Investment in Unconsolidated Affiliates

6 Months Ended

Jun. 30, 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 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 and six months ended June 30, 2022, OGE Energy recognized a pre-tax unrealized loss of $46.3 million and a pre-tax unrealized gain of $67.0 million, respectively, related to its investment in Energy Transfer's equity securities, as detailed below. 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 in April 2022. Through the end of July 2022, OGE Energy has sold 73.3 million Energy Transfer limited partner units, resulting in pre-tax net proceeds of $812.6 million and a remaining ownership percentage of less than one percent based on the latest publicly available information filed by Energy Transfer.


(In millions)	Three Months Ended June 30, 2022		Six Months Ended June 30, 2022
Gain (loss) on equity securities	$	(39.6)	$	242.7
Net gain recognized on equity securities sold	6.7		175.7
Unrealized gain (loss) on equity securities held	$	(46.3)	$	67.0

Distributions received from Energy Transfer were $13.3 million and $30.0 million during the three and six months ended June 30, 2022, respectively, which are presented within Other Income in OGE Energy's 2022 condensed consolidated income statement. On July 26, 2022, Energy Transfer announced a 15 percent increase in its quarterly cash distribution, resulting in a distribution of $0.23 per unit on its outstanding common units that will be paid on August 19, 2022 to unitholders of record as of the close of business on August 8, 2022.

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 2021 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 $18.4 million and $36.7 million during the three and six months ended June 30, 2021, respectively.

The following table presents a reconciliation of OGE Energy's equity in earnings of unconsolidated affiliates for the three and six months ended June 30, 2021.



(In millions)	Three Months Ended			Six Months Ended
Enable net income	$	79.0		$	234.0
OGE Energy's percent ownership at period end	25.5		%	25.5		%
OGE Energy's portion of Enable net income	$	20.0		$	59.5
Amortization of basis difference and dilution recognition (A)	13.5			27.2
Equity in earnings of unconsolidated affiliates	$	33.5		$	86.7

(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 $33.2 million and $33.4 million during the three months ended June 30, 2022 and 2021, respectively, and $66.1 million and $69.1 million during the six months ended June 30, 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 and $0.2 million during the three and six months ended June 30, 2021, respectively. 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 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 compensated Enable when Enable's deliveries exceeded OG&E's pipeline nominations. Enable compensated OG&E when OG&E's pipeline nominations exceeded Enable's deliveries. 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 and six months ended June 30, 2021.



(In millions)	Three Months Ended		Six Months Ended
Operating revenues:
Electricity to power electric compression assets	$	3.3	$	5.9
Fuel, purchased power and direct transmission expense:
Natural gas transportation services	$	9.3	$	14.0

Natural gas purchases (sales)	$	(8.4)	$	(20.6)