OG&E Files Settlement Agreement in Arkansas Rate Case

Fuel charge adjustment means Arkansas electric bills will be lower this year

OKLAHOMA CITY, March 18 /PRNewswire-FirstCall/ — OG&E, the Arkansas Public Service Commission staff and the Arkansas Attorney General’s office have reached an agreement calling for a general rate increase of $13.6 million – an increase that could be more than offset during 2009 by reduced customer fuel charges.

If the Commission approves the settlement agreement next month, OG&E expects Arkansas residential customers will see little impact from the increase during the remainder of 2009 and could see a decrease in their total bill. That is because the negotiated settlement calls for new base rates to take effect at the same time OG&E implements a refund for a $12 million over-collection of fuel charges.

Generally, a fuel charge rate is established annually based on the forecast cost of fuel. OG&E is allowed to recover from its customers directly – without profit or loss – the actual cost of fuel used to generate electricity. However, if fuel costs change significantly, the fuel charge produces an under-recovery or over-recovery of costs. The price of natural gas, which peaked last summer, has since declined significantly. As a result, OG&E’s fuel charge collected about $12 million more than the actual cost of fuel.

Customer bills vary based on usage and weather patterns. But most customers should see bills that are several dollars lower during 2009. This is a result of the new rate structure, an adjustment in future fuel charges because of lower natural gas prices and the refund of excess fuel charges. Beginning in 2010, after the fuel charge refund has been completed, the average residential customer’s bill may increase $2 to $3 per month.

The settlement agreement also allows implementation of OG&E’s “time-of use” tariff. This allows participating customers to save on their electric bills by shifting some of their electricity consumption to times when demand for electricity is lowest – a complement to OG&E’s existing energy management and conservation programs in Arkansas.

The settlement filed on Monday “reflects the hard work and good faith of the parties,” said Howard Motley, vice president of regulatory affairs for OG&E.

“OG&E supports the agreement as a reasonable compromise and believes it is in the public interest,” Motley told the Commission in testimony filed to support the settlement agreement.

In August 2008, OG&E asked the Commission for a general rate increase of approximately $26 million.

In its filing at that time, OG&E said it was seeking recovery of costs for investments including a new power plant and improvements in its system of power lines, substations and related equipment to ensure that the company can reliably meet growing customer demand for electricity.

In a 2006 regulatory proceeding, OG&E was granted a $5 million rate increase to recover investments in a power plant acquired in 2004 and a new wind farm in northwestern Oklahoma. Fuel savings from these two facilities more than offset that rate increase. The 2006 Arkansas rate order applied the increase to business and industry; residential customers received a slight rate decrease.

If the Commission approves the settlement agreement, it will be the first general rate increase in 25 years for OG&E’s Arkansas residential customers. OG&E’s overall Arkansas rates, now about 36 percent below the national average and 23 percent below the regional average, would still be among the lowest in the United States even after the proposed increase.

OG&E, a subsidiary of Oklahoma City-based OGE Energy Corp. (NYSE: OGE), serves about 770,000 electric customers in a service area spanning 30,000 square miles, including about 65,000 customers in western Arkansas.

SOURCE OGE Energy Corp.