Investment in Unconsolidated Affiliates

3 Months Ended

Mar. 31, 2022

Equity Method Investments and Joint Ventures Disclosure [Text Block]

Investment in Equity Securities of Energy Transfer

OGE Energy accounts for its investment in Energy Transfer's equity securities as an equity investment with a readily determinable fair value under ASC 321, "Investments – Equity Securities." OGE Energy presents the Energy Transfer equity securities at estimated fair value in its balance sheet. OGE Energy presents realized and unrealized gains and losses of the equity securities, as well as dividend income from the investment, within the Other Income (Expense) section in its statement of income, as appropriate. For the three months ended March 31, 2022, OGE Energy recognized a pre-tax unrealized gain of $282.3 million related to its investment in Energy Transfer's equity securities.

Distributions received from Energy Transfer were $16.7 million during the three months ended March 31, 2022, which are presented within Other Income in OGE Energy's 2022 condensed consolidated income statement. On April 26, 2022, Energy Transfer announced an approximately 14 percent increase in its quarterly cash distribution, resulting in a distribution of $0.20 per unit on its outstanding common units that will be paid on May 19, 2022 to unitholders of record as of the close of business on May 9, 2022.

As previously disclosed, OGE Energy intends to become a pure play electric utility by exiting its investment in Energy Transfer's equity securities, and unit sales commenced subsequent to March 31, 2022. Through the end of April 2022, OGE Energy has sold 21.75 million Energy Transfer limited partner units, resulting in pre-tax net proceeds of $246.0 million and a remaining ownership percentage of approximately two percent based on the latest publicly available information filed by Energy Transfer.

Investment in Unconsolidated Affiliates (Enable)

For more information concerning OGE Energy's former equity method investment in Enable, including the merger transaction with Energy Transfer and OGE Energy's previous accounting for its investment in Enable, see Notes 1 and 5 within "Item 8. Financial Statements and Supplementary Data" in OGE Energy's 202 1 Form 10-K. Prior to December 2, 2021, OGE Energy's investment in Enable was considered to be a variable interest entity; however, OGE Energy was not considered the primary beneficiary of Enable. Under the equity method of accounting, the investment was adjusted each period for contributions made, distributions received and OGE Energy's share of the investee's comprehensive income as adjusted for basis differences. In this Form 10-Q, Enable activity is included for the relevant portion of OGE Energy's 2021 information presented through December 2, 2021.

OGE Energy considered distributions received from Enable which did not exceed cumulative equity in earnings subsequent to the date of investment to be a return on investment and were classified as operating activities in the statements of cash flows. OGE Energy considered distributions received from Enable in excess of cumulative equity in earnings subsequent to the date of investment to be a return of investment and are classified as investing activities in the statements of cash flows. Distributions received from Enable were $18.3 million during the three months ended March 31, 2021.

The following table presents a reconciliation of OGE Energy's equity in earnings of unconsolidated affiliates for the three months ended March 31, 2021.


	Three Months Ended
(In millions)	March 31, 2021
Enable net income	$	155.0
OGE Energy's percent ownership at period end	25.5		%
OGE Energy's portion of Enable net income	$	39.5
Amortization of basis difference and dilution recognition (A)	13.7
Equity in earnings of unconsolidated affiliates	$	53.2

(A)Includes loss on dilution, net of proportional basis difference recognition.

Related Party Transactions

OGE Energy charges operating costs to OG&E, and prior to December 2, 2021, charged operating costs to Enable, based on several factors. Operating costs directly related to OG&E and/or Enable are assigned as such. Operating costs incurred for the benefit of OG&E are allocated either as overhead based primarily on labor costs or using the "Distrigas" method, which is a three-factor formula that uses an equal weighting of payroll, net operating revenues and gross property, plant and equipment.

OGE Energy and OG&E

OGE Energy charged operating costs to OG&E of $32.9 million and $35.8 million during the three months ended March 31, 2022 and 2021, respectively.

OGE Energy and Enable

Prior to December 2, 2021, OGE Energy and Enable were parties to several agreements whereby OGE Energy provided specified support services to Enable, such as certain information technology, payroll and benefits administration. Under these agreements, OGE Energy charged operating costs to Enable of $0.1 million during the three months ended March 31, 2021. OGE Energy had accounts receivable from Enable for amounts billed for support services of $0.3 million as of December 31, 2021, which is included in Accounts Receivable in OGE Energy's 2021 consolidated balance sheet.

OG&E and Enable

Enable provided gas transportation services to OG&E pursuant to agreements, which expire in May 2024 and December 2038, that granted Enable the responsibility of delivering natural gas to OG&E's generating facilities and performing an imbalance service. With this imbalance service, in accordance with the cash-out provision of the contract, OG&E purchased gas from Enable when Enable's deliveries exceeded OG&E's pipeline receipts. Enable purchased gas from OG&E when OG&E's pipeline receipts exceeded Enable's deliveries. Further, an additional gas transportation services contract with Enable became effective in December 2018 related to the project to convert Muskogee Units 4 and 5 from coal to natural gas. Upon the

closing of the merger between Enable and Energy Transfer, these contracts were assumed by Energy Transfer. The following table presents summarized related party transactions between OG&E and Enable during the three months ended March 31, 2021.


	Three Months Ended
(In millions)		March 31, 2021
Operating revenues:
Electricity to power electric compression assets		$	2.6
Fuel, purchased power and direct transmission expense:
Natural gas transportation services		$	4.7

Natural gas purchases (sales)		$	(12.2)