OKLAHOMA GAS & ELECTRIC CO - FORM 10-Q

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EX-32.01 - EXHIBIT 32.01 - OKLAHOMA GAS & ELECTRIC CO	q32017oge10-qxex3201.htm
EX-31.01 - EXHIBIT 31.01 - OKLAHOMA GAS & ELECTRIC CO	q32017oge10-qxex3101.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission File Number: 1-1097

Oklahoma Gas and Electric Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format permitted by General Instruction H(2).

OKLAHOMA GAS AND ELECTRIC COMPANY

(Exact name of registrant as specified in its charter)



Oklahoma		73-0382390
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

321 North Harvey

P.O. Box 321

Oklahoma City, Oklahoma 73101-0321

(Address of principal executive offices)

(Zip Code)

405-553-3000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.



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

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. o

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

At September 30, 2017, there were 40,378,745 shares of 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.

OKLAHOMA GAS AND ELECTRIC COMPANY

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2017

TABLE OF CONTENTS



	Page
GLOSSARY OF TERMS	ii
FORWARD-LOOKING STATEMENTS	1

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Statements of Income and Comprehensive Income	2
Condensed Statements of Cash Flows	3
Condensed Balance Sheets	4
Condensed Statements of Changes in Stockholder's Equity	6
Notes to Condensed Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	20

Item 3. Quantitative and Qualitative Disclosures About Market Risk	34

Item 4. Controls and Procedures	34

Part II - OTHER INFORMATION
Item 1. Legal Proceedings	35

Item 1A. Risk Factors	35

Item 6. Exhibits	35

Signature	36

GLOSSARY OF TERMS

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



Abbreviation	Definition
2016 Form 10-K	Annual Report on Form 10-K for the year ended December 31, 2016
ALJ	Administrative Law Judge
APSC	Arkansas Public Service Commission
ASU	Financial Accounting Standards Board Accounting Standards Update
CO₂	Carbon dioxide
CSAPR	Cross-State Air Pollution Rule
Dry Scrubbers	Dry flue gas desulfurization units with spray dryer absorber
ECP	Environmental Compliance Plan
Enable	Enable Midstream Partners, LP, a midstream partnership formed between OGE Energy and CenterPoint Energy, Inc.
EPA	U.S. Environmental Protection Agency
FASB	Financial Accounting Standards Board
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 United States
IRP	Integrated Resource Plan
kV	Kilovolt
MATS	Mercury and Air Toxics Standards
Mustang Modernization Plan	OG&E's plan to replace the soon-to-be retired Mustang steam turbines in late 2017 and early 2018 with 462 MWs of new, efficient combustion turbines at the Mustang site
MW	Megawatt
MWh	Megawatt-hour
NAAQS	National Ambient Air Quality Standards
NO_X	Nitrogen oxide
OCC	Oklahoma Corporation Commission
OG&E	Oklahoma Gas and Electric Company, wholly-owned subsidiary of OGE Energy
OGE Energy	OGE Energy Corp., parent company of OG&E
Pension Plan	Qualified defined benefit retirement plan
ppb	Parts per billion
PUD	Public Utility Division of the Oklahoma Corporation Commission
QF	Qualified cogeneration facilities
Regional Haze Rule	The EPA's regional haze rule
Restoration of Retirement Income Plan	Supplemental retirement plan to the Pension Plan
SIP	State implementation plan
SO₂	Sulfur dioxide
SPP	Southwest Power Pool
System sales	Sales to OG&E's customers

FORWARD-LOOKING STATEMENTS

Except for the historical statements contained herein, the matters discussed in this Form 10-Q, including those matters discussed in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words "anticipate," "believe," "estimate," "expect," "intend," "objective," "plan," "possible," "potential," "project" and similar expressions. Actual results may vary materially from those expressed in forward-looking statements. In addition to the specific risk factors discussed in "Item 1A. Risk Factors" in OG&E's 2016 Form 10-K and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" herein, factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:


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


•	the ability of OG&E and OGE Energy 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 costs, operating costs, transmission costs and deferred expenditures;


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


•	business conditions in the energy industry;


•	competitive factors, including the extent and timing of the entry of additional competition in the markets served by OG&E;


•	the impact on demand for our 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 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 OG&E's markets;


•	environmental laws, safety laws or regulations that may impact the cost of operations or restrict or change the way OG&E operates its facilities;


•	changes in accounting standards, rules or guidelines;


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


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


•	creditworthiness of suppliers, customers and other contractual parties;


•	social attitudes regarding the utility industry;


•	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;


•	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-Q; and


•	other risk factors listed in the reports filed by OG&E with the Securities and Exchange Commission including those listed in "Item 1A. Risk Factors" in OG&E's 2016 Form 10-K.

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2017			2016			2017			2016
OPERATING REVENUES	$	716.8		$	743.9		$	1,759.2		$	1,728.4
COST OF SALES	255.7			269.8			696.5			645.4
OPERATING EXPENSES
Other operation and maintenance	120.2			115.2			362.8			356.3
Depreciation and amortization	76.2			80.8			204.6			235.9
Taxes other than income	21.7			20.9			64.2			63.6
Total operating expenses	218.1			216.9			631.6			655.8
OPERATING INCOME	243.0			257.2			431.1			427.2
OTHER INCOME (EXPENSE)
Allowance for equity funds used during construction	11.8			3.9			27.2			9.2
Other income	13.4			2.9			27.5			11.3
Other expense	(0.5		)	(0.8		)	(1.5		)	(2.2		)
Net other income	24.7			6.0			53.2			18.3
INTEREST EXPENSE
Interest on long-term debt	38.3			35.4			112.4			106.3
Allowance for borrowed funds used during construction	(5.2		)	(2.0		)	(12.6		)	(4.7		)
Interest on short-term debt and other interest charges	1.4			0.9			3.9			3.2
Interest expense	34.5			34.3			103.7			104.8
INCOME BEFORE TAXES	233.2			228.9			380.6			340.7
INCOME TAX EXPENSE	71.7			69.0			116.7			102.4
NET INCOME	161.5			159.9			263.9			238.3
Other comprehensive income (loss), net of tax	—			—			—			—
COMPREHENSIVE INCOME	$	161.5		$	159.9		$	263.9		$	238.3

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

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)



	Nine Months Ended September 30,
(In millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	263.9		$	238.3
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	204.6			235.9
Deferred income taxes and investment tax credits, net	120.5			92.6
Allowance for equity funds used during construction	(27.2		)	(9.2		)
Stock-based compensation expense	1.9			1.7
Regulatory assets	10.9			(10.5		)
Regulatory liabilities	(0.6		)	(9.8		)
Other assets	1.6			13.5
Other liabilities	(58.1		)	(16.6		)
Change in certain current assets and liabilities
Accounts receivable, net	(88.5		)	(49.1		)
Accrued unbilled revenues	(10.1		)	(17.5		)
Fuel, materials and supplies inventories	4.0			30.9
Fuel clause under recoveries	15.8			(0.5		)
Other current assets	24.8			(12.3		)
Accounts payable	(29.7		)	(72.8		)
Income taxes payable - parent	1.7			9.2
Fuel clause over recoveries	—			(59.9		)
Other current liabilities	(51.1		)	21.9
Net cash provided from operating activities	384.4			385.8
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (less allowance for equity funds used during construction)	(662.8		)	(466.7		)
Proceeds from sale of assets	0.4			0.3
Net cash used in investing activities	(662.4		)	(466.4		)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid on common stock	(65.0		)	(90.0		)
Proceeds from long-term debt	592.3			—
Payment of long-term debt	(125.1		)	(110.1		)
Changes in advances with parent	(124.2		)	280.7
Net cash provided from financing activities	278.0			80.6
NET CHANGE IN CASH AND CASH EQUIVALENTS	—			—
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	—			—
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	—

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

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED BALANCE SHEETS

(Unaudited)



	September 30,		December 31,
(In millions)	2017		2016
ASSETS
CURRENT ASSETS
Accounts receivable, less reserve of $1.5 and $1.5, respectively	$	261.5	$	173.0
Accrued unbilled revenues	69.8		59.7
Advances to parent	32.6		—
Fuel inventories	77.2		79.8
Materials and supplies, at average cost	78.9		80.3
Fuel clause under recoveries	35.5		51.3
Other	53.5		78.3
Total current assets	609.0		522.4
OTHER PROPERTY AND INVESTMENTS	6.0		6.6
PROPERTY, PLANT AND EQUIPMENT
In service	10,791.4		10,572.3
Construction work in progress	893.9		495.1
Total property, plant and equipment	11,685.3		11,067.4
Less accumulated depreciation	3,494.7		3,385.6
Net property, plant and equipment	8,190.6		7,681.8
DEFERRED CHARGES AND OTHER ASSETS
Regulatory assets	373.4		404.8
Other	51.9		53.8
Total deferred charges and other assets	425.3		458.6
TOTAL ASSETS	$	9,230.9	$	8,669.4

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

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED BALANCE SHEETS (Continued)

(Unaudited)



	September 30,		December 31,
(In millions)	2017		2016
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable - affiliates	$	1.0	$	0.1
Accounts payable - other	134.9		196.3
Advances from parent	—		49.9
Customer deposits	79.5		77.7
Accrued taxes	58.9		40.8
Accrued interest	38.9		40.2
Accrued compensation	21.3		31.3
Long-term debt due within one year	249.7		125.0
Other	36.2		95.8
Total current liabilities	620.4		657.1
LONG-TERM DEBT	2,749.5		2,405.8
DEFERRED CREDITS AND OTHER LIABILITIES
Accrued benefit obligations	106.9		167.7
Deferred income taxes	1,870.6		1,752.3
Regulatory liabilities	331.7		299.7
Other	138.9		134.7
Total deferred credits and other liabilities	2,448.1		2,354.4
Total liabilities	5,818.0		5,417.3
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDER'S EQUITY
Common stockholder's equity	1,026.0		1,024.1
Retained earnings	2,386.9		2,228.0
Total stockholder's equity	3,412.9		3,252.1
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	9,230.9	$	8,669.4

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

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

(Unaudited)



(In millions)	Common Stock		Premium on Common Stock		Retained Earnings			Total
Balance at December 31, 2016	$	100.9	$	923.2	$	2,228.0		$	3,252.1
Net income	—		—		263.9			263.9
Dividends declared on common stock	—		—		(105.0		)	(105.0		)
Stock-based compensation	—		1.9		—			1.9
Balance at September 30, 2017	$	100.9	$	925.1	$	2,386.9		$	3,412.9

Balance at December 31, 2015	$	100.9	$	920.9	$	2,133.9		$	3,155.7
Net income	—		—		238.3			238.3
Dividends declared on common stock	—		—		(125.0		)	(125.0		)
Stock-based compensation	—		1.7		—			1.7
Balance at September 30, 2016	$	100.9	$	922.6	$	2,247.2		$	3,270.7

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

OKLAHOMA GAS AND ELECTRIC COMPANY

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)


1.	Summary of Significant Accounting Policies

Organization

OG&E generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas. Its operations are subject to regulation by the OCC, the APSC and the FERC. OG&E was incorporated in 1902 under the laws of the Oklahoma Territory. OG&E is the largest electric utility in Oklahoma, and its franchised service territory includes 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. OG&E is a wholly-owned subsidiary of OGE Energy, an energy and energy services provider offering physical delivery and related services for both electricity and natural gas primarily in the south central United States.

Basis of Presentation

The Condensed Financial Statements included herein have been prepared by OG&E, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, OG&E believes that the disclosures are adequate to prevent the information presented from being misleading.

In the opinion of management, all adjustments necessary to fairly present the financial position of OG&E at September 30, 2017 and December 31, 2016, the results of its operations for the three and nine months ended September 30, 2017 and 2016 and its cash flows for the nine months ended September 30, 2017 and 2016 have been included and are of a normal, recurring nature except as otherwise disclosed. Management also has evaluated the impact of events occurring after September 30, 2017 up to the date of issuance of these Condensed Financial Statements, and these statements contain all necessary adjustments and disclosures resulting from that evaluation.

Due to seasonal fluctuations and other factors, OG&E's operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or for any future period. The Condensed Financial Statements and Notes thereto should be read in conjunction with the audited Financial Statements and Notes thereto included in OG&E's 2016 Form 10-K.

Accounting Records

The accounting records of OG&E are maintained in accordance with the Uniform System of Accounts prescribed by the FERC and adopted by the OCC and the APSC. Additionally, OG&E, as a regulated utility, is subject to accounting principles for certain types of rate-regulated activities, which provide that certain 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.

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



	September 30,		December 31,
(In millions)	2017		2016
Regulatory Assets
Current
Oklahoma demand program rider under recovery (A)	$	38.3	$	51.0
Fuel clause under recoveries	35.5		51.3
SPP cost tracker under recovery (A)	7.8		10.0
Other (A)	2.6		9.5
Total current regulatory assets	$	84.2	$	121.8
Non-current
Benefit obligations regulatory asset	$	189.0	$	232.6
Income taxes recoverable from customers, net	76.3		62.3
Deferred storm expenses	43.3		35.7
Smart Grid	34.7		43.2
Unamortized loss on reacquired debt	12.5		13.4
Other	17.6		17.6
Total non-current regulatory assets	$	373.4	$	404.8
Regulatory Liabilities
Current
Other (B)	$	3.3	$	12.3
Total current regulatory liabilities	$	3.3	$	12.3
Non-current
Accrued removal obligations, net	$	282.0	$	262.8
Pension tracker	40.4		35.5
Other	9.3		1.4
Total non-current regulatory liabilities	$	331.7	$	299.7


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


(B)	Included in Other Current Liabilities on the Condensed Balance Sheets.

Management continuously monitors the future recoverability of regulatory assets. When in management's judgment future recovery becomes impaired, the amount of the regulatory asset is adjusted, as appropriate. If OG&E were required to discontinue the application of accounting principles for certain types of rate-regulated activities for some or all of its operations, it could result in writing off the related regulatory assets, which could have significant financial effects.

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.

The following table summarizes changes to OG&E's asset retirement obligations during the nine months ended September 30, 2017 and 2016.



	Nine Months Ended September 30,
(In millions)	2017		2016
Balance at January 1	$	69.6	$	63.3
Accretion expense	2.3		2.1
Liabilities settled	—		(0.2		)
Revisions in estimated cash flows	2.4		—
Balance at September 30	$	74.3	$	65.2


2.	Accounting Pronouncements

Revenue from Contracts with Customers. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." The new revenue standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 2017. OG&E has assessed the effect of this new guidance on its tariff-based sales, bundled arrangements and alternative revenue program and is not aware of any issues that would have a material impact on the timing of revenue recognition. The new standard will not have a material impact on OG&E's results of operations and financial position but will change the income statement presentation of revenues and require new disclosures. OG&E does not intend to early adopt the new guidance and will implement in the first quarter of 2018 utilizing the modified retrospective transition method.

Leases. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." The main difference between current lease accounting and Topic 842 is the recognition of right-to-use assets and lease liabilities by lessees for those leases classified as operating leases under current accounting guidance. Lessees, such as OG&E, will need to recognize a right-of-use asset and a lease liability for virtually all of their leases, other than leases that meet the definition of a short-term lease. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, Topic 842 retains a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense, while finance leases will result in a front-loaded expense pattern, similar to current capital leases. Classification of operating and finance leases will be based on criteria that are largely similar to those applied in current lease guidance but without the explicit thresholds. The new guidance is effective for fiscal years beginning after December 2018. The new guidance must be adopted using a modified retrospective transition method and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. OG&E has started evaluating its current lease contracts. OG&E has not determined the amount of impact on its Condensed Financial Statements, but it anticipates an increase in the recognition of right-of-use assets and lease liabilities.

Employee Share Based Payment Accounting. In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which amends Accounting Standards Codification Topic 718, Compensation - Stock Compensation. ASU 2016-09 includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in the financial statements. The new guidance, among other requirements, requires all of the tax effects related to share-based payments at settlement (or expiration) to be recorded through the income statement. Previously, tax benefits in excess of compensation cost, or windfalls, were recorded in equity, and tax deficiencies, or shortfalls, were recorded in equity to the extent of previous windfalls and then to the income statement. Under the new guidance, the windfall tax benefit is recorded when it arises, subject to normal valuation allowance considerations. This change is required to be applied on a modified retrospective basis, with a cumulative effect adjustment to opening retained earnings. All tax-related cash flows resulting from share-based payments are to be reported as operating activities on the statement of cash flows, which is a change from the previous requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. OG&E adopted this standard in the first quarter of 2017, which resulted in no financial statement impact. Going forward, tax benefits in excess of compensation costs previously recorded in equity will be recorded within the income statement, and all tax-related cash flows resulting from share-based payments will be recorded as an operating activity within the statement of cash flows.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. In May 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The new guidance is designed to improve the reporting of pension and other postretirement benefit costs by bifurcating the components of net benefit expense between those that are attributed to compensation for service and those that are not. The service cost component of benefit expense will continue to be presented within operating income, but entities will now be required to present the other components of benefit expense as non-operating within the income statement. Additionally, the new guidance only permits the capitalization of the service cost component of net benefit expense.

The accounting change is required to be applied on a retrospective basis for the presentation of components of net benefit cost and on a prospective basis for the capitalization of only the service cost component of net benefit costs. The new guidance is effective for annual periods beginning after December 2017, including interim periods within those annual periods. Early adoption is permitted, subject to certain conditions.

OG&E believes that the impact of the change in capitalization of only the service cost component of net periodic benefit costs will be immaterial from current practice. OG&E does not intend to early adopt the new guidance and will implement the change in the first quarter of 2018.


3.	Related Party Transactions

OGE Energy charged operating costs to OG&E of $30.2 million and $30.1 million during the three months ended September 30, 2017 and 2016, respectively, and $97.9 million and $97.0 million during the nine months ended September 30, 2017 and 2016, respectively. OGE Energy charges operating costs to OG&E based on several factors. 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.

Enable provides gas transportation services to OG&E pursuant to an agreement that expires in April 2019. This transportation agreement grants Enable the responsibility of delivering natural gas to OG&E’s generating facilities and performing an imbalance service. With this imbalance service, in accordance with the cash-out provision of the contract, OG&E purchases gas from Enable when Enable’s deliveries exceed OG&E’s pipeline receipts. Enable purchases gas from OG&E when OG&E’s pipeline receipts exceed Enable’s deliveries. The following table summarizes related party transactions between OG&E and Enable during the three and nine months ended September 30, 2017 and 2016.



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2017		2016		2017			2016
Operating revenues:
Electricity to power electric compression assets	$	4.5	$	3.7	$	10.0		$	9.0
Cost of sales:
Natural gas transportation services	$	8.8	$	8.8	$	26.3		$	26.3
Natural gas purchases (sales)	0.4		4.4		(0.4		)	11.3

During the nine months ended September 30, 2017, OG&E declared dividends of $105.0 million to OGE Energy as compared to $125.0 million during the same period in 2016.


4.	Fair Value Measurements

The classification of OG&E's fair value measurements requires judgment regarding the degree to which market data is observable or corroborated by observable market data. GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value based on observable and unobservable data. The hierarchy categorizes the inputs into three levels, with the highest priority given to quoted prices in active markets for identical unrestricted assets or liabilities (Level 1), and the lowest priority given to unobservable inputs (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels defined in the fair value hierarchy are as follows:

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

Level 2 inputs are inputs other than quoted prices in active markets included within Level 1 that are either directly or indirectly observable at the reporting date for the asset or liability for substantially the full term of the asset or liability. Level 2 inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

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

OG&E had no financial instruments measured at fair value on a recurring basis at September 30, 2017 and December 31, 2016.

The fair value of OG&E's long-term debt is based on quoted market prices and estimates of current rates available for similar issues with similar maturities and is classified as Level 2 in the fair value hierarchy, with the exception of the Tinker Debt which fair value is based on calculating the net present value of the monthly payments discounted by OG&E's current borrowing rate and is classified as Level 3 in the fair value hierarchy.

The following table summarizes the fair value and carrying amount of OG&E's financial instruments at September 30, 2017 and December 31, 2016.



	September 30, 2017				December 31, 2016
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term Debt (including Long-term Debt due within one year)
Senior Notes	$	2,854.1	$	3,179.4	$	2,385.5	$	2,657.2
OG&E Industrial Authority Bonds	135.4		135.4		135.4		135.4
Tinker Debt	9.7		9.6		9.9		9.5


5.	Stock-Based Compensation

The following table summarizes OG&E's pre-tax compensation expense and related income tax benefit during the three and nine months ended September 30, 2017 and 2016 related to OGE Energy performance units and restricted stock for OG&E employees.



	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2017			2016			2017			2016
Performance units
Total shareholder return	$	0.7		$	0.5		$	2.0		$	1.5
Earnings per share	(0.6		)	(0.4		)	(0.1		)	—
Total performance units	0.1			0.1			1.9			1.5
Restricted stock	—			—			—			—
Total compensation expense	$	0.1		$	0.1		$	1.9		$	1.5
Income tax benefit	$	—		$	—		$	0.7		$	0.5

During the three and nine months ended September 30, 2017, OGE Energy issued an immaterial number of shares to satisfy restricted stock grants.


6.	Income Taxes

OG&E is a member of an affiliated group that files consolidated income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. With few exceptions, OG&E is no longer subject to U.S. Federal tax examinations by tax authorities for years prior to 2014 or state and local tax examinations by tax authorities for years prior to 2013. Income taxes are generally allocated to each company in the affiliated group based on its stand-alone taxable income or loss. Federal investment tax credits previously claimed on electric utility property have been deferred and are being amortized to income over the life of the related property. OG&E earns both Federal and Oklahoma state tax credits associated with production from its wind farms and earns Oklahoma state tax credits associated with its investments in electric generating facilities which further reduce OG&E's effective tax rate.


7.	Long-Term Debt

At September 30, 2017, OG&E was in compliance with all of its debt agreements.

Industrial Authority Bonds

OG&E has tax-exempt pollution control bonds with optional redemption provisions that allow the holders to request repayment of the bonds on any business day. The bonds, which can be tendered at the option of the holder during the next 12 months, are as follows:



SERIES			DATE DUE	AMOUNT
				(In millions)
0.65%	-	1.03%	Garfield Industrial Authority, January 1, 2025	$	47.0
0.65%	-	0.97%	Muskogee Industrial Authority, January 1, 2025	32.4
0.66%	-	0.98%	Muskogee Industrial Authority, June 1, 2027	56.0
Total (redeemable during next 12 months)				$	135.4

All of these bonds are subject to an optional tender at the request of the holders, at 100 percent of the principal amount, together with accrued and unpaid interest to the date of purchase. The bond holders, on any business day, can request repayment of the bond by delivering an irrevocable notice to the tender agent stating the principal amount of the bond, payment instructions for the purchase price and the business day the bond is to be purchased. The repayment option may only be exercised by the holder of a bond for the principal amount. When a tender notice has been received by the trustee, a third-party remarketing agent for the bonds will attempt to remarket any bonds tendered for purchase. This process occurs once per week. Since the original issuance of these series of bonds in 1995 and 1997, the remarketing agent has successfully remarketed all tendered bonds. If the remarketing agent is unable to remarket any such bonds, OG&E is obligated to repurchase such unremarketed bonds. As OG&E has both the intent and ability to refinance the bonds on a long-term basis and such ability is supported by an ability to consummate the refinancing, the bonds are classified as Long-term Debt in OG&E's Condensed Financial Statements. OG&E believes that it has sufficient liquidity to meet these obligations.

Issuance of New Long-Term Debt

In March 2017, OG&E issued $300.0 million of 4.15 percent senior notes due April 1, 2047. The proceeds from the issuance were used to repay short-term debt and were added to OG&E's general funds to be used for general corporate purposes, including to repay borrowings under the revolving credit facility, to fund the payment of OG&E's $125.0 million of 6.5 percent senior notes that matured on July 15, 2017 and to fund ongoing capital expenditures and working capital.

In August 2017, OG&E issued $300.0 million of 3.85 percent senior notes due August 15, 2047. The proceeds from the issuance were used for general corporate purposes, including to repay short-term debt, to repay borrowings under the revolving credit facility, to fund ongoing capital expenditures and for working capital.


8.	Short-Term Debt and Credit Facility

On March 8, 2017, OG&E entered into a new unsecured $450.0 million five-year revolving credit facility. The new facility is scheduled to terminate on March 8, 2022. However, OG&E has the right to request an extension of the revolving credit facility termination date under its facility for an additional one-year period, which can be exercised up to two times. All such extension requests are subject to majority lender group approval (and only the commitments of those lenders that consent to such extension (or that agree to replace any non-consenting lender) will be extended for such additional period).

Borrowings under OG&E’s new facility shall bear interest at rates equal to either the eurodollar base rate (reserve adjusted, if applicable), plus a margin of 0.69 percent to 1.275 percent, or an alternate base rate, plus a margin of 0.0 percent to 0.275 percent. OG&E’s new facility has a facility fee that ranges from 0.06 percent to 0.225 percent. Interest rate margins and facility fees are based on OG&E’s then-current senior unsecured credit ratings.

The new facility provides for issuance of letters of credit, provided that (i) the aggregate outstanding credit exposure shall not exceed the amount of the revolving credit facility and (ii) the aggregate outstanding stated amount of letters of credit issued under such facility shall not exceed a sublimit of $100.0 million. Advances under the new facility may be used to refinance existing indebtedness and for working capital and general corporate purposes, including commercial paper liquidity support, letters of credit, acquisitions and distributions.

The new facility is unsecured and, under certain circumstances, may be increased by up to $150.0 million, to a maximum revolving commitment limit of $600.0 million. Advances of revolving loans and letters of credit under the new facility are subject to certain conditions precedent, including the accuracy of certain representations and warranties and the absence of any default or unmatured default.

The new facility has a financial covenant requiring that OG&E maintain a maximum debt to capitalization ratio of 65 percent, as defined in the facility. OG&E's new facility also contains covenants which restrict, among other things, mergers and consolidations, sales of all or substantially all assets, incurrence of liens and transactions with affiliates. OG&E's new facility is subject to acceleration upon the occurrence of any default, including, among others, payment defaults on such facility, 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 the new 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.

OGE Energy's and OG&E's ability to access the commercial paper market could be adversely impacted by a credit ratings downgrade or major market disruptions. Pricing grids associated with OGE Energy's and OG&E'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 and OG&E's short-term borrowings, but a reduction in OGE Energy's and OG&E's credit ratings would not result in any defaults or accelerations. Any future downgrade of OG&E could also lead to higher long-term borrowing costs and, if below investment grade, would require OG&E to post collateral or letters of credit.

OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur up to $800.0 million in short-term borrowings at any one time for a two-year period beginning January 1, 2017 and ending December 31, 2018.


9.	Retirement Plans and Postretirement Benefit Plans

The details of net periodic benefit cost, before consideration of capitalized amounts, of OG&E's portion of OGE Energy's Pension Plan, the Restoration of Retirement Income Plan and the postretirement benefit plans included in the Condensed Financial Statements are as follows:

Net Periodic Benefit Cost



	Pension Plan												Restoration of Retirement Income Plan
	Three Months Ended						Nine Months Ended						Three Months Ended				Nine Months Ended
	September 30,						September 30,						September 30,				September 30,
(In millions)	2017 (A)			2016 (A)			2017 (B)			2016 (B)			2017 (A)		2016 (A)		2017 (B)		2016 (B)
Service cost	$	2.5		$	2.6		$	7.6		$	7.7		$	0.1	$	—	$	0.1	$	—
Interest cost	4.9			4.8			14.6			14.4			—		0.1		0.1		0.1
Expected return on plan assets	(8.2		)	(8.2		)	(24.6		)	(24.8		)	—		—		—		—
Amortization of net loss	3.2			3.1			9.7			9.3			0.1		—		0.3		0.1
Settlement	—			—			—			—			—		—		—		0.4
Net periodic benefit cost	$	2.4		$	2.3		$	7.3		$	6.6		$	0.2	$	0.1	$	0.5	$	0.6

(A)

In addition to the $2.6 million and $2.4 million of net periodic benefit cost recognized during the three months ended September 30, 2017 and 2016, respectively, OG&E recognized an increase in pension expense during the three months ended September 30, 2017 and 2016 of $2.7 million and $2.4 million, respectively, to maintain the allowable amount to be recovered for pension expense in the Oklahoma jurisdiction, which are included in the pension tracker regulatory liability (see Note 1).


(B)	In addition to the $7.8 million and $7.2 million of net periodic benefit cost recognized during the nine months ended September 30, 2017 and 2016, respectively, OG&E recognized the following:


•	an increase in pension expense during the nine months ended September 30, 2017 and 2016 of $8.5 million and $7.4 million, respectively, to maintain the allowable amount to be recovered for pension expense in the Oklahoma jurisdiction, which are included in the pension tracker regulatory liability (see Note 1);


•	a deferral of pension expense during the nine months ended September 30, 2017 of $2.3 million related to the Arkansas jurisdictional portion of the pension settlement charge of $22.4 million in 2013;


•	a deferral of pension expense during the nine months ended September 30, 2016 of $0.6 million, which includes a portion of OGE Energy's pension settlement charge, related to the pension settlement charge of $0.4 million, in accordance with the Oklahoma pension tracker regulatory liability (see Note 1); and


•	a deferral of pension expense during the nine months ended September 30, 2016 of $0.1 million, which includes a portion of OGE Energy's pension settlement charge, related to the Arkansas jurisdictional portion of the pension settlement charge of $0.4 million.



	Postretirement Benefit Plans
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2017 (B)			2016 (B)			2017 (C)			2016 (C)
Service cost	$	0.1		$	0.1		$	0.3		$	0.4
Interest cost	1.2			1.8			4.5			5.5
Expected return on plan assets	(0.5		)	(0.6		)	(1.5		)	(1.6		)
Amortization of net loss	0.5			0.6			1.3			1.9
Amortization of unrecognized prior service cost (A)	(1.0		)	(1.5		)	(1.0		)	(4.6		)
Settlement	0.4			—			0.4			—
Net periodic benefit cost	$	0.7		$	0.4		$	4.0		$	1.6


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

(B)

In addition to the $0.7 million and $0.4 million of net periodic benefit cost recognized during the three months ended September 30, 2017 and 2016, respectively, OG&E recognized an increase in postretirement medical expense of $1.9 million in both the three months ended September 30, 2017 and 2016 to maintain the allowable amount to be recovered for postretirement medical expense in the Oklahoma jurisdiction, which are included in the pension tracker regulatory liability (see Note 1).

(C)

In addition to the $4.0 million and $1.6 million of net periodic benefit cost recognized during the nine months ended September 30, 2017 and 2016, respectively, OG&E recognized an increase in postretirement medical expense in the nine months ended September 30, 2017 and 2016 of $3.9 million and $5.9 million, respectively, to maintain the allowable amount to be recovered for postretirement medical expense in the Oklahoma jurisdiction, which are included in the pension tracker regulatory liability (see Note 1).



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2017		2016		2017		2016
Capitalized portion of net periodic pension benefit cost	$	0.8	$	0.8	$	2.6	$	2.2
Capitalized portion of net periodic postretirement benefit cost	0.1		0.2		1.2		0.6

Pension Plan Funding

In August 2017, OGE Energy contributed $20.0 million to its Pension Plan, of which $4.0 million was attributed to OG&E. No additional contributions are expected in 2017.

Postretirement Benefit Plans

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.

In August 2017, OGE Energy adopted an amendment to the retiree medical plan. Effective January 1, 2018, OGE Energy will reduce the amount of supplemental Medicare coverage for Medicare-eligible retirees, providing a fixed stipend based on current market analysis in August 2017. OGE Energy will continue to allow those Medicare-eligible retirees to acquire coverage from a company-provided third-party administrator. The effect of these plan amendments is reflected in OGE Energy’s

September 30, 2017 Condensed Consolidated Balance Sheet as a reduction to the postretirement benefit obligation of $42.9 million, of which $32.1 million was attributed to OG&E.

In August 2017, OGE Energy settled the retiree life plan in its entirety and paid $26.4 million to participants in August 2017. No gain or loss was recognized upon settlement, and the effect of the settlement is reflected in OGE Energy’s September 30, 2017 Condensed Consolidated Balance Sheet as a reduction in the benefit obligation of $27.9 million and related other comprehensive income and regulatory asset of $2.1 million, of which $19.9 million was attributed to OG&E.


10.	Commitments and Contingencies

Except as set forth below, in Note 11 and under "Environmental Laws and Regulations" in Item 2 of Part I, and in Item 1 of Part II of this Form 10-Q, the circumstances set forth in Notes 12 and 13 to OG&E's Financial Statements included in OG&E's 2016 Form 10-K appropriately represent, in all material respects, the current status of OG&E's material commitments and contingent liabilities.

Public Utility Regulatory Policy Act of 1978

As previously disclosed in OG&E’s 2016 Form 10-K, OG&E has a QF contract with AES-Shady Point, Inc. ("AES") whereby OG&E purchases 100 percent of the electricity generated from AES’s 320 MW facility. The QF contract expires on January 15, 2023; however, OG&E had the option beginning in July 2017 to provide notice to AES to terminate the contract in January 2018.

On July 17, 2017, OG&E and AES amended the agreement to allow OG&E the ability, through July 17, 2018, to provide AES a termination notice that would terminate the agreement on January 15, 2019.

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 OG&E's business activities in many ways including the handling or disposal of waste material, future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions 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 its 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. Compliance with these environmental standards is expected to increase the cost of conducting business. OG&E is managing several potentially material uncertainties about the scope and timing for the acquisition, installation and operation of additional pollution control equipment and compliance costs for a variety of the EPA rules that are being challenged in court. OG&E is unable to predict the financial impact of these matters with certainty at this time. Management continues to evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a competitive market.

Air Quality Control System

On September 10, 2014, OG&E executed a contract for the design, engineering and fabrication of two circulating Dry Scrubber systems to be installed at Sooner Units 1 and 2. OG&E entered into an agreement on February 9, 2015 to install the Dry Scrubber systems. The Dry Scrubbers are scheduled to be completed by 2019. More detail regarding the ECP can be found under "Pending Regulatory Matters" in Note 11.

Other

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


11.	Rate Matters and Regulation

Except as set forth below, the circumstances set forth in Note 13 to OG&E's Financial Statements included in OG&E's 2016 Form 10-K appropriately represent, in all material respects, the current status of OG&E's regulatory matters.

Completed Regulatory Matters

Arkansas Rate Case Filing

On August 25, 2016, OG&E filed a general rate case with the APSC. The rate filing requested a $16.5 million rate increase based on a 10.25 percent return on equity. The rate increase was based on a June 30, 2016 test year and included a recovery of over $3.0 billion of electric infrastructure additions since the last Arkansas general rate case in 2011. The increase also reflects increases in operation and maintenance expenses, including vegetation management and increased recovery of depreciation and dismantlement costs.

In May 2017, the APSC approved a settlement between OG&E and the staff of the APSC and other intervenors. The settlement provides for a $7.1 million annual rate increase and a 9.5 percent return on equity on a 50.0 percent equity capital structure.

The settlement also provides that OG&E will be regulated under a formula rate rider, which should result in a more efficient process as the return on equity, depreciation rates and capital structure should not change from what is approved by the APSC in the current rate case proceeding. The formula rate rider provides for an 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 projected year. The initial term for the formula rate rider is not to exceed five years, unless additional approval is obtained from the APSC. OG&E expects to make its first filing under the Arkansas Formula Rate Rider in October 2018.

Fuel Adjustment Clause Review for Calendar Year 2015

On September 8, 2016, the OCC staff filed an application to review OG&E’s fuel adjustment clause for calendar year 2015, including the prudence of OG&E’s electric generation, purchased power and fuel procurement costs. On October 12, 2017, the OCC issued an order, finding that, for the calendar year 2015, OG&E's electric generation, purchased power and fuel procurement processes and costs were prudent.

Pending Regulatory Matters

Set forth below is a list of various proceedings pending before state or Federal regulatory agencies. Unless stated otherwise, OG&E cannot predict when the regulatory agency will act or what action the regulatory agency will take. OG&E's financial results are dependent in part on timely and adequate decisions by the regulatory agencies that set OG&E's rates.

Environmental Compliance Plan

On August 6, 2014, OG&E filed an application with the OCC for approval of its plan to comply with the EPA’s MATS and Regional Haze Rule FIP while serving the best long-term interests of customers in light of future environmental uncertainties. The application sought approval of the ECP and for a recovery mechanism for the associated costs. The ECP includes installing Dry Scrubbers at Sooner Units 1 and 2 and the conversion of Muskogee Units 4 and 5 to natural gas. The application also asked the OCC to predetermine the prudence of its Mustang Modernization Plan, which calls for replacing OG&E's soon-to-be retired Mustang steam turbines with 462 MWs of new, efficient combustion turbines at the Mustang site and approval for a recovery mechanism for the associated costs.

On December 2, 2015, OG&E received an order from the OCC denying its plan to comply with the environmental mandates of the Federal Clean Air Act, Regional Haze Rule and MATS. The OCC also denied OG&E's request for pre-approval of its Mustang Modernization Plan, revised depreciation rates for both the retirement of the Mustang units and the replacement combustion turbines and pre-approval of early retirement and replacement of generating units at its Mustang site, including cost recovery through a rider.

On February 12, 2016, OG&E filed an application requesting the OCC to issue an order approving its decision to install Dry Scrubbers at the Sooner facility. OG&E's application did not seek approval of the costs of the Dry Scrubber project. Instead, the reasonableness of the costs would be considered after the project is completed, and OG&E seeks recovery in its rates. On April 28, 2016, the OCC approved the Dry Scrubber project.

Two parties appealed the OCC's decision to the Oklahoma Supreme Court. OG&E is unable to predict what action the Oklahoma Supreme Court may take or the timing of any such action.

OG&E anticipates the total cost of Dry Scrubbers will be $542.4 million, including allowance for funds used during construction and capitalized ad valorem taxes. As of September 30, 2017, OG&E had invested $352.7 million of construction work in progress on the Dry Scrubbers. OG&E anticipates the total cost for the Mustang Modernization Plan will be $390.0 million, including allowance for funds used during construction and capitalized ad valorem taxes and expects the project to be completed in early 2018. As of September 30, 2017, OG&E had invested $306.0 million in the Mustang Modernization Plan.

Integrated Resource Plans

In October 2015, OG&E finalized the 2015 IRP and submitted it to the OCC. The 2015 IRP updated certain assumptions contained in the IRP submitted in 2014 but did not make any material changes to the ECP and other parts of the plan. Currently, OG&E is scheduled to update its IRP in Oklahoma by October 1, 2018 and in Arkansas by October 31, 2018.

Oklahoma Rate Case Filing

On December 18, 2015, OG&E filed a general rate case with the OCC requesting a rate increase of $92.5 million and a 10.25 percent return on equity based on a common equity percentage of 53 percent. The rate case was based on a June 30, 2015 test year and included recovery of $1.6 billion of electric infrastructure additions since its last general rate case in Oklahoma.

On July 1, 2016, OG&E implemented an annual interim rate increase of $69.5 million, subject to refund for amounts in excess of the rates approved by the OCC.

In December 2016, the ALJ issued a report and recommendations in the case. The ALJ's recommendations included, among other things, the use of OG&E's actual capital structure of 53.0 percent equity and 47.0 percent long-term debt and a return on equity of 9.87 percent resulting in an annual increase in OG&E's revenues of $40.7 million.

On March 20, 2017, the OCC held hearings and issued an order. The order results in an annual net increase of approximately $8.8 million in OG&E's rates to its Oklahoma retail customers. Although the order adopted certain recommendations set forth in the ALJ report, it differs in certain key respects.

The primary adjustments to the ALJ report consist of: (i) Oklahoma retail authorized rate of return on equity of 9.50 percent, (ii) depreciation expense is reduced by approximately $28.6 million from the ALJ report or $36.4 million from current rates on an annual basis, (iii) recovery of 50.0 percent of short-term incentive compensation and no recovery of long-term incentive compensation, (iv) recovery of OG&E's requested vegetation management expenses and (v) recovery of production tax credits expiring in 2017 and air quality control systems consumable costs through the fuel adjustment clause. The order maintained OG&E's existing capital structure of 53.0 percent equity and 47.0 percent long-term debt.

As a result of the March 2017 order, OG&E recorded, in the first quarter of 2017, adjustments to depreciation expense, amortization of regulatory assets and liabilities and impacts to the fuel adjustment clause effective July 1, 2016. On May 1, 2017, OG&E implemented new rates and began refunding excess amounts that it had collected in interim rates.

As of September 30, 2017, OG&E had refunded $45.6 million of the $47.5 million expected refund from the interim rate increase. Additionally, OG&E has reserved $5.6 million, pending resolution of a dispute with PUD staff, regarding recovery of certain lost revenues associated with energy efficiency incurred prior to the March 20, 2017 rate order. These lost revenues are included within the total Demand Program Rider regulatory asset balance of $38.3 million as disclosed in Note 1. OG&E is unable to predict what actions the OCC may take regarding the unrecovered lost revenue or the timing of any actions. The remaining reserve for the interim rate refund and the lost revenues reserve are included in Other Current Liabilities on OG&E's Condensed Balance Sheets.

Fuel Adjustment Clause Review for Calendar Year 2016

On August 3, 2017, the OCC staff filed an application to review OG&E's fuel adjustment clause for calendar year 2016, including the prudence of OG&E's electric generation, purchased power and fuel procurement costs. A hearing date of March 29, 2018 has been scheduled.

Mustang Modernization Plan - Arkansas

On August 15, 2017, OG&E filed for a determination with the APSC that the Mustang facility is in the public's interest. The filing does not seek recovery for any costs associated with the Mustang Modernization Plan, as request for recovery of costs will take place with the first formula rate filing expected to be made in October 2018.

Oklahoma Rate Case Filing - 2017

OG&E intends to file a general rate case in Oklahoma with the OCC during the fourth quarter of 2017. The rate case will be based on a September 30, 2017 test year.

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

Introduction

Overview

OG&E Mission and Focus

OGE Energy's mission, through OG&E and its equity interest in Enable, is to fulfill its critical role in the nation's electric utility and natural gas midstream pipeline infrastructure and meet individual customer's needs for energy and related services, focusing on safety, efficiency, reliability, customer service and risk management.

Summary of Operating Results

Three Months Ended September 30, 2017 as compared to Three Months Ended September 30, 2016

OG&E reported net income of $161.5 million and $159.9 million during the three months ended September 30, 2017 and 2016, respectively, an increase of $1.6 million, or 1.0 percent, primarily due to higher net other income and lower depreciation and amortization expense as a result of the OCC's March 2017 order mandating a reduction in depreciation rates as discussed in Note 11, partially offset by lower gross margin primarily due to milder weather, higher operation and maintenance expense and higher income tax expense.

Nine Months Ended September 30, 2017 as compared to Nine Months Ended September 30, 2016

OG&E reported net income of $263.9 million and $238.3 million during the nine months ended September 30, 2017 and 2016, respectively, an increase of $25.6 million, or 10.7 percent, primarily due to higher net other income and lower depreciation and amortization expense as a result of the OCC's March 2017 order mandating a reduction in depreciation rates, partially offset by lower gross margin primarily due to milder weather, higher income tax expense and higher operation and maintenance expense.

Recent Developments and Regulatory Matters

As discussed in Note 11, on March 20, 2017, the OCC issued an order in OG&E's general rate case. The order results in an annual net increase of approximately $8.8 million in OG&E's rates to its Oklahoma retail customers. Although the order adopted certain of the recommendations set forth in the ALJ report, it differs in certain key respects.

The primary adjustments to the ALJ report consist of: (i) Oklahoma retail authorized rate of return on equity of 9.50 percent, (ii) depreciation expense is reduced by approximately $28.6 million from the ALJ report or $36.4 million from current rates on an annual basis, (iii) recovery of only 50.0 percent of short-term incentive compensation and no recovery of long-term incentive compensation, (iv) recovery of OG&E's requested vegetation management expenses and (v) recovery of production tax credits expiring in 2017 and air quality control systems consumable costs through the fuel adjustment clause. The order maintained OG&E's existing capital structure of 53.0 percent equity and 47.0 percent long-term debt.

As a result of the March 2017 order, OG&E recorded in the first quarter of 2017 adjustments to depreciation expense, amortization of regulatory assets and liabilities and impacts to the fuel adjustment clause effective July 1, 2016. On May 1, 2017, OG&E implemented new rates and began refunding excess amounts that it had collected in interim rates.

reserve for the interim rate refund and the lost revenues reserve are included in Other Current Liabilities on OG&E's Condensed Balance Sheets.

Also as discussed in Note 11, in May 2017, the APSC approved a settlement between OG&E and the staff of the APSC and other intervenors. The settlement provides for a $7.1 million annual rate increase and a 9.5 percent return on equity on a 50.0 percent equity capital structure. The settlement also provides that OG&E will be regulated under a formula rate rider, which should result in a more efficient process as the return on equity, depreciation rates and capital structure should not change from what is approved by the APSC in the current rate case proceeding. The formula rate rider provides for an 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 projected year. The initial term for the formula rate rider is not to exceed five years, unless additional approval is obtained from the APSC. OG&E expects to make its first filing under the Arkansas Formula Rate Rider in October 2018.

2017 Outlook

OG&E projects earnings guidance to be between $300 million to $304 million of net income in 2017, changed from the previously issued earnings guidance at the low end of the earnings range of $316 million to $340 million of net income in 2017 and based on the following assumptions:


•	normal weather patterns are experienced for the remainder of the year;


•	gross margin on revenues of approximately $1.359 billion to $1.362 billion on a weather adjusted basis;


•	operating expenses of approximately $851 million to $854 million with operation and maintenance expenses approximately 57 percent of the total;


•	interest expense of approximately $140 million which assumes a $17 million allowance for borrowed funds used during construction reduction to interest expense; and


•	other income of approximately $69 million including approximately $36 million of allowance for equity funds used during construction.

Non-GAAP Financial Measures

Gross margin is defined by OG&E as operating revenues less fuel, purchased power and certain transmission expenses. Gross margin is a non-GAAP financial measure because it excludes depreciation and amortization and other operation and maintenance expenses. Expenses for fuel and purchased power are recovered through fuel adjustment clauses, and as a result, changes in these expenses are offset in operating revenues with no impact on net income. OG&E believes gross margin provides a more meaningful basis for evaluating its operations across periods than operating revenues because gross margin excludes the revenue effect of fluctuations in these expenses. Gross margin is used internally to measure performance against budget and in reports for management and the Board of Directors. OG&E's definition of gross margin may be different from similar terms used by other companies.

Reconciliation of Gross Margin to Revenue

Detailed below is a reconciliation of gross margin to revenue included in the 2017 Outlook.



(In millions)	Twelve Months Ended December 31, 2017 (A)
Operating revenues	$	2,206.0
Fuel and purchased power	846.0
Gross margin	$	1,360.0


(A)	Based on the midpoint of OG&E earnings guidance for 2017.

Results of Operations

The following discussion and analysis presents factors that affected OG&E's results of operations for the three and nine months ended September 30, 2017 as compared to the same periods in 2016 and OG&E's financial position at September 30, 2017. Due to seasonal fluctuations and other factors, OG&E's operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017 or for any future period. The following information should be read in conjunction with the Condensed Financial Statements and Notes thereto. Known trends and contingencies of a material nature are discussed to the extent considered relevant.



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(Dollars in millions)	2017		2016			2017		2016
Operating revenues	$	716.8	$	743.9		$	1,759.2	$	1,728.4
Cost of sales	255.7		269.8			696.5		645.4
Other operation and maintenance	120.2		115.2			362.8		356.3
Depreciation and amortization	76.2		80.8			204.6		235.9
Taxes other than income	21.7		20.9			64.2		63.6
Operating income	243.0		257.2			431.1		427.2
Allowance for equity funds used during construction	11.8		3.9			27.2		9.2
Other income	13.4		2.9			27.5		11.3
Other expense	0.5		0.8			1.5		2.2
Interest expense	34.5		34.3			103.7		104.8
Income tax expense	71.7		69.0			116.7		102.4
Net income	$	161.5	$	159.9		$	263.9	$	238.3
Operating revenues by classification
Residential	$	295.1	$	351.9		$	700.0	$	750.0
Commercial	174.2		188.4			450.6		434.2
Industrial	58.0		60.4			156.3		147.4
Oilfield	43.4		47.3			124.6		118.4
Public authorities and street light	60.6		66.8			159.4		154.4
Sales for resale	—		—			0.1		0.2
System sales revenues	631.3		714.8			1,591.0		1,604.6
Provision for rate refund	29.2		(21.0		)	25.0		(21.0		)
Integrated market	14.0		13.2			16.8		33.0
Other	42.3		36.9			126.4		111.8
Total operating revenues	$	716.8	$	743.9		$	1,759.2	$	1,728.4
Reconciliation of gross margin to revenue
Operating revenues	$	716.8	$	743.9		$	1,759.2	$	1,728.4
Cost of sales	255.7		269.8			696.5		645.4
Gross margin	$	461.1	$	474.1		$	1,062.7	$	1,083.0
MWh sales by classification (In millions)
Residential	2.9		3.2			6.9		7.3
Commercial	2.1		2.1			5.7		5.7
Industrial	0.9		1.0			2.7		2.8
Oilfield	0.8		0.8			2.4		2.4
Public authorities and street light	0.8		0.9			2.3		2.4
System sales	7.5		8.0			20.0		20.6
Integrated market	0.6		0.7			1.4		1.5
Total sales	8.1		8.7			21.4		22.1
Number of customers	840,519		832,234			840,519		832,234
Weighted-average cost of energy per kilowatt-hour (In cents)
Natural gas	2.747		2.688			2.795		2.366
Coal	2.049		2.222			2.100		2.251
Total fuel	2.253		2.337			2.231		2.175
Total fuel and purchased power	2.966		2.984			3.093		2.796
Degree days (A)
Heating - Actual	4		3			1,574		1,714
Heating - Normal	19		19			2,021		2,020
Cooling - Actual	1,223		1,450			1,847		2,082
Cooling - Normal	1,380		1,380			2,018		2,018


(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 one heating degree day. The daily calculations are then totaled for the particular reporting period.

OG&E's net income increased $1.6 million and $25.6 million during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The three month increase of $1.6 million, or 1.0 percent, was primarily due to higher other income, higher allowance for equity funds used during construction, lower depreciation and amortization expense as a result of the OCC's March 2017 order mandating a reduction in depreciation rates as discussed in Note 11, and higher allowance for borrowed funds used during construction, partially offset by lower gross margin, higher operation and maintenance expense, higher interest on long-term debt and higher income tax expense. The nine month increase of $25.6 million, or 10.7 percent, was primarily due to lower depreciation and amortization expense as a result of the OCC's March 2017 order mandating a reduction in depreciation rates, higher allowance for equity funds used during construction, higher other income and higher allowance for borrowed funds used during construction, partially offset by lower gross margin, higher income tax expense, higher operation and maintenance expense and higher interest on long-term debt.

Gross margin was $461.1 million and $1,062.7 million during the three and nine months ended September 30, 2017, respectively, as compared to $474.1 million and $1,083.0 million during the same periods in 2016, respectively. Gross margin decreased $13.0 million, or 2.7 percent, and $20.3 million, or 1.9 percent, during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The below factors contributed to the change in gross margin:



	Change for
	September 30, 2017
(In millions)	Three Months Ended			Nine Months Ended
Weather (price and quantity) (A)	$	(14.9	)	$	(29.3	)
Price variance (B)	(7.3		)	(13.4		)
Other	(0.4		)	0.1
New customer growth	6.4			12.1
Wholesale transmission revenue	1.7			4.4
Non-residential demand and related revenues	0.9			3.6
Industrial and oilfield sales	0.6			2.2
Change in gross margin	$	(13.0	)	$	(20.3	)


(A)	Cooling degree days decreased approximately 16 percent during the three months ended September 30, 2017. Cooling degree days decreased approximately 11 percent, and heating degree days decreased approximately eight percent during the nine months ended September 30, 2017.


(B)	Decreased primarily due to riders moving to base rates in the March 2017 OCC order.

Cost of sales for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. The actual cost of fuel used in electric generation and certain purchased power costs are passed through to 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 cost of sales decreased $14.1 million, or 5.2 percent, and increased $51.1 million, or 7.9 percent, during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The changes are detailed in the table below.



	Change for
	September 30, 2017
(In millions)	Three Months Ended			Nine Months Ended
Fuel expense (A)	$	(22.9	)	$	(6.9	)
Purchased power costs
Purchases from SPP (B)	9.9			50.5
Wind	(2.6		)	0.2
Cogeneration	(3.6		)	(7.5		)
Transmission expense (C)	5.1			14.8
Change in cost of sales	$	(14.1	)	$	51.1


(A)	Decrease in fuel expense was primarily due to decreased utilization of company-owned generation.

(B)

Increase of $9.9 million in the cost of purchases from the SPP for the three months ended September 30, 2017 was due to a 51.1 percent increase in MWhs purchased offset by a decrease of 17.3 percent in cost per MWh purchased. The decrease in cost per MWh purchased was due to a decrease in fuel prices. Increase of $50.5 million in the cost of purchases from the SPP for the nine months ended September 30, 2017 was due to an increase of 5.9 percent in MWh purchased and an increase of 29.8 percent in cost per MWhs purchased. The increase in cost per MWh purchased was due to an increase in fuel prices and higher grid congestion costs during 2017.


(C)	Increase in transmission-related charges was primarily due to higher SPP charges for the base plan projects of other utilities.

Other operation and maintenance expense increased $5.0 million, or 4.3 percent, and $6.5 million, or 1.8 percent, during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016. The below factors contributed to the changes in other operation and maintenance expense:



	Change for
	September 30, 2017
(In millions)	Three Months Ended			Nine Months Ended
Vegetation management	$	6.1		$	5.7
Other	0.5			6.9
Capitalized labor (A)	(1.6		)	(6.1		)
Change in other operation and maintenance expense	$	5.0		$	6.5


(A)	Increased during the three months ended September 30, 2017 primarily due to mutual assistance, which was provided during the aftermath of natural disasters. Increased during the nine months ended September 30, 2017 primarily due to more storm costs exceeding the $2.7 million OCC-allowed threshold, which were moved to a regulatory asset, as well as mutual assistance.

Depreciation and amortization expense decreased $4.6 million, or 5.7 percent, and $31.3 million, or 13.3 percent, for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016, primarily due to lower depreciation expense related to the reduction in depreciation rates approved in the OCC's March 2017 order as discussed in Note 11, partially offset by additional assets being placed into service.

Allowance for equity funds used during construction increased $7.9 million and $18.0 million during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016, primarily due to higher construction work in progress balances resulting from increased spending for environmental projects.

Other income increased $10.5 million and $16.2 million during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016, primarily due to an increase in the tax gross-up related to higher allowance for funds used during construction and an increase in gains on guaranteed flat bill margins.

Allowance for borrowed funds used during construction increased $3.2 million and $7.9 million during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016, primarily due to higher construction work in progress balances resulting from increased spending for environmental projects.

Income tax expense increased $2.7 million, or 3.9 percent, and $14.3 million, or 14.0 percent, during the three and nine months ended September 30, 2017, respectively, as compared to the same periods in 2016, primarily due to higher pre-tax income.

Off-Balance Sheet Arrangements

There have been no significant changes in OG&E's off-balance sheet arrangements from those discussed in OG&E's 2016 Form 10-K.

Liquidity and Capital Resources

Working Capital

Working capital is defined as the difference in current assets and current liabilities. OG&E'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 customers, the level and timing of spending for maintenance and expansion activity, inventory levels and fuel recoveries.

Accounts Receivable and Accrued Unbilled Revenues. The balance of Accounts Receivable and Accrued Unbilled Revenues was $331.3 million and $232.7 million at September 30, 2017 and December 31, 2016, respectively, an increase of $98.6 million, or 42.4 percent, primarily due to an increase in billings to OG&E's retail customers reflecting higher usage due to warmer weather in September 2017 as compared to December 2016.

Advances to Parent/Advances from Parent. The balance in Advances to Parent was $32.6 million at September 30, 2017 compared to an Advances from Parent balance of $49.9 million at December 31, 2016. The change in Advances with Parent is primarily due to an increase of cash from customers due to increased rates and long-term debt issued in 2017, partially offset by daily operational expenses and capital expenditures.

Fuel Clause Under Recoveries. The balance of Fuel Clause Under Recoveries was $35.5 million and $51.3 million at September 30, 2017 and December 31, 2016, respectively, a decrease of $15.8 million, or 30.8 percent, primarily due to higher recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power.

Other Current Assets. The balance of Other Current Assets was $53.5 million and $78.3 million at September 30, 2017 and December 31, 2016, respectively, a decrease of $24.8 million, or 31.7 percent, primarily due to increased revenue collections from customers associated with various rate riders.

Accounts Payable. The balance of Accounts Payable was $135.9 million and $196.4 million at September 30, 2017 and December 31, 2016, respectively, a decrease of $60.5 million, or 30.8 percent, primarily due to the timing of vendor payments.

Accrued Taxes. The balance of Accrued Taxes was $58.9 million and $40.8 million at September 30, 2017 and December 31, 2016, respectively, an increase of $18.1 million, or 44.4 percent, primarily resulting from ad valorem tax accruals offset by payments.

Accrued Compensation. The balance of Accrued Compensation was $21.3 million and $31.3 million at September 30, 2017 and December 31, 2016, respectively, a decrease of $10.0 million, or 31.9 percent, primarily due to the payment of 2016 incentive compensation in 2017, partially offset by 2017 accruals.

Long-Term Debt Due Within One Year. The balance of Long-term Debt Due Within One Year was $249.7 million and $125.0 million at September 30, 2017 and December 31, 2016, respectively, an increase of $124.7 million, or 99.8 percent, primarily due to the reclassification of long-term debt that will mature on September 1, 2018.

Other Current Liabilities. The balance of Other Current Liabilities was $36.2 million and $95.8 million at September 30, 2017 and December 31, 2016, respectively, a decrease of $59.6 million, or 62.2 percent, primarily due to amounts refunded to customers in 2017.

Cash Flows



	Nine Months Ended
	September 30,						2017 vs. 2016
(In millions)	2017			2016			$ Change			% Change
Net cash provided from operating activities	$	384.4		$	385.8		$	(1.4	)	(0.4	)%
Net cash used in investing activities	(662.4		)	(466.4		)	(196.0		)	42.0	%
Net cash provided from financing activities	278.0			80.6			197.4			*

Operating Activities

The decrease of $1.4 million, or 0.4 percent, in net cash provided from operating activities during the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily due to an increase in vendor payments, partially offset by increased amounts received from customers.

Investing Activities

The increase of $196.0 million, or 42.0 percent, in net cash used in investing activities during the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily due to an increase in capital expenditures related to environmental projects.

Financing Activities

The increase of $197.4 million in net cash provided from financing activities during the nine months ended September 30, 2017 as compared to the same period in 2016 was primarily due to the issuance of $300.0 million in long-term debt in March 2017 and the issuance of $300.0 million in long-term debt in August 2017, partially offset by changes in cash advances with parent.

Future Capital Requirements

OG&E's primary needs for capital are related to acquiring or constructing new facilities and replacing or expanding existing facilities. Other working capital requirements are expected to be primarily related to maturing debt, operating lease obligations, fuel clause under and over recoveries and other general corporate purposes. OG&E generally meets its cash needs through a combination of cash generated from operations, short-term borrowings (through a combination of bank borrowings, commercial paper and borrowings from OGE Energy) and permanent financings.

Capital Expenditures

OG&E's estimates of capital expenditures for the years 2017 through 2021 are shown in the following table. These capital expenditures represent the base maintenance capital expenditures (i.e., capital expenditures to maintain and operate OG&E's business) plus capital expenditures for known and committed projects.



(In millions)	2017		2018		2019		2020		2021
OG&E Base Transmission	$	35	$	30	$	30	$	30	$	30
OG&E Base Distribution	200		175		175		175		175
OG&E Base Generation	35		75		75		75		75
OG&E Other	45		25		25		25		25
Total Base Transmission, Distribution, Generation and Other	315		305		305		305		305
OG&E Known and Committed Non-Base Projects:
Transmission Projects:
Other Regionally Allocated Projects (A)	50		30		20		20		20
Large SPP Integrated Transmission Projects (B) (C)	140		20		—		—		—
Total Transmission Projects	190		50		20		20		20
Other Projects:
Solar	15		—		—		—		—
Environmental - low NO_X burners (D)	15		—		—		—		—
Environmental - Dry Scrubbers (D)	160		95		15		—		—
Combustion turbines - Mustang	145		30		—		—		—
Environmental - natural gas conversion (D)	10		35		15		—		—
Allowance of funds used during construction and ad valorem taxes	55		40		5		—		—
Total Other Projects	400		200		35		—		—
Total Known and Committed Non-Base Projects	590		250		55		20		20
Total	$	905	$	555	$	360	$	325	$	325


(A)	Typically 100kV to 299kV projects. Approximately 30 percent of revenue requirement allocated to SPP members other than OG&E.


(B)	Typically 300kV and above projects. Approximately 85 percent of revenue requirement allocated to SPP members other than OG&E.



(C)	Project Type	Project Description	Estimated Cost (In millions)	Projected In-Service Date
	Integrated Transmission Project	30 miles of transmission line from OG&E's Gracemont substation to an AEP companion transmission line to its Elk City substation. $5.0 million of the estimated cost has been spent prior to 2017.	$45	Late 2017
	Integrated Transmission Project	126 miles of transmission line from OG&E's Woodward District Extra High Voltage substation to OG&E's Cimarron substation and construction of the Mathewson substation on this transmission line. $50.0 million of the estimated cost associated with the Mathewson to Cimarron line and substations went into service in 2016; $55.0 million has been spent prior to 2017.	$160	Mid 2018


(D)	Represent capital costs associated with OG&E’s ECP to comply with the EPA’s MATS and Regional Haze Rule. More detailed discussion regarding the Regional Haze Rule and OG&E’s ECP can be found in Note 11 and under "Environmental Laws and Regulations" within "Management's Discussion and Analysis of Financial Condition and Results of Operations" under Part I, Item 2 of this Form 10-Q.

Additional capital expenditures beyond those identified in the table above, including additional incremental growth opportunities in electric transmission assets, will be evaluated based on their impact on OG&E's financial objectives.

Financing Activities and Future Sources of Financing

Management expects that cash generated from operations, proceeds from the issuance of long- and short-term debt and funds received from OGE Energy (proceeds from OGE Energy's other offerings) will be adequate over the next three years to meet anticipated cash needs and to fund future growth opportunities. OG&E utilizes short-term borrowings (through a combination of bank borrowings, commercial paper and borrowings from OGE Energy) 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 Facility

At September 30, 2017, there was $32.6 million in advances to OGE Energy compared to $49.9 million in advances from OGE Energy at December 31, 2016. OG&E has an intercompany borrowing agreement with OGE Energy whereby OG&E has access to up to $350.0 million of OGE Energy's revolving credit amount. This agreement has a termination date of March 8, 2022. At September 30, 2017, there were no intercompany borrowings under this agreement. On March 8, 2017, OG&E entered into a new $450.0 million revolving credit facility which 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. At September 30, 2017, there were $0.3 million supporting letters of credit at a weighted-average interest rate of 0.95 percent. There were no outstanding commercial paper borrowings at September 30, 2017. At September 30, 2017, OG&E had $449.7 million of net available liquidity under its revolving credit agreement. OG&E has the necessary regulatory approvals to incur up to $800.0 million in short-term borrowings at any one time for a two-year period beginning January 1, 2017 and ending December 31, 2018. See Note 8 for a discussion of OG&E's short-term debt activity.

Issuance of New Long-Term Debt

Security Ratings

Access to reasonably priced capital is dependent in part on credit and security ratings. Generally, lower ratings lead to higher financing costs. Pricing grids associated with OGE Energy's and OG&E'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 and OG&E's short-term borrowings, but a reduction in OGE Energy's and OG&E's credit ratings would not result in any defaults or accelerations. Any future downgrade of OGE Energy or OG&E could also lead to higher long-term borrowing costs and, if below investment grade, would require OG&E 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.

On June 29, 2017, Moody's Investors Service ("Moody's") revised the rating outlooks on OGE Energy and OG&E from stable to negative. Moody's indicated that the revised outlooks reflect the potential for a decline in financial metrics amidst some uncertainty over cost recovery and earned returns in Oklahoma. The revised outlooks did not trigger any collateral requirements or change fees under the revolving credit agreements.

Critical Accounting Policies and Estimates

The Condensed Financial Statements and Notes to Condensed Financial Statements contain information that is pertinent to Management's Discussion and Analysis. In preparing the Condensed Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the Condensed Financial Statements and the reported amounts of revenues and expenses during the reporting period. Changes to these assumptions and estimates could have a material effect on OG&E's Condensed Financial Statements. However, OG&E believes it has taken reasonable positions where assumptions and estimates are used in order to minimize the negative financial impact to OG&E that could result if actual results vary from the assumptions and estimates.

In management's opinion, the areas of OG&E where the most significant judgment is exercised include the determination of Pension Plan assumptions, income taxes, contingency reserves, asset retirement obligations and depreciable lives of property, plant and equipment, the determination of regulatory assets and liabilities and unbilled revenues. The selection, application and disclosure of OG&E's critical accounting estimates have been discussed with OGE Energy's Audit Committee and are discussed in detail in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in OG&E's 2016 Form 10-K.

Commitments and Contingencies

In the normal course of business, OG&E is confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to assess the claim. If, in management's opinion, OG&E has incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the appropriate accounting entries are reflected in OG&E's Condensed Financial Statements. At the present time, based on available information, OG&E believes that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to its financial statements and would not have a material adverse effect on OG&E's financial position, results of operations or cash flows. See Notes 10 and 11 for a discussion of OG&E's 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 OG&E's business activities in many ways, including the handling or disposal of waste material, future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions 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. OG&E believes that its operations are in substantial compliance with current Federal, state and local environmental standards. These environmental laws and regulations are discussed in detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in OG&E's 2016 Form 10-K.

Air

Federal Clean Air Act Overview

OG&E’s operations are subject to the Federal Clean Air Act 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 will likely 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.

Regional Haze Control Measures

The EPA's 2005 Regional Haze Rule is intended to protect visibility in certain national parks and wilderness areas throughout the United States that may be impacted by air pollutant emissions. On December 28, 2011, the EPA issued a final Regional Haze Rule for Oklahoma which adopted a FIP for SO₂ emissions at Sooner Units 1 and 2 and Muskogee Units 4 and 5. The FIP compliance date is now January 4, 2019 as a result of the appeal filed by OG&E and others.

OG&E's current strategy for satisfying the FIP includes installing Dry Scrubbers at Sooner Units 1 and 2 and the conversion of Muskogee Units 4 and 5 to natural gas. As described in Note 11, the OCC has approved OG&E's decision to install Dry Scrubbers at the Sooner Units. As of September 30, 2017, OG&E has incurred $352.7 million of construction work in progress on the Dry Scrubbers.

Cross-State Air Pollution Rule

In August 2011, the EPA finalized its CSAPR that required 27 states in the eastern half of the United States to reduce power plant emissions that contribute to ozone and particulate matter pollution in other states. Litigation challenging the rule prevented it from entering into effect until 2014. Several parties to that litigation, including OG&E, have petitions for review that remain pending although the rule is now effective. Compliance with the CSAPR began in 2015 using the amount of allowances originally scheduled to be available in 2012. As of September 30, 2017, OG&E has installed seven low NO_X burner systems on two Muskogee units, two Sooner units and three Seminole units and is in compliance.

On September 7, 2016, the EPA finalized an update to the 2011 CSAPR. The new rule applies to ozone-season NO_X in 22 eastern states (including Oklahoma), utilizes a cap and trade program for NO_X emissions and took effect on May 1, 2017. The rule reduces the 2016 CSAPR emissions cap for all seven of OG&E's coal and gas facilities by 47 percent combined. On December 23, 2016, OG&E filed a petition for reconsideration of the 2016 rule with the EPA. OG&E is asking the agency to reconsider the methodology used to calculate state ozone-season emissions budgets. OG&E's petition, along with the petitions for reconsideration filed by various other parties, is currently pending. Also on December 23, 2016, OG&E filed a petition for review of the 2016 rule in the United States Court of Appeals for the District of Columbia Circuit, asking the court to set aside the rule on the grounds that it is arbitrary, capricious, an abuse of the EPA's discretion and not otherwise in accordance with the law. OG&E's case has been consolidated with several other petitions for review, all of which are currently pending.

Due to pending litigation and administrative proceedings, the ultimate timing and impact of the 2016 CSAPR update rule on our operations cannot be determined with certainty at this time. However, OG&E does not expect that the reduced emissions cap, if upheld, will have a material impact on OG&E's financial position, results of operations or cash flows.

Hazardous Air Pollutants Emission Standards

On February 16, 2012, the EPA published the final MATS rule regulating the emissions of certain hazardous air pollutants from electric generating units, which became effective April 16, 2012. OG&E believes that it complied with the MATS rule by the April 16, 2016 deadline that applied to OG&E. Nonetheless, there is continuing litigation, to which OG&E is not a party, challenging whether the EPA had statutory authority to issue the MATS rule.

National Ambient Air Quality Standards

The EPA is required to set NAAQS for certain pollutants considered to be harmful to public health or the environment. The Clean Air Act requires the EPA to review each NAAQS every five years. As a result of these reviews, the EPA periodically has taken action to adopt more stringent NAAQS for those pollutants. If any areas of Oklahoma were to be designated as not attaining the NAAQS for a particular pollutant, OG&E could be required to install additional emission controls on its facilities to help the state achieve attainment with the NAAQS. As of September 30, 2017, no areas of Oklahoma had been designated as non-attainment for pollutants that are likely to affect OG&E's operations. Several processes are under way to designate areas in Oklahoma as attaining or not attaining revised NAAQS. OG&E is monitoring those processes and their possible impact on its operations but, at this time, cannot determine with any certainty whether they will cause a material impact to OG&E's financial results.

The EPA proposed to designate part of Muskogee County, in which OG&E's Muskogee Power Plant is located, as non-attainment for the 2010 SO₂ NAAQS on March 1, 2016, even though nearby monitors indicate compliance with the NAAQS. The proposed designation is based on modeling that does not reflect the planned conversion of two of the coal units at Muskogee to natural gas. OG&E commented that the EPA should defer a designation of the area to allow time for additional monitoring. The EPA has a deadline for making a decision on the designation pursuant to a consent decree entered by the U.S. District Court for the Northern District of California to resolve a citizen suit. The deadline has been extended several times, with the latest deadline being August 26, 2017, but a decision has yet to be reached. The EPA has published final decisions on all but two other areas of Oklahoma. In this decision, Noble County, in which the Sooner plant is located, was deemed to be in unclassifiable attainment with the 2010 standard. At this time, OG&E cannot determine with any certainty whether any of these determinations will cause a material impact to OG&E's financial results.

On September 30, 2015, the EPA finalized a NAAQS for ozone at 70 ppb, which is more stringent than the previous standard of 75 ppb set in 2008. In September 2016, Governor Mary Fallin submitted to the EPA the recommendation of "attainment/unclassifiable" for all 77 counties in Oklahoma. This recommendation is subject to approval by the EPA.

OG&E is monitoring those processes and their possible impact on its operations but, at this time, cannot determine with any certainty whether they will cause a material impact to OG&E's financial results.

Climate Change and Greenhouse Gas Emissions

There is continuing discussion and evaluation of possible global climate change in certain regulatory and legislative arenas. The focus is generally on emissions of greenhouse gases, including CO₂, sulfur hexafluoride and methane and whether these emissions are contributing to the warming of the earth's atmosphere. On June 1, 2017, President Trump announced that the U.S. will withdraw from the Paris Climate Accord and begin negotiations to re-enter the agreement with different terms. The new agreement may result in future additional emissions reductions in the United States; however, it is not possible to determine what the international legal standards for greenhouse gas emissions will be in the future and the extent to which these commitments will be implemented through the Clean Air Act, or any other existing statutes and new legislation.

If legislation or regulations are passed at the Federal or state levels in the future requiring mandatory reductions of CO₂ and other greenhouse gases on 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. Several states outside the area where OG&E operates have passed laws, adopted regulations or undertaken regulatory initiatives to reduce the emission of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs.

On October 23, 2015, the EPA published the final Clean Power Plan that established standards of performance for CO₂ emissions from existing fossil-fuel-fired power plants along with state-specific CO₂ reduction standards expressed as both rate-based (lbs/MWh) and mass-based (tons/yr) goals. The 2030 rate-based reduction requirement for all existing generating units in Oklahoma has decreased from a proposed 43 percent reduction to 32 percent in the final rule. The mass-based approach for existing units calls for a 24 percent reduction by 2030 in Oklahoma. However, the rule was challenged in court when it was issued, and the U.S. Supreme Court issued orders staying implementation of the Clean Power Plan on February 9, 2016 pending resolution of the court challenges. In addition, the EPA published a proposal on October 16, 2017 to repeal the Clean Power Plan. Due to the pending litigation and the uncertainties created by the proposed repeal of the rule, it is increasingly unlikely that the Clean Power Plan will be implemented as it was issued in 2015, and the ultimate timing and impact of these standards on OG&E's operations cannot be determined with certainty at this time, although the standards ultimately could result in significant additional compliance costs that would affect its future consolidated financial position, results of operations and cash flows if such costs are not recovered through regulated rates.

Nonetheless, OG&E’s current business strategy will result in a reduced carbon emissions rate compared to current levels. As discussed in "Pending Regulatory Matters" in Note 11, OG&E's plan to comply with the EPA’s MATS and Regional Haze Rule FIP includes converting two coal-fired generating units at Muskogee Station to natural gas, among other measures. OG&E’s deployment of Smart Grid technology helps to reduce the peak load demand. OG&E also seeks to utilize renewable energy sources that do not emit greenhouse gases. OG&E's service territory borders one of the nation's best wind resource areas. OG&E has leveraged its geographic position to develop renewable energy resources and completed transmission investments to deliver the renewable energy. The SPP has begun to authorize the construction of transmission lines capable of bringing renewable energy out of the wind resource area in western Oklahoma, the Texas Panhandle and western Kansas to load centers by planning for more transmission to be built in the area. In addition to increasing overall system reliability, these new transmission resources should provide greater access to additional wind resources that are currently constrained due to existing transmission delivery limitations.

EPA Startup, Shutdown and Malfunction Policy

On May 22, 2015, the EPA issued a final rule to address the outdated provisions in the SIPs of 36 states, including Oklahoma, regarding the treatment of emissions that occur during startup, shutdown and malfunction operations. The final rule clarifies the EPA's Startup, Shutdown and Malfunction Policy to assure consistency with the Clean Air Act and other recent court decisions. The Oklahoma Department of Environmental Quality submitted a SIP revision for the EPA's approval on November 7, 2016 to comply with this rule. Although the extent of impact is not known, this rule will impact certain OG&E units.

Endangered Species

Certain Federal laws, including the Bald and Golden Eagle Protection Act, the Migratory Bird Treaty Act and the Endangered Species Act, provide special protection to certain designated species. These laws and any state equivalents provide for significant civil and criminal penalties for unpermitted activities that result in harm to or harassment of certain protected animals and plants, including damage to their habitats. If such species are located in an area in which OG&E conducts operations, or if additional species in those areas become subject to protection, OG&E’s operations and development projects, particularly transmission, wind or pipeline projects, could be restricted or delayed, or OG&E could be required to implement expensive mitigation measures.

In 2014, OG&E enrolled in the Western Association of Fish and Wildlife Agencies range-wide conservation plan which consists of industry-specific conservation practices that apply to projects and activities in the impacted area. The range-wide conservation plan was approved by the U.S. Fish and Wildlife Service and incorporated as part of the agency’s final decision on March 27, 2014 to list the lesser prairie chicken as a threatened species. On September 1, 2015, the U.S. District Court Western District of Texas vacated federal protections for the lesser prairie chicken based on the U.S. Fish and Wildlife Service's failure to thoroughly consider the active conservation efforts in making the listing decision. On July 19, 2016, the U.S. Fish and Wildlife Service issued a final rule to amend its regulations to remove the lesser prairie chicken from the list of threatened species under the Endangered Species Act. On September 8, 2016, WildEarth Guardians, Defenders of Wildlife and the Center for Biological Diversity filed a petition with the U.S. Fish and Wildlife Services to list the lesser prairie chicken as "endangered" under the Endangered Species Act. On November 30, 2016, the U.S. Fish and Wildlife Services published a notice in the Federal Register announcing its finding that the September 2016 petition presents information indicating that listing of the lesser prairie chicken may be warranted. The agency has initiated a 12-month status review. OG&E will continue to monitor the progress of the petition.

Air Quality Control System

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.

On December 19, 2014, the EPA finalized a rule under the Federal Resource Conservation and Recovery Act for the handling and disposal of coal combustion residuals or coal ash. The final rule regulates coal ash as a solid waste rather than a hazardous waste, which would have made the management of coal ash more costly. The final rule is currently being appealed at the D.C. Circuit Court of Appeals. OG&E is in compliance with this rule at this time.

OG&E has sought and will continue to seek pollution prevention opportunities and to evaluate the effectiveness of its waste reduction, reuse and recycling efforts. OG&E obtains refunds from the recycling of scrap metal, salvaged transformers and used transformer oil. Additional savings are 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.

The EPA issued a final rule on May 19, 2014 to implement Section 316(b) of the Federal Clean Water Act, which requires that power plant cooling water intake structure location, design, construction and capacity reflect the best available technology for minimizing their adverse environmental impact via the impingement and entrainment of aquatic organisms. OG&E submitted compliance plans to the state in April 2015. OG&E expects to be able to provide a reasonable estimate of any material costs associated with the rule's implementation following issuance of the permits from the state.

On September 30, 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. On June 6, 2017, the EPA proposed to delay the compliance deadlines

for the 2015 final rule following granting numerous petitions for reconsideration that were filed with the EPA. On September 13, 2017, the EPA finalized an extension of initial deadlines which would take effect in 2018. The earliest applicable date for compliance with this rule is now November 1, 2020, rather than November 1, 2018. The latest applicability date of December 31, 2023 did not change. OG&E is evaluating what, if any, compliance actions are needed but is not able to quantify with any certainty what costs may be incurred. OG&E expects to be able to provide a reasonable estimate of any material costs associated with the rule's implementation following issuance of the permits from the state.

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 generate 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.

For a further discussion regarding contingencies relating to environmental laws and regulations, see Note 10.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Under the reduced disclosure format permitted by General Instruction H(2)(c) of Form 10-Q, the information otherwise required by Item 3 has been omitted.

Item 4. Controls and Procedures.

OG&E maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by OG&E in reports that it files or submits 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 OG&E's management, including the chief executive officer and chief financial officer, of the effectiveness of OG&E's 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 OG&E's disclosure controls and procedures are effective.

No change in OG&E's internal control over financial reporting has occurred during OG&E's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, OG&E's 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).

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Reference is made to Item 3 of Part I of OG&E's 2016 Form 10-K for a description of certain legal proceedings presently pending. Except as described above under Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Environmental Laws and Regulations," there are no new significant cases to report against OG&E and there have been no material changes in the previously reported proceedings.

Item 1A. Risk Factors.

There have been no significant changes in OG&E's risk factors from those discussed in OG&E's 2016 Form 10-K, which are incorporated herein by reference.

Item 6. Exhibits.



Exhibit No.	Description
4.01	Supplemental Indenture No. 17 dated as of August 1, 2017 between OG&E and UMB Bank, N.A., as trustee. (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).
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.
32.01	Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Schema Document.
101.PRE	XBRL Taxonomy Presentation Linkbase Document.
101.LAB	XBRL Taxonomy Label Linkbase Document.
101.CAL	XBRL Taxonomy Calculation Linkbase Document.
101.DEF	XBRL Definition Linkbase Document.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	OKLAHOMA GAS AND ELECTRIC COMPANY
	(Registrant)

By:	/s/ Scott Forbes
	Scott Forbes
	Controller and Chief Accounting Officer
	(On behalf of the Registrant and in his capacity as Chief Accounting Officer)

November 1, 2017

Attached files

OKLAHOMA GAS & ELECTRIC CO Reports

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