Income Taxes

12 Months Ended

Dec. 31, 2020

Income Taxes [Abstract]

Income Tax Disclosure [Text Block]

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)	2020		2019		2018		2020		2019		2018
Provision (benefit) for current income taxes:
Federal	$	8.4	$	(6.4)	$	(1.9)	$	(3.8)	$	(7.9)	$	(12.4)
State	0.5		5.1		(4.4)		(0.6)		4.1		(4.1)
Total provision (benefit) for current income taxes	8.9		(1.3)		(6.3)		(4.4)		(3.8)		(16.5)
Provision (benefit) for deferred income taxes, net:
Federal	(105.2)		48.5		74.7		45.7		37.7		53.7
State	(31.1)		(17.4)		3.7		(6.6)		(13.8)		2.7
Total provision (benefit) for deferred income taxes, net	(136.3)		31.1		78.4		39.1		23.9		56.4
Deferred federal investment tax credits, net	—		—		0.1		—		—		0.1
Total income tax expense (benefit)	$	(127.4)	$	29.8	$	72.2	$	34.7	$	20.1	$	40.0

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 2017. 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 utility property have been deferred and will be amortized to income over the life of the related property. Additionally, OG&E earns federal tax credits associated with production from its wind facilities. Oklahoma production and investment state tax credits are also earned on investments in electric and solar 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	2020		2019		2018		2020		2019		2018
Statutory federal tax rate	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%	21.0	%
Impairment of OGE Energy's investment in Enable (A)	31.6		—		—		—		—		—
Remeasurement of state deferred tax liabilities	0.9		(0.8)		(0.4)		—		—		—
Executive compensation limitation	0.2		0.2		0.2		—		—		—
Other	0.1		(0.7)		0.4		0.1		(0.6)		(0.1)
Federal renewable energy credit (B)	(5.0)		(6.0)		(5.1)		(5.4)		(7.6)		(6.9)
Amortization of net unfunded deferred taxes	(4.4)		(4.5)		(2.1)		(4.8)		(5.6)		(2.9)
State income taxes, net of federal income tax benefit	(1.4)		(1.2)		0.4		(1.6)		(1.8)		(0.2)
Stock-based compensation	(0.3)		(1.2)		—		—		—		—
401(k) dividends	(0.4)		(0.4)		(0.3)		—		—		—
Federal deferred tax revaluation	—		—		0.4		—		—		—
Effective income tax rate	42.3	%	6.4	%	14.5	%	9.3	%	5.4	%	10.9	%

(A)As further discussed in Note 5, OGE Energy recorded a $780.0 million impairment on its investment in Enable in March 2020, which resulted in a tax benefit being recorded that caused a significant variance to the effective tax rate as compared to the prior year. This variance has been presented in the table as a single line item in order to facilitate comparability of other components of the effective tax rate.

(B)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, 2020 and 2019.

	OGE Energy				OG&E
December 31 (In millions)	2020		2019		2020		2019
Deferred income tax liabilities, net:
Accelerated depreciation and other property related differences	$	1,721.2	$	1,656.8	$	1,721.2	$	1,656.8
Investment in Enable	302.6		478.2		—		—
Regulatory assets	52.3		28.4		52.3		28.4
Pension Plan	3.9		4.1		27.4		24.5
Bond redemption-unamortized costs	2.0		2.2		2.0		2.2
Derivative instruments	1.7		1.6		—		—
Federal tax credits	(236.6)		(238.0)		(236.6)		(238.0)
Income taxes recoverable from customers, net	(221.8)		(229.9)		(221.8)		(229.9)
State tax credits	(204.4)		(185.8)		(189.0)		(170.8)
Regulatory liabilities	(81.0)		(68.1)		(81.0)		(68.1)
Postretirement medical and life insurance benefits	(22.4)		(23.3)		(15.3)		(16.0)
Asset retirement obligations	(20.3)		(19.2)		(20.3)		(19.2)
Net operating losses	(12.0)		(16.6)		(1.4)		(5.7)
Accrued liabilities	(9.6)		(10.7)		(5.2)		(4.3)
Deferred federal investment tax credits	(2.7)		(1.8)		(2.7)		(1.8)
Accrued vacation	(2.2)		(2.1)		(1.6)		(1.6)
Other	(1.4)		0.4		(6.5)		(4.7)
Uncollectible accounts	(0.7)		(0.4)		(0.7)		(0.4)
Total deferred income tax liabilities, net	$	1,268.6	$	1,375.8	$	1,020.8	$	951.4

As of December 31, 2020, the Registrants have classified $17.6 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, 2020, 2019 and 2018.

(In millions)	2020		2019		2018
Balance at January 1	$	20.7	$	20.7	$	20.7
Tax positions related to current year:
Additions	1.2		—		—
Balance at December 31	$	21.9	$	20.7	$	20.7

As of December 31, 2020, 2019 and 2018, there were $17.6 million, $16.4 million and $16.4 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

Where applicable, the Registrants classify income tax-related interest and penalties as interest expense and other expense, respectively. During the year ended December 31, 2020, there were no income tax-related interest or penalties recorded with regard to uncertain tax positions.

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. As a result of those measurements, in September 2020, the Registrants recorded an additional reserve for certain federal research and development credits in the amount of $1.2 million.

The Registrants sustained federal and state tax operating losses through 2012 caused primarily by bonus depreciation and other book versus tax temporary differences. Federal net operating losses generated during those years have been fully utilized. State operating losses are being carried forward for utilization in future years. In addition to the tax operating losses, the Registrants were unable to utilize the various tax credits that were generated during those years. These tax losses and credits are being carried as deferred tax assets and will be utilized in future periods. Under current law, the Registrants anticipate future taxable income will be sufficient to utilize remaining losses and credits before they begin to expire after 2020. The following table presents a summary of these carry forwards.

	OGE Energy				OG&E
(In millions)	Carry Forward Amount		Deferred Tax Asset		Carry Forward Amount		Deferred Tax Asset		Earliest Expiration Date
State operating loss	$	268.0	$	12.0	$	21.5	$	1.4	2030
Federal tax credits	$	236.6	$	236.6	$	236.6	$	236.6	2032
State tax credits:
Oklahoma investment tax credits	$	205.6	$	162.3	$	186.1	$	147.0	N/A
Oklahoma capital investment board credits	$	12.7	$	12.7	$	12.7	$	12.7	N/A
Oklahoma zero emission tax credits	$	37.2	$	29.3	$	37.2	$	29.3	2021
Louisiana inventory credits	$	0.2	$	0.1	$	—	$	—	2021

N/A - not applicable