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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-1097
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.)
101 North Robinson
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.
Yes x No
-------- --------
There were 40,378,745 Shares of Common Stock, par value $2.50 per share,
outstanding as of April 30, 1997, all of which were held by OGE Energy Corp.
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OKLAHOMA GAS AND ELECTRIC COMPANY
PART I. FINANCIAL INFORMATION
Item 1 FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
3 Months Ended
March 31
See Note 1
----------
1997 1996
---------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C>
OPERATING REVENUES............................... $ 227,878 $ 233,826
---------- ----------
OPERATING EXPENSES:
Fuel ........................................ 67,307 70,590
Purchased power ............................. 58,157 56,649
Other operation & maintenance................ 56,106 60,259
Depreciation and amortization ............... 28,476 27,740
Current income taxes ........................ (1,088) (250)
Deferred income taxes, net .................. (1,416) (2,014)
Deferred investment tax credits, net ........ (1,287) (1,287)
Taxes other than income ..................... 11,514 11,246
---------- ----------
Total operating expenses ................. 217,769 222,933
---------- ----------
OPERATING INCOME ................................ 10,109 10,893
---------- ----------
OTHER INCOME (DEDUCTIONS):
Interest Income ............................. 781 531
Other ....................................... (347) (622)
---------- ----------
Net other income (deductions)............. 434 (91)
---------- ----------
INTEREST CHARGES:
Interest on long-term debt .................. 13,316 13,530
Allowance for borrowed funds used
during construction ....................... (67) (188)
Other ....................................... 1,179 1,423
---------- ----------
Total interest charges, net ................ 14,428 14,765
---------- ----------
LOSS FROM CONTINUING OPERATIONS.................. (3,885) (3,963)
INCOME FROM OPERATIONS OF ENOGEX DISTRIBUTED
TO OGE ENERGY CORP. (less applicable taxes
of $2,094)..................................... --- 4,501
---------- ----------
NET INCOME (LOSS) ............................... (3,885) 538
PREFERRED DIVIDEND REQUIREMENTS ................. 571 579
---------- ----------
LOSS AVAILABLE FOR COMMON ....................... $ (4,456) $ (41)
========== ==========
AVERAGE COMMON SHARES OUTSTANDING (thousands) ... 40,379 40,371
EARNINGS PER AVERAGE COMMON SHARE
Loss from continuing operations................ $ (0.11) $ (0.11)
Income from Enogex operations.................. --- 0.11
---------- ----------
Earnings per average common share.............. $ (0.11) $ (0.00)
========== ==========
DIVIDENDS DECLARED PER SHARE .................... $ .764 $ .665
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF.
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CONSOLIDATED BALANCE SHEETS
(Unaudited)
See Note 1
------------
March 31 December 31
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
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ASSETS
PROPERTY, PLANT AND EQUIPMENT:
In service.......................................... $ 3,590,277 $ 3,574,241
Construction work in progress....................... 27,287 26,807
------------ ------------
Total property, plant and equipment............ 3,617,564 3,601,048
Less accumulated depreciation.............. 1,588,703 1,560,546
------------ ------------
Net property, plant and equipment................... 2,028,861 2,040,502
------------ ------------
OTHER PROPERTY AND INVESTMENTS, at cost............... 22,217 21,869
------------ ------------
CURRENT CURRENT ASSETS:
Cash and cash equivalents........................... 229 200
Accounts receivable - customers, less reserve
of $3,033 and $3,520 respectively................. 74,226 96,067
Accrued unbilled revenues........................... 24,900 34,900
Accounts receivable - other......................... 15,678 44,699
Fuel inventories, at LIFO cost...................... 57,618 60,463
Materials and supplies, at average cost............. 22,408 20,387
Prepayments and other............................... 2,247 3,094
Accumulated deferred tax assets..................... 6,214 8,994
------------ ------------
Total current assets.............................. 203,520 268,804
------------ ------------
DEFERRED CHARGES:
Advance payments for gas............................ 9,500 9,500
Income taxes recoverable through future rates....... 43,913 44,368
Other............................................... 34,065 36,198
------------ ------------
Total deferred charges............................ 87,478 90,066
------------ ------------
TOTAL ASSETS.......................................... $ 2,342,076 $ 2,421,241
============ ============
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock and retained earnings.................. $ 805,748 $ 841,035
Cumulative preferred stock.......................... 49,329 49,379
Long-term debt...................................... 684,385 709,281
------------ ------------
Total capitalization.............................. 1,539,462 1,599,695
------------ ------------
CURRENT LIABILITIES:
Short-term debt..................................... 65,900 41,400
Accounts payable.................................... 60,056 63,596
Dividends payable................................... 571 27,421
Customers' deposits................................. 23,443 23,257
Accrued taxes....................................... 10,071 25,037
Accrued interest.................................... 15,429 16,386
Long-term debt due within one year.................. 25,000 15,000
Other............................................... 34,885 35,739
------------ ------------
Total current liabilities......................... 235,355 247,836
------------- ------------
DEFERRED CREDITS AND OTHER LIABILITIES:
Accrued pension and benefit obligation.............. 57,905 57,137
Accumulated deferred income taxes................... 424,798 429,766
Accumulated deferred investment tax credits......... 76,740 78,028
Other............................................... 7,816 8,779
------------ ------------
Total deferred credits and other liabilities...... 567,259 573,710
------------ ------------
TOTAL CAPITALIZATION AND LIABILITIES.................. $ 2,342,076 $ 2,421,241
============ ============
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART HEREOF.
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CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
3 Months Ended
March 31
See Note 1
-----------
1997 1996
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)........................................... $ (3,885) $ 538
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided From Operating Activities:
Depreciation and amortization............................ 28,476 33,470
Deferred income taxes and investment tax credits, net.... (2,703) (2,385)
Change in Certain Current Assets and Liabilities:
Accounts receivable - customers........................ 21,841 14,276
Accrued unbilled revenues.............................. 10,000 3,950
Fuel, materials and supplies inventories............... 824 2,190
Accumulated deferred tax assets........................ 2,780 1,119
Other current assets................................... 29,868 (2,883)
Accounts payable....................................... (3,540) 5,028
Accrued taxes.......................................... (14,966) (10,553)
Accrued interest....................................... (957) (2,554)
Other current liabilities.............................. (27,518) (2,974)
Other operating activities............................... (521) 4,702
---------- -----------
Net cash provided from operating activities........... 39,699 43,924
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................................... (17,700) (21,679)
---------- -----------
Net cash used in investing activities................. (17,700) (21,679)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt, net........................ (15,000) ---
Short-term debt, net..................................... 24,500 12,300
Redemption of preferred stock............................ (50) ---
Cash dividends declared on preferred stock............... (571) (579)
Cash dividends declared on common stock.................. (30,849) (26,846)
---------- -----------
Net cash used in financing activities................. (21,970) (15,125)
---------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS..................... 29 7,120
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD:
From continuing operations............................... 200 397
From Enogex operations................................... --- 5,023
---------- -----------
Total cash and cash equivalents at beginning of period 200 5,420
---------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD:
From continuing operations............................... 229 326
From Enogex operations................................... --- 12,214
---------- -----------
Total cash and cash equivalents at end of period...... $ 229 $ 12,540
========== ===========
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Period for:
Interest (net of amount capitalized)....................... $ 14,077 $ 18,253
Income taxes............................................... $ 5,175 $ 4,613
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DISCLOSURE OF ACCOUNTING POLICY:
For purposes of these statements, the Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. These investments are carried at cost which approximates market.
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
HEREOF.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The condensed consolidated financial statements included herein have been
prepared by Oklahoma Gas and Electric Company (the "Company"), without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations; however, the Company believes that the disclosures are
adequate to make the information presented not misleading.
OGE Energy Corp. ("Energy Corp.") became the parent company of the Company
and its former subsidiary, Enogex Inc. ("Enogex") on December 31, 1996. On
that date, all outstanding Company common stock was exchanged on a
share-for-share basis for common stock of Energy Corp. and the Company
distributed its ownership of Enogex to Energy Corp. Although Enogex
continues to operate as a subsidiary of Energy Corp., for purposes of these
consolidated financial statements, Enogex has been accounted for as
discontinued operations. The net income of Enogex for the period ended
March 31, 1996, is included in the consolidated statements of income as
"Income from Operations of Enogex Distributed to OGE Energy Corp." Prior
period consolidated financial statements have been restated to reflect
Enogex being accounted for as discontinued operations.
In the opinion of management, all adjustments necessary to present fairly
the financial position of the Company as of March 31, 1997, and December
31, 1996, and the results of operations and the changes in cash flows for
the periods ended March 31, 1997, and March 31, 1996, have been included
and are of a normal recurring nature (excluding amortization of a
regulatory asset relating to a Voluntary Early Retirement Package ("VERP")
and severance package - See Item 2 "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for related discussion).
The results of operations for such interim periods are not necessarily
indicative of the results for the full year. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's Form 10-K for the year ended December 31, 1996.
2. In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." Adoption of SFAS No. 128 is required for both interim and annual
periods ending after December 15, 1997. The Company will adopt this new
standard effective December 31, 1997, and management does not believe the
adoption of this standard will have a material impact on its earnings per
share.
3. In March 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure." Adoption of SFAS No. 129 is required for
financial statements for periods
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ending after December 15, 1997. The Company will adopt this new standard
effective December 31, 1997.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis presents factors which affected the
results of operations for the three months ended March 31, 1997 (the "current
period"), and the financial position as of March 31, 1997, of the Company.
Revenues from sales of electricity are somewhat seasonal, with a large portion
of the Company's annual electric revenues occurring during the summer months
when the electricity needs of its customers increase. Because of seasonal
fluctuations and other factors, the results of one interim period are not
necessarily indicative of results to be expected for the year. Actions of the
regulatory commissions that set the Company's electric rates will continue to
affect financial results. Unless indicated otherwise, all comparisons are with
the corresponding period of the prior year.
Some of the matters discussed in this Form 10-Q may contain forward-looking
statements that are subject to certain risks, uncertainties and assumptions.
Actual results may vary materially. Factors that could cause actual results to
differ materially include, but are not limited to: general economic conditions,
including their impact on capital expenditures; business conditions in the
energy industry; competitive factors; unusual weather; regulatory decisions and
other risk factors listed in the Company's Form 10-K for the year ended December
31, 1996, including Exhibit 99.01 thereto and other factors described from time
to time in the Company's reports to the Securities and Exchange Commission.
On February 11, 1997, the Oklahoma Corporation Commission ("OCC") issued an
order that, among other things, effectively lowered the Company's rates to its
Oklahoma retail customers by $50 million annually (based on a test year ended
December 31, 1995). Of the $50 million rate reduction, approximately $45 million
became effective on March 5, 1997, and the remaining $5 million becomes
effective March 1, 1998. This $50 million rate reduction is in addition to the
$15 million rate reduction discussed below that was effective January 1, 1995.
The Order also directed the Company to transition to competitive bidding of its
gas transportation requirements, currently met by Enogex, no later than April
30, 2000, and set annual compensation for the transportation services provided
by Enogex to OG&E at $41.3 million until competitively-bid gas transportation
begins.
In 1994, the Company restructured and redesigned its operations to reduce
costs in order to more favorably position itself for the competitive electric
utility environment. As part of this process, the Company implemented a
Voluntary Early Retirement Package ("VERP") and a
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severance package in 1994. These two packages reduced the Company's workforce by
approximately 900 employees.
In response to an application filed by the Company, the OCC issued an order
on October 26, 1994, that permitted the Company to: (i) establish a regulatory
asset in connection with the costs associated with the workforce reduction; (ii)
amortize the December 31, 1994, balance of the regulatory asset over 26 months;
and (iii) reduce the Company's electric rates by approximately $15 million
annually, effective January 1995. In 1996, the labor savings substantially
offset the amortization of the regulatory asset and the annual rate reduction of
$15 million. The regulatory asset was fully amortized at February 28, 1997, and
again, the labor savings substantially offset the regulatory asset amortization
in 1997 and, therefore, did not significantly impact operating results in the
current period.
As previously reported, the Oklahoma House of Representatives was
considering legislation to set the framework for electric industry competition.
In April 1997, this legislation was passed by the Oklahoma House and signed into
law by the Governor. See Part II, Item 5 - "Other Information" for further
discussion of this legislation.
REVENUES
Operating revenues decreased $5.9 million or 2.5 percent. This decrease was
due to lower sales of electricity primarily attributable to warmer weather.
The impact of the warmer weather resulted in a 1.1 percent decrease in
kilowatt-hour sales to Company customers ("system sales"). Sales to other
utilities decreased 26.3 percent; however, sales to other utilities are at much
lower prices per kilowatt-hour and have less impact on operating revenues and
earnings than system sales.
EXPENSES
Operating expenses decreased $5.2 million or 2.3 percent primarily due to
decreased fuel expense and other operation and maintenance expense.
Fuel expense decreased $3.3 million or 4.7 percent in the current period
due to decreased generation. Variances in the actual cost of fuel used in
electric generation and certain purchased power costs, as compared to that
component in cost-of-service for ratemaking, are passed through to the Company's
electric customers through automatic fuel adjustment clauses. The automatic fuel
adjustment clauses are subject to periodic review by the OCC, the Arkansas
Public Service Commission ("APSC") and the Federal Energy Regulatory Commission
("FERC"). Enogex Inc. owns and operates a pipeline business that delivers
natural gas to the generating stations of the Company. The OCC, the APSC and the
FERC have authority to examine the appropriateness of any gas transportation
charges or other fees the Company pays Enogex, which the Company seeks to
recover through the fuel adjustment clause or other tariffs.
Other operation and maintenance decreased $4.2 million or 6.9 percent
primarily due to completion of the VERP amortization in February 1997, and costs
associated with the
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development of the enterprise software in 1996. Depreciation and amortization
increased due to an increase in depreciable property. Income taxes decreased
primarily due to lower pre-tax earnings.
Other income and deductions increased $525,000 in the current period
primarily due to a gain on the sale of sulfur dioxide allowances. Total interest
charges decreased in the current period due to the retirement of $15 million of
5.125 percent first-mortgage bonds in January 1997, and a lower average daily
balance in short-term debt.
EARNINGS
The loss from continuing operations of $3.9 million represents an
improvement of $78,000 in the current period. Earnings per share from continuing
operations remained at an eleven cent loss in the current period compared to the
first quarter of 1996, which reflects the above items and the seasonal nature of
the Company's regulated electric business.
LIQUIDITY AND CAPITAL REQUIREMENTS
The Company meets its cash needs through internally generated funds,
permanent financing and short-term borrowings. Internally generated funds and
short-term borrowings are expected to meet virtually all of the Company's
capital requirements through the remainder of 1997. Short-term borrowings will
continue to be used to meet temporary cash requirements.
The Company's primary needs for capital are related to construction of new
facilities to meet anticipated demand for utility service, to replace or expand
existing facilities and to some extent, for satisfying maturing debt and sinking
fund obligations. Capital expenditures for the current period of $17.7 million
were financed with internally generated funds and short-term borrowings.
The Company's capital structure and cash flow remained strong throughout
the current period. The Company's combined cash and cash equivalents from
continuing operations decreased approximately $97,000 during the three months
ended March 31, 1997. The decrease reflects the Company's cash flow from
operations plus an increase in short-term borrowings, net of retirement of
long-term debt, construction expenditures and dividend payments.
In April 1996, the Company filed a registration statement for the sale of
up to $300 million of senior notes. In February 1997, the Company reduced the
amount of the registration statement for senior notes to $250 million and filed
a new registration statement for up to $50 million of grantor trust preferred
securities. Assuming favorable market conditions, the Company may issue all or
part of these securities to refinance, at lower rates, one or more series of
outstanding first mortgage bonds or preferred stock.
Like any business, the Company is subject to numerous contingencies, many
of which are beyond its control. For discussion of significant contingencies
that could affect the Company,
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reference is made to Part II, Item 1 - "Legal Proceedings" and Item 5 - "Other
Information" of this Form 10-Q and to "Management's Discussion and Analysis" and
Notes 8 and 9 of Notes to the Consolidated Financial Statements in the Company's
1996 Form 10-K.
PART II. OTHER INFORMATION
Item 1 LEGAL PROCEEDINGS
Reference is made to Item 3 of the Company's 1996 Form 10-K for a
description of certain legal proceedings presently pending. There are no new
significant cases to report against the Company and there have been no
significant changes in the previously reported proceedings.
Item 5 OTHER INFORMATION
As previously reported, the Oklahoma State Senate passed legislation that
will permit increased competition at the retail level by July 2002. In April
1997, this legislation which is known as the Electric Restructuring Act of 1997
(the "Act") was passed by the Oklahoma House of Representatives and signed into
law by the Governor. If implemented as proposed, the Act will significantly
affect OG&E's operations in the future.
The following summary of the Act does not purport to be complete and is
subject to the specific provisions of the Act, which is codified at Sections
190.2 et. seq. of Title 17 of the Oklahoma Statutes. The Act consists of eight
sections, with Section 1 designating the name of the Act. Section 2 describes
the purposes of the Act, which is generally to restructure the electric industry
to provide for more competition and, in particular, to provide for the orderly
restructuring of the electric utility industry in the State of Oklahoma in order
to allow direct access by retail consumers to the competitive market for the
generation of electricity while maintaining the safety and reliability of the
electric system in the state.
The primary goals of a restructured electric utility industry, as set forth
in Section 2 of the Act, are as follows:
1. To reduce the cost of electricity for as many consumers as possible,
helping industry to be more competitive, to create more jobs in
Oklahoma and help lower the cost of government by reducing the amount
and type of regulation now paid for by taxpayers;
2. To encourage the development of a competitive electricity industry
through the unbundling of prices and services and separation of
generation services from transmission and distribution services;
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3. To enable retail electric energy suppliers to engage in fair and
equitable competition through open, equal and comparable access to
transmission and distribution systems and to avoid wasteful
duplication of facilities;
4. To ensure that direct access by retail consumers to the competitive
market for generation be implemented in Oklahoma by July 1, 2002; and
5. To ensure that proper standards of safety, reliability and service are
maintained in a restructured electric service industry.
Section 3 of the Act sets forth various definitions and exempts in large
part several electric cooperatives and municipalities from the Act unless they
choose to be governed by it.
Sections 4, 5 and 6 of the Act are designed to implement the goals of the
Act and provide for various studies and task forces to assess the issues and
consequences associated with the proposed restructuring of the electric utility
industry. In Section 4, the Oklahoma Corporation Commission (the "Oklahoma
Commission") is directed to undertake a study of all relevant issues relating to
restructuring the electric utility industry in Oklahoma including, but not
limited to, the issues set forth in Section 4, and to develop a proposed
electric utility framework for Oklahoma under the direction of the Joint
Electric Utility Task Force (which task force is described below). However, the
Oklahoma Commission is prohibited from promulgating orders relating to the
restructuring without prior authorization of the Oklahoma Legislature. Also, in
developing a framework for a restructured electric utility industry, the
Oklahoma Commission is to adhere to fourteen principles set forth in Section 4,
including the following:
1. Appropriate rules shall be promulgated, ensuring that reliable and
safe electric service is maintained.
2. Consumers shall be allowed to choose among retail electric energy
suppliers to help ensure competitive and innovative markets. A process
should be established whereby all retail consumers are permitted to
choose their retail electric energy suppliers by July 1, 2002.
3. When consumer choice is introduced, rates shall be unbundled to
provide clear price information on the components of generation,
transmission and distribution and any other ancillary charges. Charges
for public benefit programs currently authorized by statute or the
Oklahoma Commission, or both, shall be unbundled and appear in line
item format on electric bills for all classes of consumers.
4. An entity providing distribution services shall be relieved of its
traditional obligation to provide electric supply but shall have a
continuing obligation to provide distribution service for all
consumers in its service territory.
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5. The benefits associated with implementing an independent system
planning committee composed of owners of electric distribution systems
to develop and maintain planning and reliability criteria for
distribution facilities shall be evaluated.
6. A defined period for the transition to a restructured electric utility
industry shall be established. The transition period shall reflect a
suitable time frame for full compliance with the requirements of a
restructured utility industry.
7. Electric rates for all consumer classes shall not rise above current
levels throughout the transition period. If possible, electric rates
for all consumers shall be lowered when feasible as markets become
more efficient in a restructured industry.
8. The Oklahoma Commission shall consider the establishment of a
distribution access fee to be assessed to all consumers in Oklahoma
connected to electric distribution systems regulated by the Oklahoma
Commission. This fee shall be charged to cover social costs, capital
costs, operating costs, and other appropriate costs associated with
the operation of electric distribution systems and the provision of
electric services to the retail consumer.
9. Electric utilities have traditionally had an obligation to provide
service to consumers within their established service territories and
have entered into contracts, long-term investments and federally
mandated co-generation contracts to meet the needs of consumers. These
investments and contracts have resulted in costs which may not be
recoverable in a competitive restructured market and thus may be
"stranded." Procedures shall be established for identifying and
quantifying stranded investments and for allocating costs and
mechanisms shall be proposed for recovery of an appropriate amount of
prudently incurred, unmitigable and verifiable stranded costs and
investments. As part of this process, each entity shall be required to
propose a recovery plan which establishes its unmitigable and
verifiable stranded costs and investments and a limited recovery
period designed to recover such costs expeditiously, provided that the
recovery period and the amount of qualified transition costs shall
yield a transition charge which shall not cause the total price for
electric power, including transmission and distribution services, for
any consumer to exceed the cost per kilowatt-hour paid on the
effective date of this Act during the transition period. The
transition charge shall be applied to all consumers including direct
access consumers, and shall not disadvantage one class of consumer or
supplier over another, nor impede competition and shall be allocated
over a period of not less than three (3) years nor more than seven (7)
years.
10.
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10. It is the intent that all transition costs shall be recovered by
virtue of the savings generated by the increased efficiency in markets
brought about by restructuring of the electric utility industry. All
classes of consumers shall share in the transition costs.
Subject to the principles set forth in Section 4, the Oklahoma Commission
is directed to prepare a four-part study to be delivered to the Joint Electric
Utility Task Force (the "Joint Task Force"). The first part of the study, which
is due February 1, 1998, is to address independent operation issues. The second
part, which is due December 31, 1998, is to address technical issues, such as
reliability, safety, unbundling of generation, transmission and distribution
services, transition issues and market power. The third part of the study is due
December 31, 1999, and is to address financial issues, including rates, charges,
access fees, transition costs and stranded costs. The final part of the study is
due August 31, 2000 and is to cover consumer issues, such as the obligation to
serve, service territories, consumer choices, competition and consumer
safeguards.
Section 5 of the Act directs the Oklahoma Tax Commission to study and
submit a report to the Joint Task Force by December 31, 1998 on the impact of
the restructuring of the electric utility industry on state tax revenues and all
other facets of the current utility tax structure on the state and all political
subdivisions of the state. The Oklahoma Tax Commission is precluded from issuing
any rules on such matters without the approval of the Oklahoma Legislature or
the Joint Task Force. Also, in the event a uniform tax policy that allows all
competitors to be taxed on a fair and equitable basis is not established on or
before July 1, 2002, then the effective date for implementing customer choice of
retail electric suppliers shall be extended until a uniform tax policy is
established.
Section 6 creates the Joint Task Force, which shall consist of seven
members from the Oklahoma Senate and seven members from the Oklahoma House of
Representatives. The Joint Task Force is to direct and oversee the studies of
the Oklahoma Commission and Oklahoma Tax Commission set forth in Sections 4 and
5 of the Act. The Joint Task Force is permitted to make final recommendations to
the Governor and Oklahoma Legislature. The Joint Task Force is also empowered to
retain consultants to study the creation of an Independent System Operator,
which would coordinate the physical supply of electricity throughout Oklahoma
and maintain reliability, security and stability of the bulk power system. In
addition, such study shall assess the benefits of establishing a power exchange
that would operate as a power pool allowing power producers to compete on common
ground in Oklahoma. In fulfilling its tasks, the Joint Task Force can appoint
advisory councils made up of electric utilities, regulators, residential
customers and other constituencies.
Section 7 provides generally that, with respect to electric distribution
providers, no customer switching will be allowed from the effective date of the
Act until July 1, 2002, except by mutual consent. It also provides that any
municipality that fails to become subject to the Act will be prohibited from
selling power outside its municipal limits except from lines owned on the
effective date of the Act. Section 8 sets forth the effective date of the Act as
April 25, 1997.
11
<PAGE>
The Company intends to actively participate in the restructuring of the
electric utility industry in Oklahoma and to remain a competitive supplier of
electricity. However, due to the early stages of this process, the Company
cannot predict the impact that the restructuring will have on its operations in
the future.
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.01 - Financial Data Schedule.
(b) Reports on Form 8-K
A Form 8-K Current Report under Item 5, Other Events, dated January 29,
1997, reported that the Oklahoma Corporation Commission voted to approve the
Company's proposed settlement to lower rates by $50 million annually.
A Form 8-K Current Report under Item 5, Other Events, dated January 31,
1997, reported that the Company became a subsidiary of OGE Energy Corp. on
December 31, 1996.
12
<PAGE>
SIGNATURES
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/ Donald R. Rowlett
-----------------------------------------
Donald R. Rowlett
Controller Corporate Accounting
(On behalf of the registrant and in
his capacity as Chief Accounting Officer)
May 12, 1997
13
<PAGE>
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
27.01 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the Oklahoma
Gas and Electric Company Consolidated Statements of Income, Balance Sheets, and
Statements of Cash Flows as reported on Form 10-Q as of March 31, 1996 and is
qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,028,861
<OTHER-PROPERTY-AND-INVEST> 22,217
<TOTAL-CURRENT-ASSETS> 203,520
<TOTAL-DEFERRED-CHARGES> 87,478
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,342,076
<COMMON> 116,177
<CAPITAL-SURPLUS-PAID-IN> 396,247
<RETAINED-EARNINGS> 293,324
<TOTAL-COMMON-STOCKHOLDERS-EQ> 805,748
0
49,329
<LONG-TERM-DEBT-NET> 684,385
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 65,900
<LONG-TERM-DEBT-CURRENT-PORT> 25,000
0
<CAPITAL-LEASE-OBLIGATIONS> 6,802
<LEASES-CURRENT> 3,122
<OTHER-ITEMS-CAPITAL-AND-LIAB> 701,790
<TOT-CAPITALIZATION-AND-LIAB> 2,342,076
<GROSS-OPERATING-REVENUE> 227,878
<INCOME-TAX-EXPENSE> (1,088)
<OTHER-OPERATING-EXPENSES> 218,857
<TOTAL-OPERATING-EXPENSES> 217,769
<OPERATING-INCOME-LOSS> 10,109
<OTHER-INCOME-NET> 434
<INCOME-BEFORE-INTEREST-EXPEN> 10,543
<TOTAL-INTEREST-EXPENSE> 14,428
<NET-INCOME> (3,885)
571
<EARNINGS-AVAILABLE-FOR-COMM> (4,456)
<COMMON-STOCK-DIVIDENDS> 30,849
<TOTAL-INTEREST-ON-BONDS> 13,316
<CASH-FLOW-OPERATIONS> 39,699
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
