OGE ENERGY CORP.

Previous wording

OGE Energy's purpose is to energize life, providing life-sustaining and life-enhancing products and services that enrich its communities and encourage growth and a higher quality of life. OGE Energy's purpose comes with a balanced approach to multifaceted stewardship: keeping its employees (internally referred to as "members") safe, reducing its environmental impact, strengthening its diverse communities and ensuring its effective corporate governance. OGE Energy's business model is centered around growth and sustainability for members, communities and customers and the owners of OGE Energy, its shareholders. OGE Energy is focused on creating long-term shareholder value by targeting the consistent growth of consolidated earnings per share of five to seven percent, supported by strong load growth enabled by low customer rates and a strategy of investing in lower risk infrastructure projects that improve the economic vitality of the communities it serves in Oklahoma and Arkansas. OGE Energy's long-term sustainability is predicated on providing exceptional customer experiences, investing in grid improvements and investments related to new generation capacity needs, environmental stewardship, strong governance practices and caring for and supporting its members and communities. Further discussion of OGE Energy's strategy can be found in its 2023 Form 10-K.

Current wording

OGE Energy's purpose is to energize life, providing life-sustaining and life-enhancing products and services that enrich its communities, encouraging growth and a higher quality of life. OGE Energy's purpose comes with a balanced approach to multifaceted stewardship: keeping its employees (internally referred to as "members") safe, reducing its environmental impact, strengthening its diverse communities and ensuring its effective corporate governance. OGE Energy's business model is centered around growth and sustainability for members, communities and customers and the owners of OGE Energy, its shareholders. OGE Energy is focused on creating long-term shareholder value by targeting the consistent growth of consolidated earnings per share of five to seven percent, supported by strong load growth enabled by low customer rates and a strategy of investing in lower risk infrastructure projects that improve the economic vitality of the communities it serves in Oklahoma and Arkansas. OGE Energy's long-term sustainability is predicated on providing exceptional customer experiences, strengthening the energy grid, investing in proven technologies to meet generation capacity needs, environmental stewardship, strong governance practices and caring for and supporting its members and communities. Further discussion of OGE Energy's strategy can be found in its 2024 Form 10-K.

Previous wording

OGE Energy's net income was $218.7 million, or $1.09 per diluted share, during the three months ended September 30, 2024 as compared to $241.9 million, or $1.20 per diluted share, during the same period in 2023. The decrease in net income of $23.2 million, or $0.11 per diluted share, is further discussed below.

Current wording

OGE Energy's net income was $62.7 million, or $0.31 per diluted share, during the three months ended March 31, 2025 as compared to $18.6 million, or $0.09 per diluted share, during the same period in 2024. The increase in net income of $44.1 million, or $0.22 per diluted share, is further discussed below.

Previous wording

A decrease in net income at OG&E of $18.3 million, or $0.09 per diluted share of OGE Energy's common stock, was primarily due to higher depreciation and amortization expense driven by additional assets being placed into service, higher interest expense driven by borrowings under OG&E's revolving credit agreement and senior notes issuance in August 2024 and April 2023, higher other operation and maintenance expense, lower other income and higher income tax expense, partially offset by higher operating revenues (excluding the impact of recoverable fuel, purchased power and direct transmission expense not impacting earnings) driven primarily by load growth.

Current wording

An increase in net income at OG&E of $45.8 million, or $0.23 per diluted share of OGE Energy's common stock, was primarily due to higher operating revenues (excluding the impact of recoverable fuel, purchased power and direct transmission expense not impacting earnings) driven primarily by recovery of capital investments and load growth, as well as lower operation and maintenance expense, partially offset by higher income tax expense, higher depreciation expense driven by additional assets being placed into service, and higher interest expense driven by borrowings under OG&E's revolving credit agreement and senior notes issuance in August 2024.

Previous wording

An increase in net loss of other operations of $2.1 million, or $0.01 per diluted share of OGE Energy's common stock, was primarily due to higher interest expense driven by OGE Energy's senior notes issuance in May 2024, partially offset by a higher income tax benefit.

Current wording

An increase in net loss of other operations of $1.7 million, or $0.01 per diluted share of OGE Energy's common stock, was primarily due to higher interest expense driven by borrowings under OGE Energy's revolving credit agreement and OGE Energy's senior notes issuance in May 2024, partially offset by higher income tax benefit.

Previous wording

Due to strong load growth and warmer than normal weather, OGE Energy’s consolidated earnings are expected to be at the top of OGE Energy's original 2024 earnings guidance range of $2.06 to $2.18 per average diluted share. The guidance assumes, among other things, approval of the uncontested rate review settlement by the OCC in 2024, approximately 201.5 million average diluted shares outstanding, and normal weather for the remainder of the year. See OGE Energy's 2023 Form 10-K for other key factors and assumptions underlying its 2024 guidance.

Current wording

OGE Energy’s consolidated earnings remains unchanged from OGE Energy's original 2025 earnings guidance range of $447 million to $471 million, or $2.21 to $2.33 per average diluted share. OG&E is projected to earn approximately $491 million, or $2.43 per average diluted share. A loss of $32 million, or $0.16 per average diluted share is projected for other operations (primarily the holding company). The guidance assumes, among other things, approximately 202.1 million average diluted shares outstanding and normal weather for the remainder of the year. OG&E has significant seasonality in its earnings due to weather on a year over year basis. See OGE Energy's 2024 Form 10-K for other key factors and assumptions underlying its 2025 guidance.

Previous wording

The following discussion and analysis presents factors that affected the Registrants' results of operations for the three and nine months ended September 30, 2024 as compared to the same periods in 2023 and the Registrants' financial position at September 30, 2024. Due to seasonal fluctuations and other factors, the Registrants' operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 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.

Current wording

The following discussion and analysis presents factors that affected the Registrants' results of operations for the three months ended March 31, 2025 as compared to the same period in 2024 and the Registrants' financial position at March 31, 2025. Due to seasonal fluctuations and other factors, the Registrants' operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 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.

Previous wording

OG&E's net income decreased $21.1 million, or 8.6 percent, and $18.3 million, or 4.8 percent, during the three and nine months ended September 30, 2024, respectively, as compared to the same periods in 2023. The following section discusses the primary drivers for the decrease in net income during the three and nine months ended September 30, 2024, as compared to the same periods in 2023.

Current wording

OG&E's net income increased $45.8 million, during the three months ended March 31, 2025, as compared to the same period in 2024. The following section discusses the primary drivers for the increase in net income during the three months ended March 31, 2025, as compared to the same period in 2024.

Previous wording

Operating revenues increased $20.0 million, or 2.1 percent, and increased $117.2 million, or 5.6 percent, during the three and nine months ended September 30, 2024, respectively, primarily driven by the below factors.

Current wording

Operating revenues increased $150.9 million, or 25.3 percent, during the three months ended March 31, 2025, primarily driven by the below factors.

Previous wording

These expenses are generally recoverable from customers through regulatory mechanisms and are offset in Fuel, Purchased Power and Direct Transmission Expense in the statements of income. The primary drivers of the changes in fuel, purchased power and direct transmission expense during the periods are further detailed in the table below.

Current wording

These expenses are generally recoverable from customers through regulatory mechanisms and are offset in Fuel, Purchased Power and Direct Transmission Expense in the statements of income. The primary drivers of the changes in fuel, purchased power and direct transmission expense during the period are further detailed in the table below.

Previous wording

Fuel, purchased power and direct transmission expense for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. As described above, the actual cost of fuel used in electric generation and certain purchased power costs are generally recoverable from OG&E's customers through fuel adjustment clauses. The fuel adjustment clauses are subject to periodic review by the OCC and the APSC. OG&E's fuel, purchased power and direct transmission expense increased $16.3 million, or 4.9 percent, and $60.0 million, or 8.4 percent, during the three and nine months ended September 30, 2024, respectively, primarily driven by the below factors.

Current wording

Fuel, purchased power and direct transmission expense for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. As described above, the actual cost of fuel used in electric generation and certain purchased power costs are generally recoverable from OG&E's customers through fuel adjustment clauses. The fuel adjustment clauses are subject to periodic review by the OCC and the APSC. OG&E's fuel, purchased power and direct transmission expense increased $91.8 million, or 39.5 percent, during the three months ended March 31, 2025, primarily driven by the below factors.

Previous wording

Decreased during the three months ended September 30, 2024 primarily due to lower fuel costs related to the generating assets utilized during the period, and decreased during the nine months ended September 30, 2024 primarily due to lower fuel costs partially offset by an increase in MWhs generated related to the generating assets utilized during the period.

Current wording

Increased during the three months ended March 31, 2025 primarily due to higher fuel costs related to the generating assets utilized during the period.

Previous wording

Increased during the three months ended September 30, 2024 primarily due to increased MWhs purchased, and increased during the nine months ended September 30, 2024 primarily due to higher market prices and increased MWhs purchased.

Current wording

Increased during the three months ended March 31, 2025 primarily due to higher market prices and increased MWhs purchased during the period.

Previous wording

Other operation and maintenance expense increased $8.1 million, or 6.6 percent, and $10.6 million, or 2.8 percent, during the three and nine months ended September 30, 2024, respectively, primarily due to an increase in various costs such as payroll and benefits, net of capitalized labor, and software expense, partially offset by the timing of vegetation management activities.

Current wording

Other operation and maintenance expense decreased $10.6 million, or 8.0 percent, during the three months ended March 31, 2025, primarily due to a decrease in payroll and benefits, net of capitalized labor, and timing of the energy efficiency program activities, partially offset by an increase in vegetation management activities as a result of the most recent Oklahoma rate review.

Previous wording

Depreciation and amortization expense increased $11.5 million, or 8.7 percent, and $30.9 million, or 8.2 percent, during the three and nine months ended September 30, 2024, respectively, primarily due to additional assets being placed into service and increased amortization of certain regulatory assets.

Current wording

Depreciation and amortization expense increased $8.2 million, or 6.3 percent, during the three months ended March 31, 2025, primarily due to additional assets being placed into service and increased amortization of certain regulatory assets.

Previous wording

Other income decreased $12.0 million, or 54.1 percent, during the nine months ended September 30, 2024, primarily due to the carrying charge for the higher fuel under recovery balance in 2023.

Current wording

Net other income increased $2.3 million, or 34.8 percent, during the three months ended March 31, 2025, primarily due to increased allowance for equity funds used during construction driven by higher work in progress balances related to new generation projects as well as increased carrying charge for the higher fuel under recovery balance in 2025, partially offset by higher other net periodic benefit expense driven by changes to the level of pension expense included in base rates as a result of the most recent Oklahoma rate review.

Previous wording

Income tax expense increased $3.9 million, or 9.3 percent, and $7.2 million, or 11.1 percent, during the three and nine months ended September 30, 2024, respectively, primarily due to a decrease in state tax credits generated and lower amortization of unfunded deferred taxes, partially offset by lower pretax income.

Current wording

Income tax expense increased $10.4 million during the three months ended March 31, 2025, primarily due to higher pretax income, partially offset by an increase in federal and state tax credits recognized and higher amortization of unfunded deferred taxes.

Previous wording

Accounts Receivable and Accrued Unbilled Revenues increased $137.2 million, or 48.7 percent, primarily due to an increase in billings to OG&E's retail customers reflecting higher seasonal usage in September 2024 as compared to December 2023.

Current wording

Accounts Receivable and Accrued Unbilled Revenues increased $48.8 million, or 15.5 percent, primarily due to an increase in billings to OG&E's retail customers reflecting higher usage in early 2025 as compared to late 2024.

Previous wording

Fuel Clause Under Recoveries increased $43.3 million, primarily due to lower recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power.

Current wording

Fuel Clause Under Recoveries increased $51.9 million, or 46.1 percent, primarily due to lower recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power.

Previous wording

Short-Term Debt decreased $284.0 million, or 56.9 percent, primarily due to OGE Energy's $350.0 million senior notes issuance in May 2024 and OG&E's $350.0 million senior notes issuance in August 2024, which were used to pay down short-term debt, and decreased borrowings for general operating needs. The Registrants borrow on a short-term basis, as necessary, through the issuance of commercial paper under their revolving credit agreements.

Current wording

Short-Term Debt increased $297.4 million, or 63.4 percent, primarily due to increased borrowings for general operating needs. The Registrants borrow on a short-term basis, as necessary, through the issuance of commercial paper under their revolving credit agreements.

Previous wording

Long-Term Debt due within One Year increased $32.4 million, due to the reclassification of industrial authority bonds that are scheduled to mature in January 2025.

Current wording

Long-Term Debt due within One Year decreased $32.4 million, or 100.0 percent, due to the repayment of the Muskogee industrial authority bonds that matured in January 2025.

Previous wording

OGE Energy's estimates of capital expenditures for the years 2024 through 2028 are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants'2023 Form 10-K, and OGE Energy's estimates have not changed significantly at this time. The capital investments are customer-focused and targeted to maintain and improve the safety, resiliency and reliability of OG&E's distribution and transmission grid and generation fleet, enhance the ability of OG&E's system to perform during extreme weather events and to serve OG&E's growing customer base. Additional capital expenditures beyond those identified in the Registrants'2023 Form 10-K, including additional incremental growth opportunities, will be evaluated based upon the requirements of OG&E's power supply, transmission and distribution operational teams and the expected resultant customer benefits. In May 2024, OG&E issued requests for proposals for resources to meet the capacity needs identified in its 2024 IRP and is currently reviewing the proposals submitted in this process. OG&E intends to file for approval of generation capacity investments and would expect to update its capital plan based on final orders received by state regulators. The annual level of investments in the transmission and distribution system could vary depending on the amount and timing of incremental generation capacity investments.

Current wording

OGE Energy's estimates of capital expenditures for the years 2025 through 2029 are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants'2024 Form 10-K, and OGE Energy's estimates have not changed significantly at this time. The capital investments are customer-focused and targeted to maintain and improve the safety, resiliency and reliability of OG&E's distribution and transmission grid and generation fleet, enhance the ability of OG&E's system to perform during extreme weather events and to serve OG&E's growing customer base. Additional capital expenditures beyond those identified in the Registrants'2024 Form 10-K, including additional incremental growth opportunities, will be evaluated based upon the requirements of OG&E's power supply, transmission and distribution operational teams and the expected resultant customer benefits. In May 2024, OG&E issued requests for proposals for resources to meet the capacity needs identified in its 2024 IRP. OG&E has selected proposed projects for contract negotiations. Once that process is complete, OG&E intends to file for approval of generation capacity investments and would expect to update its capital plan based on final orders received by state regulators. The annual level of investments in the transmission and distribution system could vary depending on the amount and timing of incremental generation capacity investments.

Previous wording

OGE Energy borrows on a short-term basis, as necessary, by issuance of commercial paper and borrowings under its revolving credit agreements and term credit agreements maturing in one year or less.

Current wording

OGE Energy borrows on a short-term basis, as necessary, by issuance of commercial paper and borrowings under its revolving credit agreements.

Previous wording

The following table presents information about OGE Energy's total short-term debt activity for the three and nine months ended September 30, 2024.

Current wording

The following table presents information about OGE Energy's total short-term debt activity for the three months ended March 31, 2025.

Previous wording

OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur up to $1.0 billion in short-term borrowings at any one time for a two-year period beginning January 1, 2023 and ending December 31, 2024. OG&E has requested renewal of this authority for an additional two-year period and expects to receive approval prior to the expiration of its current authority.

Current wording

OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur up to $1.0 billion in short-term borrowings at any one time for a two-year period beginning January 1, 2025 and ending December 31, 2026.

Previous wording

On August 15, 2024, OG&E issued $350.0 million of 5.60 percent senior notes due April 1, 2053, bringing the aggregate total principal amount of this series of senior notes to $700.0 million. The proceeds from this issuance were added to OG&E's general funds to be used for repayment of short-term debt and borrowings under OG&E's revolving credit agreement, and to fund OG&E's capital investment program and working capital needs.

Current wording

On April 1, 2025, OG&E issued $350.0 million of 5.80 percent senior notes due April 1, 2055. The proceeds from this issuance were added to OG&E's general funds to be used for the repayment of short-term debt and borrowings under its revolving credit facility, and to fund OG&E's capital investment program and working capital needs.

Previous wording

In management's opinion, the areas where the most significant judgment is exercised include the determination of pension and postretirement plan assumptions, income taxes, contingency reserves, and regulatory assets and liabilities. The selection, application and disclosure of the critical accounting estimates have been discussed with the Audit Committee of OGE Energy's Board of Directors and are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants'2023 Form 10-K.

Current wording

In management's opinion, the areas where the most significant judgment is exercised include the determination of pension and postretirement plan assumptions, income taxes, contingency reserves, and regulatory assets and liabilities. The selection, application and disclosure of the critical accounting estimates have been discussed with the Audit Committee of OGE Energy's Board of Directors and are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants'2024 Form 10-K.

Previous wording

In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the appropriate accounting entries are reflected in the condensed financial statements. If the assessment indicates that a potential loss is not probable but reasonably possible, the nature of the contingent matter, together with an estimate of the range of possible loss if determinable and material, would be disclosed. At the present time, based on available information, except as disclosed in Note 12 within "Item 1. Financial Statements," the Registrants believe that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to their condensed financial statements and would not have a material adverse effect on their financial position, results of operations or cash flows. See Notes 12 and 13 within "Item 1. Financial Statements" for further discussion of the Registrants' commitments and contingencies.

Current wording

In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the appropriate accounting entries are reflected in the condensed financial statements. If the assessment indicates that a potential loss is not probable but reasonably possible, the nature of the contingent matter, together with an estimate of the range of possible loss if determinable and material, would be disclosed. At the present time, based on currently available information, except as disclosed in Note 12 within "Item 1. Financial Statements," the Registrants believe that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to their condensed financial statements and would not have a material adverse effect on their financial position, results of operations or cash flows. See Notes 12 and 13 within "Item 1. Financial Statements" for further discussion of the Registrants' commitments and contingencies.

Previous wording

The EPA revised the NAAQS for ozone in 2015. Although Oklahoma complies with the revised standard, the Federal Clean Air Act of 1970, as amended, requires states to submit to the EPA for approval a SIP to prohibit in-state sources from contributing significantly to nonattainment of the NAAQS in another state. On October 28, 2018, Oklahoma submitted its SIP to the EPA related to these "Good Neighbor" requirements. On January 31, 2023, the EPA disapproved the SIPs of 19 states, including Oklahoma. On March 2, 2023, the Oklahoma Attorney General and the ODEQ jointly filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On March 16, 2023, OG&E filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On June 6, 2023, OG&E, together with the Oklahoma Attorney General and other parties, jointly filed a motion with the Tenth Circuit requesting a stay of the EPA’s disapproval of the Oklahoma SIP; the stay was granted on July 27, 2023. On February 27, 2024, the Tenth Circuit issued a decision to transfer venue to the U.S. Court of Appeals for the District of Columbia and vacated oral argument originally scheduled for March 21, 2024 but did not vacate the stay it granted. On March 28, 2024, the Oklahoma Attorney General, on behalf of the parties noted above, petitioned the Supreme Court to review the Tenth Circuit’s decision to transfer the SIP disapproval cases to the D.C. Circuit, and on April 24, 2024, the D.C. Circuit ordered that the cases be held in abeyance pending action by the Supreme Court. The timing of a Supreme Court decision or further action at the D.C. Circuit is unknown.

Current wording

The EPA revised the NAAQS for ozone in 2015. Although Oklahoma complies with the revised standard, the Federal Clean Air Act of 1970, as amended, requires states to submit to the EPA for approval a SIP to prohibit in-state sources from contributing significantly to nonattainment of the NAAQS in another state. On October 28, 2018, Oklahoma submitted its SIP to the EPA related to these "Good Neighbor" requirements. On January 31, 2023, the EPA disapproved the SIPs of 19 states, including Oklahoma. On March 2, 2023, the Oklahoma Attorney General and the ODEQ jointly filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On March 16, 2023, OG&E filed a Petition for Review of the SIP disapproval in the Tenth Circuit. On June 6, 2023, OG&E, together with the Oklahoma Attorney General and other parties, jointly filed a motion with the Tenth Circuit requesting a stay of the EPA’s disapproval of the Oklahoma SIP; the stay was granted on July 27, 2023. On February 27, 2024, the Tenth Circuit issued a decision to transfer venue to the U.S. Court of Appeals for the District of Columbia and vacated oral argument originally scheduled for March 21, 2024 but did not vacate the stay it granted. On March 28, 2024, the Oklahoma Attorney General, on behalf of the parties noted above, petitioned the U.S. Supreme Court to review the Tenth Circuit’s decision to transfer the SIP disapproval cases to the D.C. Circuit, and on April 24, 2024, the D.C. Circuit ordered that the cases be held in abeyance pending action by the U.S. Supreme Court. On October 21, 2024, the U.S. Supreme Court granted review of the Tenth Circuit’s venue decision. On November 6, 2024, the D.C. Circuit ordered that the cases remain in abeyance pending the U.S. Supreme Court’s review of the Clean Air Act’s venue provision. On January 24, 2025, the EPA asked the U.S. Supreme Court to hold the briefing schedule in abeyance upon determination that the agency should reassess the basis for and soundness of the underlying disapproval action. However, on February 6, 2025, the U.S. Supreme Court denied the EPA's motion to hold the case in abeyance. Briefing concluded on February 18, 2025 and oral arguments at the U.S. Supreme Court occurred on March 25, 2025. The timing of a U.S. Supreme Court decision or further action at the D.C. Circuit is unknown.

Previous wording

In a separate but related matter, on April 6, 2022, the EPA also published a proposed FIP related to the "Good Neighbor" requirements intended to reduce interstate NOX emissions contributions. OG&E filed comments to the proposed FIP with the EPA on June 21, 2022. On June 5, 2023, the EPA published a final FIP for 23 states, including Oklahoma. The issuance of the FIP resulted from the EPA's aforementioned SIP disapprovals. Among other changes, the EPA finalized a revision of the current Oklahoma NOX emissions budget for electric generating units, including OG&E's units, which began in 2023. Under the terms of the FIP, the emissions budget will decline over time based on the level of reductions that the EPA has determined is achievable through particular emissions controls. OG&E’s analysis indicates that Oklahoma’s state budget for 2026 will be reduced by 34.5 percent from 2023 levels and that for 2027 it will be reduced by 50 percent from 2021 levels. In October 2023, several state and industry petitioners filed emergency applications for a stay of the EPA’s Good Neighbor FIP in the U.S. Supreme Court. On June 27, 2024, the U.S. Supreme Court granted the emergency applications and stayed the EPA's final FIP, pending review of petitioners' challenges in the D.C. Circuit Court.

Current wording

In a separate but related matter, on April 6, 2022, the EPA also published a proposed FIP related to the "Good Neighbor" requirements intended to reduce interstate NOX emissions contributions. OG&E filed comments to the proposed FIP with the EPA on June 21, 2022. On June 5, 2023, the EPA published a final FIP for 23 states, including Oklahoma. The issuance of the FIP resulted from the EPA's aforementioned SIP disapprovals. Among other changes, the EPA finalized a revision of the current Oklahoma NOX emissions budget for electric generating units, including OG&E's units, which began in 2023. Under the terms of the FIP, the emissions budget will decline over time based on the level of reductions that the EPA has determined is achievable through particular emissions controls. OG&E’s analysis indicates that Oklahoma’s state budget for 2026 will be reduced by 34.5 percent from 2023 levels and that for 2027 it will be reduced by 50 percent from 2021 levels. In October 2023, several state and industry petitioners filed emergency applications for a stay of the EPA’s Good Neighbor FIP in the U.S. Supreme Court. On June 27, 2024, the U.S. Supreme Court granted the emergency applications and stayed the EPA's final FIP, pending review of petitioners' challenges in the D.C. Circuit Court. On February 6, 2025, the EPA requested that the D.C. Circuit Court not issue an opinion and place the case in abeyance for 60 days in order for the new EPA leadership to determine how they want to proceed in the litigation. The D.C. Circuit Court denied the EPA’s request on February 21, 2025. On March 10, 2025, the EPA filed a motion in the D.C. Circuit Court to voluntarily remand the Good Neighbor FIP without vacating it so the EPA can reconsider the rule; on April 14, 2025, the D.C. Circuit Court issued an order holding challenges to the EPA’s Good Neighbor FIP in abeyance and deferring oral argument pending the EPA’s review of the FIP. The D.C. Circuit Court directed parties to file status reports every 90 days, beginning July 14, 2025, and a motion to govern further proceedings within 30 days after the EPA completes its review. The timing of further action at the D.C. Circuit is unknown.

Previous wording

In light of the issuance of the FIP, OG&E has been evaluating various control strategies to reduce emissions at its generating units, which can range from some combination of purchase of emission allowances, installation of selective catalytic reduction controls, conversion of coal-fired units to gas-fired units or retirement and replacement of capacity. OG&E submitted its final 2024 IRP to the OCC and APSC on March 29, 2024. The IRP evaluates various potential compliance options related to the EPA's Good Neighbor FIP. Due to the uncertainty relating to the disapproval of the SIP and implementation of the FIP, OG&E cannot determine the cost to comply with certainty, as such costs are dependent upon the timing and outcome of the litigation discussed above, the particular control strategies ultimately selected for each unit, the terms and timing of regulatory approvals required from the OCC and the time period necessary to complete the projects. However, OG&E preliminarily estimates that the cost of compliance with the FIP as issued could be approximately $2.4 billion to $2.8 billion in total, including $100 million to $300 million over the 12- to 18-month period following effectiveness of the FIP. OG&E expects that it would seek recovery of any necessary environmental expenditures to handle state and federally mandated environmental upgrades, but there is no guarantee that all of such expenditures will be approved for recovery or will be approved for recovery on a timely basis.

Current wording

In light of the issuance of the FIP, OG&E has been evaluating various control strategies to reduce emissions at its generating units, which can range from some combination of purchase of emission allowances, installation of selective catalytic reduction controls, conversion of coal-fired units to gas-fired units or retirement and replacement of capacity. OG&E submitted its final 2024 IRP to the OCC and APSC on March 29, 2024. The IRP evaluates various potential compliance options related to the EPA's Good Neighbor FIP. Due to the uncertainty relating to the disapproval of the SIP and implementation of the FIP, OG&E cannot determine the cost to comply with certainty, as such costs are dependent upon the timing and outcome of the litigation discussed above, the particular control strategies ultimately selected for each unit, the terms and timing of regulatory approvals required from the OCC and APSC and the time period necessary to complete the projects. However, OG&E preliminarily estimates that the cost of compliance with the FIP as issued could be approximately $2.4 billion to $2.8 billion in total, including $100 million to $300 million over the 12- to 18-month period following effectiveness of the FIP. OG&E expects that it would seek recovery of any necessary environmental expenditures to address state and federally mandated environmental upgrades, but there is no guarantee that all of such expenditures will be approved for recovery or will be approved for recovery on a timely basis.

Previous wording

On February 7, 2024, the EPA issued a final rule resulting from its reconsideration of the primary (health-based) and secondary (welfare-based) NAAQS for PM, which were set in 2013 and which the EPA declined to revise in 2020. The final rule lowers the primary annual PM 2.5 NAAQS from 12.0 µg/m3 to 9.0 µg/m3 and retains the other PM standards at their current levels, including the 24-hour PM 2.5 NAAQS. The EPA will determine which areas of the country meet the standards, such as making initial attainment and nonattainment designations, no later than two years after new standards are issued. States must develop and submit attainment plans no later than 18 months after the EPA finalizes nonattainment designations.

Current wording

On February 7, 2024, the EPA issued a final rule resulting from its reconsideration of the primary (health-based) and secondary (welfare-based) NAAQS for PM, which were set in 2013 and which the EPA declined to revise in 2020. The final rule lowers the primary annual PM 2.5 NAAQS from 12.0 µg/m 3 to 9.0 µg/m 3 and retains the other PM standards at their current levels, including the 24-hour PM 2.5 NAAQS. The EPA will determine which areas of the country meet the standards, such as making initial attainment and nonattainment designations, no later than two years after new standards are issued. States must develop and submit attainment plans no later than 18 months after the EPA finalizes nonattainment designations.

Previous wording

On April 25, 2024, the EPA released the final revised Mercury and Air Toxics Standards regulation with a compliance date in May 2027. On May 8, 2024, a coalition of states, including Oklahoma, filed a challenge to the final rule in the D.C. Circuit Court and on June 7, 2024 filed a motion to stay the final rule which was ultimately denied. Subsequently, this coalition of states filed an emergency stay application with the U.S. Supreme Court on August 16, 2024. The U.S. Supreme Court denied the applications on October 4, 2024. It is unknown what potential material impacts, if any, will be from the final action by the EPA.

Current wording

On April 25, 2024, the EPA released the final revised Mercury and Air Toxics Standards regulation with a compliance date in July 2027. On May 8, 2024, a coalition of states, including Oklahoma, filed a challenge to the final rule in the D.C. Circuit Court and on June 7, 2024 filed a motion to stay the final rule which was ultimately denied. Subsequently, this coalition of states filed an emergency stay application with the U.S. Supreme Court on August 16, 2024. The U.S. Supreme Court denied the applications on October 4, 2024. On April 14, 2025, the EPA notified OG&E that the July 2027 compliance deadline would be extended to July 8, 2029. It is unknown what potential material impacts, if any, will be from further action by the EPA or final action by the D.C. Circuit Court.

Previous wording

OG&E monitors possible changes in legal standards for emissions of greenhouse gases, including CO 2, sulfur hexafluoride and methane, and President Biden Administration's target of a 50 to 52 percent reduction in economy-wide net greenhouse gas emissions from 2005 levels by 2030 with full decarbonization of the electric power industry by 2035. If legislation or regulations are passed at the federal or state levels in the future requiring mandatory reductions of CO 2 and other greenhouse gases at OG&E's facilities, this could result in significant additional compliance costs that would affect OG&E's future financial position, results of operations and cash flows if such costs are not recovered through regulated rates.

Current wording

OG&E monitors possible changes in legal standards for emissions of greenhouse gases, including CO 2, sulfur hexafluoride and methane. As discussed below, federal rules promulgated in 2024 under the Biden Administration will potentially impose requirements on fossil fuel assets, but the Trump Administration is evaluating energy-related regulations impacting reliability and affordability. If these recently promulgated rules are implemented and enforced as currently written or if legislation or regulations are passed at the federal or state levels in the future requiring mandatory reductions of CO 2 and other greenhouse gases at OG&E's facilities, this could result in significant additional compliance costs that would affect OG&E's future financial position, results of operations and cash flows if such costs are not recovered through regulated rates.

Previous wording

On May 9, 2024, the EPA published its final rule addressing emission guidelines under Section 111(d) for existing fossil fuel fired steam units, including both coal-fired and oil/gas-fired steam units, and revising performance standards under Section 111(b) for new gas turbines. Unlike the proposed rules, the final rules do not address simple and combined-cycle existing combustion turbine units which are now addressed in a separate rulemaking with proposed rules expected later this year.

Current wording

On May 9, 2024, the EPA published its final rule addressing emission guidelines under Section 111(d) for existing fossil fuel fired steam units, including both coal-fired and oil/gas-fired steam units, and revising performance standards under Section 111(b) for new gas turbines. Unlike the proposed rules, the final rules do not address existing simple and combined-cycle combustion turbine units; additional EPA rulemaking to address such units has not commenced.

Previous wording

Under Section 111(d), existing coal units will be required to use carbon capture covering 90 percent of emissions by 2032 if they plan to operate beyond 2039. If the coal units plan to operate until 2039, they must co-fire with natural gas at 40 percent by 2030. Coal plants that commit to retire by 2032 are exempt and may continue to operate as is. Subject to litigation, compliance decisions must be submitted to the state for inclusion in the SIP, which is due to the EPA in May 2026.

Current wording

Under Section 111(d), existing coal units will be required to use carbon capture covering 90 percent of emissions by 2032 if they plan to operate beyond 2039. If the coal units plan to operate until 2039, they must co-fire with natural gas at 40 percent by 2030.

Previous wording

On May 24, 2024, several groups of petitioners, including OG&E, which joined with Edison Electric Institute and three other declarants, filed motions for stay of the rule at the D.C. Circuit. The Court consolidated these motions and on July 19, 2024, denied all stay requests. On July 29, 2024, OG&E, jointly with Edison Electric Institute and another applicant, appealed the stay denial to the U.S. Supreme Court. Other industry and state petitioners, including Oklahoma, appealed the D.C. Circuit's stay denial to the U.S. Supreme Court as well. On October 16, 2024, the U.S. Supreme Court denied the stay request. The litigation on the merits, as referenced in the paragraph above, will continue at the D.C. Circuit. It is unknown what the outcome of the litigation will be, or potential material impacts, if any, it will have on these new emission standards and guidelines, but the Registrants continue to plan for compliance and, if the new emission standards and guidelines are implemented as adopted, such compliance costs would be material.

Current wording

On May 24, 2024, several groups of petitioners, including OG&E, which joined with Edison Electric Institute and three other declarants, filed motions for stay of the rule at the D.C. Circuit. The Court consolidated these motions and on July 19, 2024, denied all stay requests. On July 29, 2024, OG&E, jointly with Edison Electric Institute and another applicant, appealed the stay denial to the U.S. Supreme Court. Other industry and state petitioners, including Oklahoma, appealed the D.C. Circuit's stay denial to the U.S. Supreme Court as well. On October 16, 2024, the U.S. Supreme Court denied the stay request. Petitioners can seek another stay from the U.S. Supreme Court in the event the D.C. Circuit rules against them. Oral argument was held before the D.C. Circuit on December 6, 2024. However, on February 5, 2025, the EPA requested that the D.C. Court not issue an opinion and place the case in abeyance for 60 days in order for the new EPA leadership to determine how they want to proceed in the litigation; on February 19, 2025, the D.C. Circuit Court granted the EPA’s request. On April 21, 2025, the EPA filed an unopposed request for the D.C. Circuit Court to continue to hold the case in abeyance while the EPA reconsiders the final rule; on April 25, 2025, the D.C Circuit Court granted the EPA's request. It is unknown what the outcome of the litigation will be, or potential material impacts, if any, it will have on these new emission standards and guidelines, but the Registrants continue to plan for compliance and, if the new emission standards and guidelines are implemented as adopted, such compliance costs would be material.

Previous wording

As a member of the SPP Integrated Marketplace, OG&E customers have access to clean energy resources while maintaining reliability and affordability. With respect to its calendar year 2023 direct emissions, compared to 2005 levels, OG&E has reduced CO 2 emissions by over 60 percent, emissions of ozone-forming NOX have been reduced by approximately 80 percent, and emissions of sulfur dioxide have been reduced by approximately 95 percent. Direct emission reductions are due to factors such as OG&E’s conversion of certain coal units to natural gas units, its participation in the SPP integrated market, and its active engagement with customers in OG&E’s SmartHours and Load Reduction Programs which helps reduce the amount of generation required to serve peak demand. OG&E is also planning to deploy more renewable energy sources that do not emit greenhouse gases. OG&E has leveraged its geographic position to develop and access renewable energy resources and completed transmission investments to deliver the renewable energy.

Current wording

As a member of the SPP Integrated Marketplace, OG&E customers have access to clean energy resources while maintaining reliability and affordability. With respect to its calendar year 2024 direct emissions, compared to 2005 levels, OG&E has reduced CO 2 emissions by approximately 60 percent, emissions of ozone-forming NOx have been reduced by approximately 80 percent, and emissions of SO 2 have been reduced by approximately 95 percent. Direct emission reductions are due to factors such as OG&E’s conversion of certain coal units to natural gas units, its participation in the SPP integrated market, and its active engagement with customers in OG&E’s SmartHours and Load Reduction Programs which helps reduce the amount of generation required to serve peak demand. OG&E is also planning to deploy more renewable energy sources that do not emit greenhouse gases. OG&E has leveraged its geographic position to develop and access renewable energy resources and completed transmission investments to deliver the renewable energy.

Previous wording

During 2023, approximately 94 percent of the ash from OG&E's River Valley, Muskogee and Sooner facilities was recovered and reused off-site in various ways, including soil stabilization, landfill cover, road base construction and cement and concrete production. Reusing fly ash reduces the need to manufacture cement resulting in reductions in greenhouse gas emissions from cement and concrete production. Based on estimates from the American Coal Ash Association, OG&E fly ash reuse helped avoid over 3.5 million tons of CO 2 emissions in the last 16 years.

Current wording

During 2024, approximately 95 percent of the ash from OG&E's River Valley, Muskogee and Sooner facilities was recovered and reused off-site in various ways, including soil stabilization, landfill cover, road base construction and cement and concrete production. Reusing fly ash reduces the need to manufacture cement resulting in reductions in greenhouse gas emissions from cement and concrete production. Based on estimates from the American Coal Ash Association, OG&E fly ash reuse helped avoid over approximately 4 million tons of CO 2 emissions in the last 16 years.

Previous wording

Since the purchase of the Redbud facility in 2008, OG&E made investments in the infrastructure that have led to OG&E's average use of approximately 1.9 billion gallons per year of treated municipal effluent for cooling water at Redbud and McClain. This use of treated municipal effluent offsets the need for fresh water as cooling water, making fresh water available for other beneficial uses like drinking water, irrigation and recreation.

Current wording

Since the purchase of the Redbud facility in 2008, OG&E made investments in the infrastructure that have led to OG&E's average use of approximately 2.4 billion gallons per year of treated municipal effluent for cooling water at Redbud and McClain. This use of treated municipal effluent offsets the need for fresh water as cooling water, making fresh water available for other beneficial uses like drinking water, irrigation and recreation.