionate interest of the interested shareowner or transactions in which the interested shareowner
receives certain other benefits.
Oklahoma law also contains control share acquisition provisions. These provisions generally require the approval of the holders of a majority of the
corporation's voting shares held by disinterested shareowners before a person purchasing one-fifth or more of the corporation's voting shares can vote the
shares in excess of the one-fifth interest. Similar shareholder approvals are required at one-third and majority thresholds.
The board of directors may allot and issue shares of common stock for such consideration, not less than the par value thereof, as it may from time
to time determine. No holder of common stock has the preemptive right to subscribe for or purchase any part of any new or additional issue of stock or
securities convertible into stock. Our common stock is not subject to further calls or to assessment by us.
Listing
Our common stock is listed on the New York Stock Exchange.
Transfer Agent and Registrar
Computershare is the Transfer Agent and Registrar for our common stock.
Exhibit 10.10
OGE Energy Corp.
Director Compensation
Compensation of non-management directors of OGE Energy Corp. ("OGE Energy") in 2024 included an annual retainer fee of $275,000, of which
$115,000 was payable in cash in quarterly installments and $160,000 was deposited in the director's account under OGE Energy's Deferred Compensation
Plan and converted to 3,793.3 common stock units based on the closing price of OGE Energy's Common Stock on December 10, 2024. In 2024, the
independent directors did not receive additional compensation for attending Board or committee meetings but were instead paid a quarterly cash retainer.
The lead director that served in 2024 received an additional $30,000 annual cash retainer in 2024. The chair of each of the Compensation and Audit
Committees that served in 2024 received an additional $20,000 annual cash retainer in 2024. The chair of the Nominating, Corporate Governance and
Stewardship Committee that served in 2024 received an additional $15,000 annual cash retainer in 2024. Each member of the Audit Committee also received
an additional annual cash retainer of $5,000. These amounts represent the total fees paid to directors in their capacities as directors of OGE Energy and
Oklahoma Gas and Electric Company in 2024.
Under OGE Energy's Deferred Compensation Plan, non-management directors may defer payment of all or part of their quarterly and annual cash
retainer fee, which deferred amounts in 2024 were credited to their account as of the scheduled payment date. Amounts credited to the accounts are
assumed to be invested in one or more of the investment options permitted under OGE Energy's Deferred Compensation Plan. In 2024, those investment
options included an OGE Energy Common Stock fund, whose value was determined based on the stock price of OGE Energy's Common Stock. When an
individual ceases to be a director of OGE Energy, all amounts credited under OGE Energy's Deferred Compensation Plan are paid in cash in a lump sum or
installments. In certain circumstances, participants may also be entitled to in-service withdrawals from OGE Energy's Deferred Compensation Plan.
On December 3, 2024, the Compensation Committee met to consider director compensation. At that meeting, the Compensation Committee
recommended, and the Board subsequently approved, to make no changes in the annual cash retainer in 2025, and the annual equity retainer, credited on
December 10, 2024, was increased from $152,500 to $160,000.
Exhibit 10.11
OGE Energy Corp.
Executive Officer Compensation
Executive Compensation
In December 2024, the Compensation Committee of the OGE Energy Corp. ("OGE Energy") board of directors took actions setting executives' salaries
and target amount of annual incentive awards for 2025. In February 2025, the Compensation Committee took action setting executives' target amounts of
long-term compensation awards for 2025. Executive compensation was set by the Compensation Committee after consideration of, among other things,
individual performance and market-based data on compensation for executives with similar duties. Payouts of 2025 annual incentive award targets and
performance-based long-term awards are dependent on achievement of specified corporate goals established by the Compensation Committee, and no
officer is assured of any payout.
Salary
The Compensation Committee established the base salaries for its senior executive group. The salaries for 2025 for the OGE Energy officers who are
expected to be named in the Summary Compensation Table in OGE Energy's 2025 Proxy Statement are listed in the table below.
Executive Officer
2025 Base Salary
Sean Trauschke, Chairman, President and Chief Executive Officer
$1,240,762
Charles B. Walworth, Chief Financial Officer and Treasurer
$560,019
William H. Sultemeier, General Counsel, Corporate Secretary and Chief Compliance Officer
$532,917
Donnie O. Jones, Vice President - Utility Operations of OG&E
$468,187
David A. Parker, Vice President - Technology, Data and Security of OG&E
$378,602
Establishment of 2025 Annual Incentive Awards
As stated above, at its December 2024 meeting, the Compensation Committee approved the target amount of annual incentive awards, expressed as a
percentage of salary, with the officer having the ability, depending upon achievement of the 2025 corporate goals to receive from 0 percent to 200 percent
of such targeted amount. For 2025, the targeted amount ranged from 45 percent to 120 percent of the approved 2025 base salary for the executive officers
in the above table.
Establishment of Long-Term Awards
At its February 2025 meeting, the Compensation Committee approved the level of target long-term incentive awards, expressed as a percentage of
salary. For the 2025 awards granted, the targeted amount ranged from 100 percent to 400 percent of the approved 2025 base salary for the executive
officers receiving this long-term award in the above table. The performance-based portion of the long-term incentive awards allow the officer to receive from
0 percent to 200 percent of such targeted amount at the end of a three-year performance period depending upon achievement of the corporate goals. The
time-based portion of the long-term incentive awards allow the officers to receive the granted amount at the end of a three-year vesting period depending
upon continued employment.
Other Benefits
Retirement Benefits. A significant amount of OGE Energy's employees hired before December 1, 2009, including executive officers, are eligible to
participate in OGE Energy's Pension Plan and certain employees are eligible to participate in OGE Energy's Restoration of Retirement Income Plan that
enables participants, including executive officers, to receive the same benefits that they would have received under OGE Energy's Pension Plan in the
absence of limitations imposed by the federal tax laws. In addition, the supplemental executive retirement plan, which was adopted in 1993 and amended in
subsequent years, provides a supplemental executive retirement plan in order to attract and retain executives designated by the Compensation Committee
of OGE Energy's Board of Directors who may not otherwise qualify for a sufficient level of benefits under OGE Energy's Pension Plan and Restoration of
Retirement Income Plan. Mr. Trauschke is the only employee who participates in the supplemental executive retirement plan.
Almost all employees of OGE Energy, including executive officers, also are eligible to participate in our 401(k) Plan. Participants may contribute each pay
period any whole percentage between two percent and 75 percent of their compensation, as defined in the 401(k) Plan, for that pay period. Participants who
have attained age 50 before the close of a year are allowed to make additional contributions referred to as "Catch-Up Contributions," subject to certain
limitations of the Code. Participants may designate, at their
discretion, all or any portion of their contributions as: (i) a before-tax contribution under Section 401(k) of the Code subject to the limitations thereof; (ii) an
after-tax Roth contribution; or (iii) a contribution made on a non-Roth after-tax basis. The 401(k) Plan also includes an eligible automatic contribution
arrangement and provides for a qualified default investment alternative consistent with the U.S. Department of Labor regulations. Participants may elect, in
accordance with the 401(k) Plan procedures, to have his or her future salary deferral rate to be automatically increased annually on a date and in an amount
as specified by the participant in such election. For employees hired or rehired on or after December 1, 2009, OGE Energy contributes to the 401(k) Plan, on
behalf of each participant, 200 percent of the participant's contributions up to five percent of compensation. OGE Energy contribution for employees hired or
rehired before December 1, 2009 varies depending on the participant's hire date, election with respect to participation in the Pension Plan and, in some
cases, years of service.
No OGE Energy contributions are made with respect to a participant's rollover contributions or with respect to a participant's contributions based on
overtime payments, pay-in-lieu of overtime for exempt personnel, special lump-sum recognition awards and lump-sum merit awards included in
compensation for determining the amount of participant contributions. Once made, OGE Energy's contribution may be directed to any available investment
option in the 401(k) Plan. OGE Energy match contributions vest over a three-year period. After two years of service, participants become 20 percent vested in
their OGE Energy contribution account and become fully vested on completing three years of service. In addition, participants fully vest when they are
eligible for normal or early retirement under the Pension Plan, in the event of their termination due to death or permanent disability or upon attainment of
age 65 while employed by OGE Energy or its affiliates.
OGE Energy provides a nonqualified deferred compensation plan which is intended to be an unfunded plan. The plan's primary purpose is to provide a
tax-deferred capital accumulation vehicle for a select group of management, highly compensated employees and non-employee members of the Board of
Directors of OGE Energy and to supplement such employees' 401(k) Plan contributions as well as offering this plan to be competitive in the marketplace.
Eligible employees who enroll in the plan have the following deferral options: (i) eligible employees may elect to defer up to a maximum of 70 percent of
base salary and 100 percent of annual incentive awards or (ii) eligible employees may elect a deferral percentage of base salary and annual incentive awards
based on the deferral percentage elected for a year under the 401(k) Plan with such deferrals to start when maximum deferrals to the qualified 401(k) Plan
have been made because of limitations in that plan. Eligible directors who enroll in the plan may elect to defer up to a maximum of 100 percent of directors'
meeting fees and annual retainers.
OGE Energy matches employee (but not non-employee director) deferrals to make up for any match lost in the 401(k) Plan because of deferrals to the
deferred compensation plan, and to allow for a match that would have been made under the 401(k) Plan on that portion of either the first six percent of total
compensation or the first five percent of total compensation, depending on prior participant elections, deferred that exceeds the limits allowed in the 401(k)
Plan. Matching credits vest based on years of service, with full vesting after three years or, if earlier, on retirement, disability, death, a change in control of
OGE Energy or termination of the plan.
Deferrals, plus any OGE Energy match, are credited to a recordkeeping account in the participant's name. Earnings on the deferrals are indexed to the
assumed investment funds selected by the participant. In 2024, those investment options included an OGE Energy Common Stock fund, whose value was
determined based on the stock price of OGE Energy's Common Stock.
Normally, payments under the deferred compensation plan begin within one year after retirement. For these purposes, normal retirement age is 65 and
the minimum age to qualify for early retirement is age 55 with at least five years of service. Benefits will be paid, at the election of the participant, either in a
lump sum or a stream of annual payments for up to 15 years, or a combination thereof. Participants whose employment terminates before they qualify for
retirement will receive their vested account balance in one lump sum following termination as provided in the plan. Participants also will be entitled to pre-
and post-retirement survivor benefits. If the participant dies while in employment before retirement, his or her beneficiary will receive a payment of the
account balance plus a supplemental survivor benefit equal to two times the total amount of base salary and annual incentive payments deferred under the
plan. If the participant dies following retirement, his or her beneficiary will continue to receive the remaining vested account balance. Additionally, eligible
surviving spouses will be entitled to a lifetime survivor annuity payable annually. The amount of the annuity is based on 50 percent of the participant's
account balance at retirement, the spouse's age and actuarial assumptions established by OGE Energy's Plan Administration Committee.
At any time prior to retirement, a participant may withdraw all or part of amounts attributable to his or her vested account balance under the deferred
compensation plan at December 31, 2004, subject to a penalty of 10 percent of the amount withdrawn. In addition, at the time of the initial deferral election,
a participant may elect to receive one or more in-service distributions on specified dates without penalty. Hardship withdrawals, without penalty, may also
be permitted at the discretion of OGE Energy's Plan Administration Committee.
Perquisites. OGE Energy also offers executive officers a limited amount of perquisites. These include payment of social membership dues at dining and
country clubs for certain executive officers, an annual physical exam for all executive officers, a relocation program and in some instances the use of a
company car. In reviewing the perquisites and the benefits under the 401(k)
Plan, Deferred Compensation Plan, Pension Plan, Restoration of Retirement Income Plan and supplemental executive retirement plan, the Compensation
Committee seeks to provide participants with benefits at least commensurate with those offered by other utilities of comparable size.
Change-of-Control Provisions and Employment Agreements. None of OGE Energy's executive officers has an employment agreement with OGE Energy.
Each of the executive officers has a change of control agreement that becomes effective upon a change of control. If an executive officer's employment is
terminated by OGE Energy "without cause" following a change of control, the executive officer is entitled to the following payments: (i) all accrued and
unpaid compensation and a prorated annual incentive payout and (ii) a severance payment equal to 2.99 times the sum of such officer's (a) annual base
salary and (b) highest recent annual incentive payout. The change of control agreements are considered to be double trigger agreements because payment
will only be made following a change of control and termination of employment. The 2.99 times multiple for change-of-control payments was selected
because at the time it was considered standard. Although many companies also include provisions for tax gross-up payments to cover any excise taxes on
excess parachute payments, OGE Energy's Board of Directors decided not to include this additional benefit in OGE Energy's agreements. Instead, under OGE
Energy's agreements if the excise tax would be imposed, the change-of-control payments will be reduced to a point where no excise tax would be payable, if
such reduction would result in a greater after-tax payment.
In addition, pursuant to the terms of OGE Energy's incentive compensation plans, upon a change of control, all performance units will vest and be paid
out immediately in cash as if the applicable performance goals had been satisfied at target levels; all restricted stock units will vest and be paid out
immediately in cash; and any annual incentive award outstanding for the year in which the participant's termination occurs for any reason, other than cause,
within 24 months after the change of control will be paid in cash at target level on a prorated basis.
Exhibit 19.01
OGE ENERGY CORP.
AND SUBSIDIARIES
SECURITIES TRADING AND CORPORATE DISCLOSURE
PROCEDURES FOR INSIDERS
As an essential part of your duties, you may use or have access to a large amount of corporate information, some of which is highly confidential
and important to OGE Energy Corp. (“OGE Energy” or the “Company”). Those who possess or monitor confidential information hold a special position of
trust and confidence with respect to this information. The Company has an important responsibility to keep information confidential until the decision has
been made to release the information publicly. This means the information should not be discussed with your family, relatives, business or social
acquaintances. In addition, if you buy or sell OGE Energy Corp. securities on the basis of "inside information," you may be liable for insider trading. You also
may be liable if you cause others to buy or sell Company securities on the basis of inside information.
The Company's candid and timely disclosure of important information to the investing public and to the Securities and Exchange Commission (the
“SEC”) is integral to maintaining our high ethical standards, as well as necessary in order to avoid violations of laws and regulations and the resulting
potential criminal and civil penalties and stock exchange sanctions. These types of penalties may be levied against our Company for a failure to disclose, or a
failure to truthfully and completely disclose, material information to the investing public when the Company has a duty to disclose that information.
To protect against liability arising from inadequate disclosure, non-disclosure and insider trading, OGE Energy's Code of Ethics prohibits insider
trading, which is trading on the basis of material, nonpublic information. Because you have been identified as a person who is expected to have access to
confidential information on a regular or specific basis, this memorandum has been prepared to explain the procedures and emphasize your obligations when
transacting in Company securities, including, for certain designated insiders referred to as Executive Officers/Pre-Clearance Insiders, pre-clearance
procedures. These procedures also establish contacts and methods for reporting confidential information to the appropriate OGE Energy officials and for
keeping this information confidential until the Company, through its designated spokespersons, release the information to the public. The procedures
discussed below are applicable to you as a designated insider and are in addition to the prohibition on insider trading contained in the Company’s Code of
Ethics that applies to all Company directors, officers and members.
OGE Energy is committed to conducting its business in compliance with all federal and state laws, including those relating to buying or selling the
Company’s securities, and expects all of the Company members to conduct their business activities in a manner that comports with all applicable laws and
regulations, and is in compliance with all policies and rules implemented from time-to-time by the Company, including these procedures. Any deviation from
these procedures may lead to disciplinary action by management, up to and including discharge. Therefore, it is extremely important that you read,
understand and abide by these guidelines and procedures.
I.
APPLICABILITY
These procedures apply to the directors, officers, members, agents and representatives, including consultants and independent contractors, of the
Company and its subsidiaries and affiliates who are expected to have access to confidential information of the Company. These individuals are referred to as
“insiders” in these procedures. These procedures also apply to the insiders’ immediate family members and members of their households. In addition, they
apply to (a) partnerships in which any of these insiders is a general partner, (b) a corporation in which such insider owns a controlling interest, (c) a trust in
which such insider is a trustee, settlor or beneficiary, (d) an estate of which such insider is an executor or beneficiary and (e) any other group or entity for
which such insider has the power to decide whether to transact in the Company’s securities. These procedures also
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apply to any person who receives material, nonpublic information from an insider. They also apply to the securities of any other company as to which an
insider obtains material, nonpublic information as a result of his or her employment with the Company or other involvement with the Company’s business.
II.
INSIDER TRADING.
The United States federal securities laws regulate the purchase and sale of securities. These laws are intended to protect the investing public and
the integrity of the public markets. These laws are based on a fundamental belief that all persons trading in a company's securities are entitled to equal
access to "material" or important information about the company. Accordingly, OGE Energy, its officers, directors and members have a responsibility to
ensure that information about the Company is not used unfairly or unlawfully to the disadvantage of investors or potential investors in Company securities.
As a general matter, it is against the law for you to buy or sell securities while in possession of material nonpublic information (inside information)
about the Company. It is also unlawful for you to disclose this inside information to anyone who is not authorized to receive it. Therefore, the Company
prohibits any member from purchasing, selling or otherwise trading in Company securities while in possession of material information concerning the
Company that has not been disclosed to the investing public or from communicating such information to any other person. For purposes of this policy,
“trading” includes making a gift of Company securities. No insider may make a gift, place a purchase or sell order or recommend that another person place a
purchase or sell order in Company securities, including initial elections, changes in elections or reallocation of funds relating to 401(k) plan accounts, when
such person has knowledge of material, nonpublic information concerning the Company. As explained in more detail below, trades pursuant to certain pre-
established written trading plans (so-called 10b5-1 plans) are not subject to these prohibitions. These insider trading rules apply to all of the Company’s
members, not just to officers, directors or designated insiders. If you violate these laws you may be subject to harsh civil and criminal penalties, including
fines and jail time.
What is "Inside" Information?
Inside information includes anything you know or learn about the Company that has not been previously disclosed to the public. The information
may be about OGE Energy or any of OGE Energy's subsidiaries or affiliates. It also may include information you learn about another company that may
impact OGE Energy. It does not matter how you obtain the inside information. You can learn it through your job, of course, but you can also overhear it in
the elevator or in the hallways, or when another employee or insider tells you about something that he or she is working on.
What is "Material" Information?
The materiality of information depends upon the circumstances. Information is material if there is a substantial likelihood that a reasonable
investor would think that it is important in deciding whether to buy, sell or hold the Company’s securities, or if it could affect the market price of the security.
Examples of material information include:
·
Company financial or liquidity problems
·
estimates of future earnings or losses and guidance regarding those estimates
·
a proposed merger, acquisition, tender offer, sale or other significant business transaction
·
important news regarding a major lawsuit or regulatory proceeding
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·
a change in dividend policy
·
an event regarding the Company’s securities (for example, defaults on senior securities, calls for securities for
redemption, repurchase plans, stock splits, changes to rights of security holders, public or private sale of additional
securities or information related to any additional funding)
·
a stock or bond offering
·
changes in Company management
·
the gain or loss of a substantial customer
·
cybersecurity risks and incidents, including vulnerabilities and breaches – restrictions may also apply during the
period of time the Company is investigating the underlying facts, ramifications and materiality of a cybersecurity
incident
Either good or bad information may be material. You should recognize that potential plaintiffs and the courts will always examine your actions with the
benefit of hindsight if transactions in Company securities ever become the subject of scrutiny. This means that, even though at the time you did not think a
particular matter was material or that it would affect the price of securities negatively, the market may react to the news differently then you anticipated.
Therefore, before engaging in any transaction in the Company’s securities or sharing confidential information regarding the Company, you should carefully
consider how your actions may be construed in the bright light of hindsight.
What is Nonpublic Information and When Does It Becomes Public?
Nonpublic information is information that has not yet been made available to the general public by the Company. Typically, information only
becomes public when the Company makes an official announcement (in an SEC filing or in a press conference, a press release or in the newspaper, for
example) and people have had a reasonable opportunity to see or hear the announcement of the information. The circulation of rumors, even if accurate
and reported in the media, does not constitute effective public dissemination of information. Therefore, you should not buy or sell securities just before the
public announcement of important information (such as how much money the Company made last year or last quarter). It would be safe to buy or sell
securities soon after the information is officially announced, as long as you do not know of other material information that has not yet been announced.
Even after the information is announced, a reasonable period of time must elapse in order for the market to react to the information. Generally, you should
wait about three business days (days on which stocks are traded in the stock market) after the information has been announced to the public in order for the
information to be absorbed by the markets before buying or selling securities.
What is a Trading Window?
The New York Stock Exchange has suggested that trades may be appropriate during a “window period” following wide dissemination of
information on the status of the Company and current results (for example, transactions may be appropriate following release of quarterly results or after a
proxy statement or prospectus has been circulated that gives information in connection with a merger or new financing) or at those times when there is
relative stability in the company’s operations and the market for its securities.
In order to avoid even the appearance of impropriety, the Company expects that, absent unusual circumstances, your trading activities would be
limited to no more than a 30-calendar day window beginning three business days following release of quarterly results. Remember that you may not trade,
even during these window periods, if you are in possession of material nonpublic information. In addition, even during a window period, you
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are still subject to the other restrictions set forth in these procedures, including, if you are an Executive Officer/Pre-Clearance Insider, the requirement that
trades be pre-cleared. In all cases, the NYSE urges officers and directors to avoid transactions until after information regarding earnings, dividends or other
important developments has appeared in the press. Similarly, transactions just prior to important press releases should be avoided.
What Procedures Must I Follow If I Wish To Trade OGE Energy Securities?
Procedures Applicable to all Insiders. As mentioned above, you may not engage in any transaction involving Company securities, including any
offer to purchase or sell or recommendation to purchase or sell (including initial elections, changes in elections or reallocation of funds relating to 401(k)
plans), at any time in which you are in possession of material nonpublic information. The Company expects that you would limit your trading activities to the
"window periods" following the release of quarterly results discussed above.
Procedures Applicable to Pre-Clearance Insiders. In addition, because officers, directors and certain other selected individuals have, or are
expected to have, access to material nonpublic information on a regular basis as a result of their duties with OGE Energy, officers, directors and those
selected individuals (collectively referred to as “Executive Officer/Pre-Clearance Insider”) must receive clearance from the Corporate Secretary's office
before engaging in any trading involving OGE Energy securities. Please note that such clearance will remain effective for only a short period of time,
typically for seven days or the remainder of the window-period, whichever is shorter. This pre-clearance procedure is essential not only to protect the
integrity of the Company, but also to protect the Company and insiders and to avoid the potential legal liability and embarrassment the Company and an
insider might face if material developments have not been publicly disclosed.
In addition to obtaining pre-clearance, the Executive Officer/Pre-Clearance Insider should promptly notify the Corporate Secretary when the trade
has occurred and all applicable details of the transaction. The purpose of such notice is to help assure that all required reporting requirements are met. SEC
rules require reporting of director and executive officer trades within two (2) days of the transaction. As a result of recent amendments to the SEC rules, gifts
are now required to be reported on Form 4 also. In addition, you remain subject to and obligated to comply with all securities laws, including, if you are a
director or executive officer, the filing of any required Form 144’s (prior to transacting) or Section 16 reports (Forms 4 or 5) (subsequent to transacting)
whenever applicable insiders trade in securities.
Will There Be Specific Blackout Periods or Times When I May Not Trade At All?
From time to time, an event may occur that is material to the Company and is known by only a few directors or executives. So long as the event
remains material and nonpublic, the Corporate Secretary may at any time advise all members, or any group of members (for instance, insiders or those
working on a special project), that they may not trade in OGE Energy securities until notified otherwise. When that happens, no trade may be made by the
notified members even if the trade would otherwise be permitted under our Code of Ethics or these procedures. Moreover, if there is an event specific
blackout period and you are notified that no trading is permitted, you should not share the fact that you are not allowed to trade in OGE Energy securities in
any way with others.
During a pension fund blackout period, directors and executive officers generally are prohibited by federal law from transacting in securities of the
Company. The applicable regulations include a broad interpretation as to the securities covered by this restriction. A pension fund blackout period exists
whenever 50% or more of the plan participants are unable to conduct transactions in their accounts for more than three consecutive days. Blackout periods
may occur, for example, when there is a change in the plan’s trustee, record keeper or investment manager. Affected persons will be contracted when the
pension fund blackout periods are instituted and provided additional detail about the transactions that will be covered by and exempted from the blackout
trading prohibition.
5
Do These Procedures Apply to Employee Benefit Plan Transactions?
Generally, yes; however, there is an exception to this general rule: The prohibition on trading while in possession of material nonpublic
information and the requirement to pre-clear trades do not apply to acquisitions of shares pursuant to OGE Energy-sponsored compensation and benefit
plans for which the timing and number of shares acquired are not within your discretion. This would include the regular investment of your pre-tax, after-tax
or matching contributions in OGE Energy securities in the Retirement Savings Plan pursuant to pre-existing elections. This exemption does not apply to
Retirement Savings Plan or other benefit plan transactions that you as a participant initiate, such as selling restricted or option shares, switching your
investment into or out of the OGE Energy stock fund, liquidating all or part of your OGE Energy stock fund to fund a plan loan, withdrawal or distribution, or
changing your contribution/investment elections with respect to future contributions so as to affect the amount of contributions allocated to the OGE Energy
stock fund. These participant-initiated transactions are to be treated like any other OGE Energy stock transaction and are subject to these procedures
including pre-clearance, if applicable.
Are There any Other Exceptions to These Procedures?
The purchase of shares of common stock through the reinvestment of dividends under our Automatic Dividend Reinvestment and Stock Purchase
Plan is also exempt from these procedures. However, any decision to increase or decrease the level of participation in the plans or any purchase of shares
through optional cash investment is not exempt.
In addition, all trades through discretionary accounts and blind trusts, where the investment decision is made by an independent third party also
are exempt from these procedures.
What is a 10b5-1 Plan and What Procedures do I Need to Follow if I Want to Use Such a Plan?
The federal securities laws include a “safe harbor” under Rule 10b5-1, pursuant to which executive officers and others can trade during periods
that otherwise would not be during a window period, provided they demonstrate that the transaction was made as part of a predetermined, systematic
trading plan established at a time when they were not aware of any “material non-public information.” This type of plan might be useful, for instance, if you
know that you will need to make a down payment or college tuition payments and can’t be sure that the timing of those payments will match up with a
window period.
There are several conditions that must be met to ensure that your 10b5-1 Plan will satisfy the necessary conditions to be able to take advantage of
the “safe harbor,” including that the plan be in writing, that it specify the dates, prices and amounts of contemplated trades (or a formula for determining
the dates, prices, and amounts), was entered into in good faith at a time when you were not in possession of material nonpublic information about the
Company, and, to the extent required by Rule 10b5-1, contains representations in the 10b5-1 Plan certifying as to the same; and otherwise satisfies the
conditions of Rule 10b5-1. After adoption or modification of a Rule 10b5-1 Plan, an individual is subject to a waiting period (a cooling-off period) before
trades can commence. For Executive Officer/Pre-Clearance Insiders, the applicable cooling-off period is the later of (i) 90 days after the adoption of
modification of the Rule 10b5-1 Plan or (ii) two full trading days following the filing of the Form 10-Q or Form 10-K for the reporting period in which the Rule
10b5-1 Plan was adopted or modified; provided that such waiting period need not exceed 120 days after the adoption or modification of the plan. For all
other individuals, the applicable cooling-off period is 30 days after the adoption or modification of the Rule 10b5-1 Plan. In addition, the SEC recently
adopted new rules that will require the Company to include information in its SEC reports regarding the adoption of 10b5-1 Plans by executive officers and
directors.
Executive Officer/Pre-Clearance Insiders must receive clearance from the Corporate Secretary’s office before entering into any 10b5-1 Plan.
Once a 10b5-1 Plan is pre-cleared and property implemented, trades made pursuant to the terms of such plan will not require further pre-clearance and may
be made at any time, even outside the trading window.
6
What do I do if I Have Questions Regarding the Procedures for Trading?
If you have any questions regarding these procedures or you have any doubt whether a proposed transaction requires an open window period or
pre-clearance, please ask the Corporate Secretary before you trade.
Will There Be Times When I May Not Trade At All?
The Corporate Secretary may at any time advise all members, or any group of members (for instance, insiders or those working on a special
project), that they may not trade in OGE Energy securities until notified otherwise. When that happens, no trade may be made by the notified members
even if the trade would otherwise be permitted under our Code of Ethics or these procedures. Moreover, if you are notified that no trading is permitted, you
should not share the fact that you are not allowed to trade in OGE Energy securities in any way with others.
What Other Trading Restrictions Are There?
Trading Following Termination of Employment. Just because you have left the employment or Board of Directors of, or your business relationship
has otherwise ended with, the Company, you may not trade in Company securities if you are still in possession of material nonpublic information about the
Company. If your employment or board service has terminated, you should not trade Company securities until any material information you have has
become public or is no longer material.
Tipping. Insiders may be liable for communicating or tipping material nonpublic information to any third party, or “tippee.” Tippees could include
an insider’s family or household members or friends or neighbors.
Tippees inherit an insider’s duties and are liable for trading on material nonpublic information illegally tipped to them by an insider. Similarly, just
as insiders are liable for the insider trading of their tippees, so are tippees who pass the information along to others who trade. In other words, a tippee’s
liability for insider trading is no different from that of an insider. Accordingly, family members may not pass on inside information they obtain from an
insider.
Speculation. Insiders should not trade in options, warrants, puts and calls or similar instruments on Company securities or sell Company securities
“short.” In addition, insiders should not hold Company securities in margin accounts. Investing in Company securities provides an opportunity to share in the
future growth of the Company. Investment in the Company and sharing in the growth of the Company, however, does not mean short-range speculation
based on fluctuations in the market. Such activities may put the personal gain of the insiders in conflict with the best interests of the Company and its
shareholders. Insiders should also refrain from participating in on-line chat rooms, or other social media, involving the Company, its business or its securities.
Hedging Transactions. Certain forms of hedging or monetization transactions with respect to the Company’s securities, such as prepaid variable
forward contracts, equity swaps, collars and exchange funds, allow an owner of securities to lock in much of the value of his or her stock holdings, often in
exchange for all or part of the potential for upside appreciation in the stock. These transactions allow the insider to continue to own the covered securities,
but without the full risks and rewards of ownership. When that occurs, the owner may no longer have the same objectives as the Company’s other
shareholders. Therefore, these transactions are prohibited.
Trading in Securities of Other Companies. You may not place purchase or sell orders or recommend that another person place a purchase or sell
order in the securities of another company if you learned of material nonpublic information about the other company in the course of your service to, or
employment with, the Company.
7
What Are the Penalties I May Be Subject to if I Trade on Material Nonpublic Information?
Penalties for trading on or communicating material nonpublic information are severe, both for individuals involved in such unlawful conduct and,
potentially, their employers. A person can be subject to some or all of the penalties below even if he or she does not permanently benefit from the violation.
Penalties include:
•
civil injunctions;
•
treble damages;
•
disgorgement of profits gained or lost;
•
prison sentences of up to 20 years and criminal fines of up to $5 million plus, in the case of entities only, up to $25 million;
•
civil fines for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person
actually benefited;
•
fines for the employer or other controlling or supervisory person of up to the greater of $1 million or three times the amount of the
profit gained or loss avoided; and
•
criminal penalties up to 25 years in prison for knowingly executing a “scheme or artifice to defraud any person” in connection with any
registered securities.
In addition, any violation of this Policy statement can be expected to result in serious sanctions by the Company, up to and including dismissal of
the persons involved.
III.
MAINTAINING CONFIDENTIALITY.
Our ability to effectively discharge our disclosure obligations and run our business may be adversely affected by the premature or otherwise
unauthorized disclosure of sensitive information relating to OGE Energy. Thus, you should do everything you can to keep inside information confidential. In
fact, you should not talk about inside information with anyone who does not need to know it, not even with your co-workers. For example, do not discuss
confidential information with your family or friends or in places where you may be overheard, and do not leave confidential material or papers where others
can access or see them. Always secure confidential information in a safe place when you are not using it or when you leave your office or work area. You can
be prosecuted for divulging inside information to others who trade based on that information, even though you personally do not benefit financially from the
trading.
IV.
DESIGNATED SPOKESPERSONS; DISCLOSURE GUIDELINES.
The Company is committed to providing timely, orderly, consistent and credible dissemination of information, consistent with legal and regulatory
requirements, to enable orderly behavior in the stock markets. It is imperative that this continues to be accomplished evenly during both good and bad
times, and that all parties in the investment community have fair access to this information, as required by SEC Regulation FD.
8
Accordingly, the Company has designated in AD-13, Corporate Policy: Media and Financial Communications, the appropriate spokespersons for
the Company relating to media contacts or inquiries for financial and investor information. Generally, this policy provides that all financial and investor-type
inquiries from third parties, including analysts, investors, the media, the NYSE and the SEC be referred to the Director, Investor Relations. From time to time,
other officers and managers may be designated by the Chief Executive Officer or Chief Financial Officer as a spokesperson and asked to converse with the
press, analysts and others on certain matters.
V.
REPORTING INFORMATION TO COMPANY SPOKESPERSONS FOR DISCLOSURE TO THE PUBLIC.
If you become aware of "material" information concerning the Company or the market for Company securities, you should consult with the Chief
Financial Officer, the General Counsel or the Corporate Secretary. The General Counsel, the Chief Financial Officer and the Corporate Secretary will then
determine the appropriate time and manner for disclosing the information to the public.
Determining materiality is a difficult task, which depends largely on the facts of each situation. Therefore, pursuant to the procedure outlined
above, all significant corporate developments shall be reported to the Chief Financial Officer or the General Counsel.
A partial list of the types of information relating to our Company which may be considered "material" and should be reported is included above
under the caption "What is Material Information?" This list does not contain all types of information that may be considered material, and all significant
information, whether or not listed above, should be reported. Information should be reported promptly, as it develops. If the information is of immediate
significance, you should notify the Chief Financial Officer or the General Counsel at the earliest possible time, in order to facilitate prompt action.
If you have a question about anything in this memorandum or procedures, contact the Corporate Secretary (405-553-3183). Remember, if you
are an Executive Officer/Pre-clearance Insider you must obtain clearance before you buy or sell.
Please sign one copy of the attached acknowledgement and return it to the Vice-President, Governance and Corporate Secretary. You should
maintain these procedures with your Company information for future reference.
[Acknowledgement is on following page.]
9
ACKNOWLEDGEMENT
I acknowledge that I have received and read and understand the OGE Securities Trading and Corporate Disclosure Procedures for Insiders, and that
I understand and will follow the policies, procedures and guidelines set forth in it.
Acknowledged By:
(sign here)
Name:
Title:
Department:
Date:
Please sign this acknowledgement and return it to the Office of the Vice-President, Governance and Corporate Secretary, OGE Energy Corp., P.O. Box 321/MC
1110. You should maintain these procedures with your Company information for future reference.
Exhibit 21.01
OGE Energy Corp.
Subsidiaries of the Registrant
Name of Subsidiary
Jurisdiction of Incorporation
Percentage of
Ownership
Oklahoma Gas and Electric Company
Oklahoma
100.0
The above listed subsidiary has been consolidated in the Registrant's financial statements. Certain of OGE Energy's subsidiaries have been omitted from
the list above in accordance with Rule 1-02(w) of Regulation S-X.
Exhibit 23.01
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)
Registration Statement (Form S-8 No. 333-92423) pertaining to the deferred compensation plan of OGE Energy Corp.,
(2)
Registration Statement (Form S-8 No. 333-104497) pertaining to the employees' stock ownership and retirement savings plan of OGE Energy
Corp.,
(3)
Registration Statement (Form S-8 No. 333-190406) pertaining to the employees' stock ownership and retirement savings plan of OGE Energy
Corp.,
(4)
Registration Statement (Form S-3ASR No. 333-279061) pertaining to common stock and debt securities of OGE Energy Corp.,
(5)
Registration Statement (Form S-8 No. 333-266540) pertaining to the OGE Energy Corp. 2022 Stock Incentive Plan of OGE Energy Corp., and
(6)
Registration Statement (Form S-3ASR No. 333-274748) pertaining to the dividend reinvestment and stock purchase plan of OGE Energy Corp.;
of our reports dated February 18, 2025, with respect to the consolidated financial statements and schedule of OGE Energy Corp. and the effectiveness of
internal control over financial reporting of OGE Energy Corp. included in this Annual Report (Form 10-K) of OGE Energy Corp. for the year ended December
31, 2024.
/s/ Ernst & Young LLP
Oklahoma City, Oklahoma
February 18, 2025
Exhibit 23.02
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement (Form S-3ASR No. 333-279061-01) of Oklahoma Gas and Electric Company of our
reports dated February 18, 2025, with respect to the financial statements and schedule of Oklahoma Gas and Electric Company, and the effectiveness of
internal control over financial reporting of Oklahoma Gas and Electric Company, included in this Annual Report (Form 10-K) for the year ended December 31,
2024.
/s/ Ernst & Young LLP
Oklahoma City, Oklahoma
February 18, 2025
Exhibit 24.01
Power of Attorney
WHEREAS, OGE ENERGY CORP., an Oklahoma corporation (herein referred to as the "Company"), is about to file with the Securities and Exchange
Commission, under the provisions of the Securities Exchange Act of 1934, as amended, its annual report on Form 10-K for the year ended December 31,
2024; and
WHEREAS, each of the undersigned holds the office or offices in the Company herein-below set opposite his or her name, respectively;
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints SEAN TRAUSCHKE, CHARLES B. WALWORTH and SARAH R. STAFFORD and
each of them individually, his or her attorney with full power to act for him or her and in his or her name, place and stead, to sign his or her name in the
capacity or capacities set forth below to said Form 10-K and to any and all amendments thereto, and hereby ratifies and confirms all that said attorney may
or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this 18th day of February, 2025.
Sean Trauschke, Chairman, Principal
Executive Officer and Director
/s/ Sean Trauschke
Frank A. Bozich, Director
/s/ Frank A. Bozich
Peter D. Clarke, Director
/s/ Peter D. Clarke
Cathy R. Gates, Director
/s/ Cathy R. Gates
David L. Hauser, Director
/s/ David L. Hauser
Luther C. Kissam, IV
/s/ Luther C. Kissam, IV
Judy R. McReynolds, Director
/s/ Judy R. McReynolds
David E. Rainbolt, Director
/s/ David E. Rainbolt
J. Michael Sanner, Director
/s/ J. Michael Sanner
Sheila G. Talton, Director
/s/ Sheila G. Talton
Charles B. Walworth, Principal Financial
Officer
/s/ Charles B. Walworth
Sarah R. Stafford, Principal Accounting
Officer
/s/ Sarah R. Stafford
STATE OF OKLAHOMA
)
)
SS
COUNTY OF OKLAHOMA
)
On the date indicated above, before me, Kelly Hamilton-Coyer, Notary Public in and for said County and State, the above named directors and officers
of OGE ENERGY CORP., an Oklahoma corporation, known to me to be the persons whose names are subscribed to the foregoing instrument, severally
acknowledged to me that they executed the same as their own free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal on the 18th day of February, 2025.
/s/ Kelly G. Hamilton-Coyer
By: Kelly G. Hamilton-Coyer
Notary Public
My commission expires: July 6, 2025
Exhibit 24.02
Power of Attorney
WHEREAS, OKLAHOMA GAS AND ELECTRIC COMPANY, an Oklahoma corporation (herein referred to as the "Company"), is about to file with the
Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, its annual report on Form 10-K for the year
ended December 31, 2024; and
WHEREAS, each of the undersigned holds the office or offices in the Company herein-below set opposite his or her name, respectively;
NOW, THEREFORE, each of the undersigned hereby constitutes and appoints SEAN TRAUSCHKE, CHARLES B. WALWORTH and SARAH R. STAFFORD and
each of them individually, his or her attorney with full power to act for him or her and in his or her name, place and stead, to sign his or her name in the
capacity or capacities set forth below to said Form 10-K and to any and all amendments thereto, and hereby ratifies and confirms all that said attorney may
or shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands this 18th day of February, 2025.
Sean Trauschke, Chairman, Principal
Executive Officer and Director
/s/ Sean Trauschke
Frank A. Bozich, Director
/s/ Frank A. Bozich
Peter D. Clarke, Director
/s/ Peter D. Clarke
Cathy R. Gates, Director
/s/ Cathy R. Gates
David L. Hauser, Director
/s/ David L. Hauser
Luther C. Kissam, IV
/s/ Luther C. Kissam, IV
Judy R. McReynolds, Director
/s/ Judy R. McReynolds
David E. Rainbolt, Director
/s/ David E. Rainbolt
J. Michael Sanner, Director
/s/ J. Michael Sanner
Sheila G. Talton, Director
/s/ Sheila G. Talton
Charles B. Walworth, Principal Financial
Officer
/s/ Charles B. Walworth
Sarah R. Stafford, Principal Accounting
Officer
/s/ Sarah R. Stafford
STATE OF OKLAHOMA
)
)
SS
COUNTY OF OKLAHOMA
)
On the date indicated above, before me, Kelly Hamilton-Coyer, Notary Public in and for said County and State, the above named directors and officers
of OKLAHOMA GAS AND ELECTRIC COMPANY, an Oklahoma corporation, known to me to be the persons whose names are subscribed to the foregoing
instrument, severally acknowledged to me that they executed the same as their own free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal on the 18th day of February, 2025.
/s/ Kelly G. Hamilton-Coyer
By: Kelly G. Hamilton-Coyer
Notary Public
My commission expires:
July 6, 2025
Exhibit 31.01
CERTIFICATIONS
I, Sean Trauschke, certify that:
1. I have reviewed this annual report on Form 10-K of OGE Energy Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: February 18, 2025
/s/ Sean Trauschke
Sean Trauschke
Chairman of the Board, President and Chief Executive
Officer
CERTIFICATIONS
I, Charles B. Walworth, certify that:
1. I have reviewed this annual report on Form 10-K of OGE Energy Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: February 18, 2025
/s/ Charles B. Walworth
Charles B. Walworth
Chief Financial Officer and Treasurer
Exhibit 31.02
CERTIFICATIONS
I, Sean Trauschke, certify that:
1. I have reviewed this annual report on Form 10-K of Oklahoma Gas and Electric Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: February 18, 2025
/s/ Sean Trauschke
Sean Trauschke
Chairman of the Board, President and Chief Executive
Officer
CERTIFICATIONS
I, Charles B. Walworth, certify that:
1. I have reviewed this annual report on Form 10-K of Oklahoma Gas and Electric Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over
financial reporting.
Date: February 18, 2025
/s/ Charles B. Walworth
Charles B. Walworth
Chief Financial Officer and Treasurer
Exhibit 32.01
Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of OGE Energy Corp. ("OGE Energy") on Form 10-K for the year ended December 31, 2024, as filed with the
Securities and Exchange Commission (the "Report"), each of the undersigned does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of OGE Energy.
February 18, 2025
/s/ Sean Trauschke
Sean Trauschke
Chairman of the Board, President and Chief Executive
Officer
/s/ Charles B. Walworth
Charles B. Walworth
Chief Financial Officer and Treasurer
Exhibit 32.02
Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Oklahoma Gas and Electric Company ("OG&E") on Form 10-K for the year ended December 31, 2024, as filed
with the Securities and Exchange Commission (the "Report"), each of the undersigned does hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of OG&E.
February 18, 2025
/s/ Sean Trauschke
Sean Trauschke
Chairman of the Board, President and Chief Executive
Officer
/s/ Charles B. Walworth
Charles B. Walworth
Chief Financial Officer and Treasurer