Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes [Abstract]

Income Taxes

7. Income Taxes

Income Tax Expense (Benefit)

The following table presents the components of income tax expense (benefit).

	OGE Energy									OG&E
Year Ended December 31 (In millions)	2023			2022			2021			2023			2022			2021
Provision (benefit) for current income taxes:
Federal	$	46.1		$	250.8		$	16.4		$	48.9		$	(141.2	)	$	(9.0	)
State		(2.2	)		28.8			1.7			3.7			(0.9	)		9.0
Total provision (benefit) for current income taxes		43.9			279.6			18.1			52.6			(142.1	)		—
Provision (benefit) for deferred income taxes, net:
Federal		18.1			(110.8	)		133.1			18.8			219.9			58.3
State		(5.8	)		(45.2	)		(10.0	)		(2.6	)		(1.4	)		(16.5	)
Total provision (benefit) for deferred income taxes, net		12.3			(156.0	)		123.1			16.2			218.5			41.8
Total income tax expense	$	56.2		$	123.6		$	141.2		$	68.8		$	76.4		$	41.8

OGE Energy files consolidated income tax returns in the U.S. federal jurisdiction and various state jurisdictions. OG&E is a part of the consolidated income tax return of OGE Energy. With few exceptions, the Registrants are no longer subject to U.S. federal tax or state and local examinations by tax authorities for years prior to 2020. Income taxes are generally allocated to each company in the affiliated group, including OG&E, based on its stand-alone taxable income or loss. Federal investment tax credits previously claimed on electric company property have been deferred and will be amortized to income over the life of the related property. Oklahoma investment tax credits are also earned on investments in electric generating facilities which further reduce OG&E's effective tax rate.

The following table presents a reconciliation of the statutory tax rates to the effective income tax rate.

	OGE Energy									OG&E
Year Ended December 31	2023			2022			2021			2023			2022			2021
Statutory federal tax rate		21.0	%		21.0	%		21.0	%		21.0	%		21.0	%		21.0	%
State income taxes, net of federal income tax benefit		(1.3	)		(1.0	)		0.9			0.3			(0.4	)		(1.4	)
Stock-based compensation		0.1			—			0.1			—			—			—
Executive compensation limitation		0.2			0.1			0.1			—			—			—
Amortization of net unfunded deferred taxes		(7.0	)		(3.2	)		(2.1	)		(6.7	)		(5.0	)		(4.6	)
Federal renewable energy credit (A)		—			—			(2.0	)		—			—			(4.4	)
Remeasurement of state deferred taxes due to Energy Transfer merger		—			—			(1.1	)		—			—			—
Remeasurement of state deferred tax liabilities		—			(0.6	)		(0.6	)		—			—			—
401(k) dividends		(0.3	)		(0.2	)		(0.2	)		—			—			—
Other		(0.8	)		(0.4	)		—			(0.7	)		(0.8	)		(0.2	)
Effective income tax rate		11.9	%		15.7	%		16.1	%		13.9	%		14.8	%		10.4	%

(A)Represents credits primarily associated with the production from OG&E's wind farms.

The deferred tax provisions are recognized as costs in the ratemaking process by the commissions having jurisdiction over the rates charged by OG&E. The following table presents the components of Deferred Income Taxes at December 31, 2023 and 2022.

	OGE Energy						OG&E
December 31 (In millions)	2023			2022			2023			2022
Deferred income tax liabilities, net:
Accelerated depreciation and other property related differences	$	1,753.8		$	1,714.5		$	1,753.8		$	1,714.5
Regulatory assets		67.6			54.8			67.6			54.7
Pension Plan		21.8			18.0			37.9			35.4
Corporate owned life insurance		2.6			2.4			—			—
Bond redemption-unamortized costs		1.4			1.6			1.4			1.6
Income taxes recoverable from customers, net		(202.7	)		(216.7	)		(202.7	)		(216.7	)
State tax credits		(228.8	)		(221.2	)		(213.5	)		(208.5	)
Regulatory liabilities		(54.4	)		(60.8	)		(54.4	)		(60.8	)
Asset retirement obligations		(19.7	)		(18.8	)		(19.7	)		(18.8	)
Postretirement medical and life insurance benefits		(20.8	)		(19.2	)		(14.0	)		(12.7	)
Accrued liabilities		(13.2	)		(11.2	)		(5.5	)		(7.3	)
Deferred federal investment tax credits		(2.7	)		(2.9	)		(2.7	)		(2.9	)
Accrued vacation		(1.4	)		(1.4	)		(1.4	)		(1.1	)
Uncollectible accounts		(0.5	)		(0.5	)		(0.4	)		(0.5	)
Other		(2.2	)		(5.1	)		(5.6	)		(5.8	)
Total deferred income tax liabilities, net	$	1,300.8		$	1,233.5		$	1,340.8		$	1,271.1

As of December 31, 2023, the Registrants have classified $14.7 million of unrecognized tax benefits as a reduction of deferred tax assets recorded. Management is currently unaware of any issues under review that could result in significant additional payments, accruals or other material deviation from this amount.

The following table presents a reconciliation of the Registrants' total gross unrecognized tax benefits as of the years ended December 31, 2023, 2022 and 2021.

(In millions)	2023		2022			2021
Balance at January 1	$	20.7	$	22.4		$	21.9
Tax positions related to current year:
Additions		7.9		—			1.7
Reductions		—		(1.7	)		(1.2	)
Balance at December 31	$	28.6	$	20.7		$	22.4

The Registrants recognize tax benefits from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. The tax benefits in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized on settlement. In 2023, the Registrants recorded a $7.9 million reserve related to a state tax position taken associated with the sale of Energy Transfer units.

Where applicable, the Registrants classify income tax-related interest and penalties as interest expense and other expense, respectively. During the years ended December 31, 2023, 2022 and 2021, there were no income tax-related interest or penalties recorded with regard to uncertain tax positions.

As of December 31, 2023, 2022 and 2021, there were $22.6 million, $16.4 million and $18.1 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

The following table presents a summary of the Registrants' tax credits carried forward as deferred tax assets. Under current law, the Registrants expect future taxable income will be sufficient to utilize all credits before they begin to expire after 2028.

	OGE Energy				OG&E
(In millions)	Carry Forward Amount		Deferred Tax Asset		Carry Forward Amount		Deferred Tax Asset		Earliest Expiration Date
State tax credits:
Oklahoma investment tax credits	$	259.1	$	204.7	$	239.8	$	189.4	N/A
Oklahoma capital investment board credits	$	12.8	$	12.8	$	12.8	$	12.8	N/A
Oklahoma zero emission tax credits	$	16.0	$	11.3	$	16.0	$	11.3	2028

N/A - not applicable

In connection with its investment in Energy Transfer during 2022, OGE Energy anticipated operating losses in various state jurisdictions. As discussed in Note 1, OGE Energy has fully disposed of its investment in Energy Transfer, and it does not expect future taxable income in these states. Therefore, as of December 31, 2022, OGE Energy recorded a valuation allowance of $2.7 million, which eliminated the related deferred tax asset balance. During 2023, OGE Energy received final information which resulted in taxable income instead of operating losses for tax year 2022. The valuation allowance originally recorded in 2022 was eliminated when the final 2022 tax returns were filed in 2023.