OGE ENERGY CORP. - Quarter Report: 2020 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____to_____

Commission File Number: 1-12579

OGE ENERGY CORP.

(Exact name of registrant as specified in its charter)


Oklahoma						73-1481638
(State or other jurisdiction of						(I.R.S. Employer
incorporation or organization)						Identification No.)

321 North Harvey

P.O. Box 321

Oklahoma City, Oklahoma 73101-0321

(Address of principal executive offices)

(Zip Code)

(Registrant's telephone number, including area code): 405-553-3000

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	OGE	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

At September 30, 2020, there were 200,020,017 shares of common stock, par value $0.01 per share, outstanding.

OGE ENERGY CORP.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

TABLE OF CONTENTS


			Page
GLOSSARY OF TERMS			ii
FORWARD-LOOKING STATEMENTS			1

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Income			3
Condensed Consolidated Statements of Comprehensive Income			4
Condensed Consolidated Statements of Cash Flows			5
Condensed Consolidated Balance Sheets			6
Condensed Consolidated Statements of Changes in Stockholders' Equity			8
Notes to Condensed Consolidated Financial Statements			9

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			31

Item 3. Quantitative and Qualitative Disclosures About Market Risk			56

Item 4. Controls and Procedures			56

Part II - OTHER INFORMATION
Item 1. Legal Proceedings			57

Item 1A. Risk Factors			57

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			58



Item 6. Exhibits			58

Signature			59

GLOSSARY OF TERMS

The following is a glossary of frequently used abbreviations that are found throughout this Form 10-Q.


Abbreviation			Definition
2019 Form 10-K			Annual Report on Form 10-K for the year ended December 31, 2019



APSC			Arkansas Public Service Commission

ASU			Accounting Standards Update from the Financial Accounting Standards Board


CenterPoint			CenterPoint Energy Resources Corp., wholly-owned subsidiary of CenterPoint Energy, Inc.
CO2			Carbon dioxide
Company			OGE Energy Corp., collectively with its subsidiaries
COVID-19			Novel Coronavirus disease


Dry Scrubber			Dry flue gas desulfurization unit with spray dryer absorber

Enable			Enable Midstream Partners, LP, a partnership formed to own and operate the midstream businesses of OGE Energy and CenterPoint; OGE Energy indirectly owns 25.5 percent of the common units of Enable and 50 percent of the general partner interest of the general partner of Enable
Enogex Holdings			Enogex Holdings LLC, the parent company of Enogex LLC and a majority-owned subsidiary of OGE Holdings, LLC (prior to May 1, 2013)
Enogex LLC			Enogex LLC, collectively with its subsidiaries (effective July 30, 2013, the name was changed to Enable Oklahoma Intrastate Transmission, LLC)
EPA			U.S. Environmental Protection Agency
Federal Clean Air Act			Federal Clean Air Act of 1970, as amended
Federal Clean Water Act			Federal Water Pollution Control Act of 1972, as amended
FERC			Federal Energy Regulatory Commission
FIP			Federal Implementation Plan
GAAP			Accounting principles generally accepted in the U.S.


MATS			Mercury and Air Toxics Standards
MBbl/d			Thousand barrels per day

MW			Megawatt
MWh			Megawatt-hour
NAAQS			National Ambient Air Quality Standards
NGLs			Natural gas liquids
NOX			Nitrogen oxide
OCC			Oklahoma Corporation Commission
ODEQ			Oklahoma Department of Environmental Quality

OG&E			Oklahoma Gas and Electric Company, wholly-owned subsidiary of OGE Energy
OGE Energy			Holding company
OGE Holdings			OGE Enogex Holdings, LLC, wholly-owned subsidiary of OGE Energy, parent company of Enogex Holdings (prior to May 1, 2013) and 25.5 percent owner of Enable
Pension Plan			Qualified defined benefit retirement plan




Regional Haze Rule			The EPA's Regional Haze Rule
Restoration of Retirement Income Plan			Supplemental retirement plan to the Pension Plan

SESH			Southeast Supply Header, LLC, in which Enable owns a 50 percent interest, that operates an approximately 290-mile interstate natural gas pipeline from Perryville, Louisiana to southwestern Alabama near the Gulf Coast
SIP			State Implementation Plan
SO2			Sulfur dioxide
SPP			Southwest Power Pool
System sales			Sales to OG&E's customers
TBtu/d			Trillion British thermal units per day
U.S.			United States of America

FORWARD-LOOKING STATEMENTS

Except for the historical statements contained herein, the matters discussed within this Form 10-Q, including those matters discussed within "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words "anticipate," "believe," "estimate," "expect," "intend," "objective," "plan," "possible," "potential," "project" and similar expressions. Actual results may vary materially from those expressed in forward-looking statements. In addition to the specific risk factors discussed within "Item 1A. Risk Factors" in the Company's 2019 Form 10-K and within "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 1A. Risk Factors" of "Part II - Other Information" herein, factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:

•general economic conditions, including the availability of credit, access to existing lines of credit, access to the commercial paper markets, actions of rating agencies and their impact on capital expenditures;

•the ability of the Company and its subsidiaries to access the capital markets and obtain financing on favorable terms as well as inflation rates and monetary fluctuations;

•the ability to obtain timely and sufficient rate relief to allow for recovery of items such as capital expenditures, fuel costs, operating costs, transmission costs and deferred expenditures;

•prices and availability of electricity, coal, natural gas and NGLs;

•the timing and extent of changes in commodity prices, particularly natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions Enable serves and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable's interstate pipelines;

•the timing and extent of changes in the supply of natural gas, particularly supplies available for gathering by Enable's gathering and processing business and transporting by Enable's interstate pipelines, including the impact of natural gas and NGLs prices on the level of drilling and production activities in the regions Enable serves;

•business conditions in the energy and natural gas midstream industries, including the demand for natural gas, NGLs, crude oil and midstream services;

•competitive factors, including the extent and timing of the entry of additional competition in the markets served by the Company;

•the impact on demand for our services resulting from cost-competitive advances in technology, such as distributed electricity generation and customer energy efficiency programs;

•technological developments, changing markets and other factors that result in competitive disadvantages and create the potential for impairment of existing assets;

•factors affecting utility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, unusual maintenance or repairs; unanticipated changes to fossil fuel, natural gas or coal supply costs or availability due to higher demand, shortages, transportation problems or other developments; environmental incidents; or electric transmission or gas pipeline system constraints;

•availability and prices of raw materials for current and future construction projects;

•the effect of retroactive pricing of transactions in the SPP markets or adjustments in market pricing mechanisms by the SPP;

•federal or state legislation and regulatory decisions and initiatives that affect cost and investment recovery, have an impact on rate structures or affect the speed and degree to which competition enters the Company's markets;

•environmental laws, safety laws or other regulations that may impact the cost of operations or restrict or change the way the Company operates its facilities;

•changes in accounting standards, rules or guidelines;

•the discontinuance of accounting principles for certain types of rate-regulated activities;

•the cost of protecting assets against, or damage due to, terrorism or cyberattacks and other catastrophic events;

•creditworthiness of suppliers, customers and other contractual parties;

•social attitudes regarding the utility, natural gas and power industries;

•identification of suitable investment opportunities to enhance shareholder returns and achieve long-term financial objectives through business acquisitions and divestitures;

•increased pension and healthcare costs;

•the impact of extraordinary external events, such as the current pandemic health event resulting from COVID-19, and their collateral consequences, including extended disruption of economic activity in our markets;

•costs and other effects of legal and administrative proceedings, settlements, investigations, claims and matters, including, but not limited to, those described in this Form 10-Q;

•difficulty in making accurate assumptions and projections regarding future revenues and costs associated with the Company's equity investment in Enable that the Company does not control; and

•other risk factors listed in the reports filed by the Company with the Securities and Exchange Commission, including those listed within "Item 1A. Risk Factors" in the Company's 2019 Form 10-K and "Item 1A. Risk Factors" of "Part II - Other Information" herein.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except per share data)	2020		2019		2020		2019
OPERATING REVENUES
Revenues from contracts with customers	$	687.8	$	739.2	$	1,600.2	$	1,717.7
Other revenues	14.3		16.2		36.7		41.4
Operating revenues	702.1		755.4		1,636.9		1,759.1



COST OF SALES	209.1		234.0		481.5		625.3



OPERATING EXPENSES
Other operation and maintenance	109.7		129.8		347.2		368.6
Depreciation and amortization	100.5		94.1		292.2		260.8


Taxes other than income	24.8		23.2		76.3		70.4
Operating expenses	235.0		247.1		715.7		699.8
OPERATING INCOME	258.0		274.3		439.7		434.0
OTHER INCOME (EXPENSE)
Equity in earnings (losses) of unconsolidated affiliates	15.8		38.3		(703.8)		104.8
Allowance for equity funds used during construction	1.1		1.0		3.7		3.7
Other net periodic benefit expense	(2.0)		(1.4)		(3.5)		(8.7)
Other income	5.5		4.6		27.0		16.3
Other expense	(5.4)		(5.5)		(23.9)		(15.6)
Net other income (expense)	15.0		37.0		(700.5)		100.5
INTEREST EXPENSE
Interest on long-term debt	38.7		37.5		114.1		101.9
Allowance for borrowed funds used during construction	(0.5)		(0.6)		(1.5)		(2.2)
Interest on short-term debt and other interest charges	1.6		2.7		6.3		10.4
Interest expense	39.8		39.6		118.9		110.1
INCOME (LOSS) BEFORE TAXES	233.2		271.7		(379.7)		424.4
INCOME TAX EXPENSE (BENEFIT)	55.8		20.8		(151.2)		26.2
NET INCOME (LOSS)	$	177.4	$	250.9	$	(228.5)	$	398.2


BASIC AVERAGE COMMON SHARES OUTSTANDING	200.1		200.2		200.1		200.1
DILUTED AVERAGE COMMON SHARES OUTSTANDING	200.4		200.8		200.1		200.6
BASIC EARNINGS (LOSS) PER AVERAGE COMMON SHARE	$	0.89	$	1.25	$	(1.14)	$	1.99
DILUTED EARNINGS (LOSS) PER AVERAGE COMMON SHARE	$	0.89	$	1.25	$	(1.14)	$	1.98

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Net income (loss)	$	177.4	$	250.9	$	(228.5)	$	398.2
Other comprehensive income (loss), net of tax:
Pension Plan and Restoration of Retirement Income Plan:
Amortization of deferred net loss, net of tax of $0.3, $0.3, $0.9 and $0.8, respectively	0.9		0.9		2.9		2.6



Settlement cost, net of tax of $0.5, $0.3, $0.6 and $2.6, respectively	1.3		0.8		1.5		7.9
Postretirement benefit plans:



Amortization of prior service credit, net of tax of ($0.2), ($0.2), ($0.5) and ($0.4), respectively	(0.4)		(0.4)		(1.2)		(1.3)

Amortization of deferred net gain, net of tax of $0.0, $0.0, $0.0 and $0.0, respectively	—		—		(0.1)		(0.1)
Other comprehensive income (loss) from unconsolidated affiliates, net of tax of $0.1, ($0.2), ($0.3) and ($0.2), respectively	0.4		(0.6)		(0.9)		(0.6)

Other comprehensive income, net of tax	2.2		0.7		2.2		8.5
Comprehensive income (loss)	$	179.6	$	251.6	$	(226.3)	$	406.7

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended September 30,
(In millions)	2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(228.5)	$	398.2
Adjustments to reconcile net income (loss) to net cash provided from operating activities:
Depreciation and amortization	292.2		260.8

Deferred income taxes and investment tax credits, net	(168.4)		25.2
Equity in (earnings) losses of unconsolidated affiliates	703.8		(104.8)
Distributions from unconsolidated affiliates	73.3		107.3
Allowance for equity funds used during construction	(3.7)		(3.7)


Stock-based compensation expense	6.7		10.8

Regulatory assets	(8.5)		(48.1)
Regulatory liabilities	(48.6)		(32.1)
Other assets	(3.7)		(4.3)
Other liabilities	(39.2)		5.1
Change in certain current assets and liabilities:
Accounts receivable and accrued unbilled revenues, net	(62.9)		(76.4)

Income taxes receivable	10.0		—
Fuel, materials and supplies inventories	(2.0)		8.0
Fuel recoveries	74.3		(44.8)
Other current assets	(6.3)		3.4
Accounts payable	(68.6)		(69.1)


Other current liabilities	5.4		(17.5)
Net cash provided from operating activities	525.3		418.0
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (less allowance for equity funds used during construction)	(419.7)		(476.5)
Investment in unconsolidated affiliates	(2.4)		(5.9)




Net cash used in investing activities	(422.1)		(482.4)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt	297.1		296.4
Increase (decrease) in short-term debt	(112.0)		168.8
Payment of long-term debt	(0.1)		(250.0)
Dividends paid on common stock	(234.4)		(221.7)
Cash paid for employee equity-based compensation and expense of common stock	(7.1)		(10.2)


Purchase of treasury stock	(14.7)		—
Net cash used in financing activities	(71.2)		(16.7)
NET CHANGE IN CASH AND CASH EQUIVALENTS	32.0		(81.1)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	—		94.3
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	32.0	$	13.2

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30,		December 31,
(In millions)	2020		2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	32.0	$	—
Accounts receivable, less reserve of $2.6 and $1.5, respectively	209.5		153.8

Accrued unbilled revenues	71.9		64.7
Income taxes receivable	0.9		10.9
Fuel inventories	36.5		46.3
Materials and supplies, at average cost	107.0		90.6

Fuel clause under recoveries	—		39.5

Other	30.7		24.4
Total current assets	488.5		430.2
OTHER PROPERTY AND INVESTMENTS
Investment in unconsolidated affiliates	376.8		1,151.5
Other	82.2		82.7
Total other property and investments	459.0		1,234.2
PROPERTY, PLANT AND EQUIPMENT
In service	13,115.2		12,771.1
Construction work in progress	128.9		141.6
Total property, plant and equipment	13,244.1		12,912.7
Less: accumulated depreciation	4,010.1		3,868.1
Net property, plant and equipment	9,234.0		9,044.6
DEFERRED CHARGES AND OTHER ASSETS
Regulatory assets	301.6		306.0


Other	14.5		9.3
Total deferred charges and other assets	316.1		315.3
TOTAL ASSETS	$	10,497.6	$	11,024.3

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

(Unaudited)


	September 30,		December 31,
(In millions)	2020		2019
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt	$	—	$	112.0

Accounts payable	123.2		194.9
Dividends payable	80.5		77.6
Customer deposits	82.4		83.0
Accrued taxes	78.4		41.9
Accrued interest	40.4		37.9
Accrued compensation	33.9		40.6
Fuel clause over recoveries	39.6		4.8
Other	39.0		65.2
Total current liabilities	517.4		657.9
LONG-TERM DEBT	3,493.9		3,195.2
DEFERRED CREDITS AND OTHER LIABILITIES

Accrued benefit obligations	194.3		225.0
Deferred income taxes	1,229.2		1,375.8
Deferred investment tax credits	10.2		7.1
Regulatory liabilities	1,199.4		1,223.5

Other	192.5		200.3
Total deferred credits and other liabilities	2,825.6		3,031.7
Total liabilities	6,836.9		6,884.8
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDERS' EQUITY
Common stockholders' equity	1,121.5		1,131.3
Retained earnings	2,570.2		3,036.1
Accumulated other comprehensive loss, net of tax	(25.7)		(27.9)
Treasury stock, at cost	(5.3)		—


Total stockholders' equity	3,660.7		4,139.5
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	10,497.6	$	11,024.3

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)


	Common Stock			Treasury Stock
(In millions)	Shares	Value		Shares	Value		Premium on Common Stock		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
Balance at December 31, 2019	200.1	$	2.0	—	$	—	$	1,129.3	$	3,036.1	$	(27.9)	$	4,139.5
Net loss	—	—		—	—		—		(491.8)		—		(491.8)
Other comprehensive loss, net of tax	—	—		—	—		—		—		(0.9)		(0.9)
Dividends declared on common stock ($0.3875 per share)	—	—		—	—		—		(79.3)		—		(79.3)
Stock-based compensation	—	—		(0.2)	9.4		(14.5)		—		—		(5.1)
Purchase of treasury stock	—	—		0.2	(9.7)		—		—		—		(9.7)
Balance at March 31, 2020	200.1	$	2.0	—	$	(0.3)	$	1,114.8	$	2,465.0	$	(28.8)	$	3,552.7
Net income	—	—		—	—		—		85.9		—		85.9
Other comprehensive income, net of tax	—	—		—	—		—		—		0.9		0.9
Dividends declared on common stock ($0.3875 per share)	—	—		—	—		—		(77.6)		—		(77.6)
Stock-based compensation	—	—		—	—		2.3		—		—		2.3
Balance at June 30, 2020	200.1	$	2.0	—	$	(0.3)	$	1,117.1	$	2,473.3	$	(27.9)	$	3,564.2
Net income	—	—		—	—		—		177.4		—		177.4
Other comprehensive income, net of tax	—	—		—	—		—		—		2.2		2.2
Dividends declared on common stock ($0.4025 per share)	—	—		—	—		—		(80.5)		—		(80.5)
Stock-based compensation	—	—		—	—		2.4		—		—		2.4
Purchase of treasury stock	—	—		0.1	(5.0)		—		—		—		(5.0)
Balance at September 30, 2020	200.1	$	2.0	0.1	$	(5.3)	$	1,119.5	$	2,570.2	$	(25.7)	$	3,660.7






Balance at December 31, 2018	199.7	$	2.0	—	$	—	$	1,125.7	$	2,906.3	$	(28.9)	$	4,005.1
Net income	—	—		—	—		—		47.1		—		47.1
Other comprehensive income, net of tax	—	—		—	—		—		—		6.8		6.8
Dividends declared on common stock ($0.3650 per share)	—	—		—	—		—		(75.6)		—		(75.6)
Stock-based compensation	0.5	—		—	—		(7.2)		—		—		(7.2)
Balance at March 31, 2019	200.2	$	2.0	—	$	—	$	1,118.5	$	2,877.8	$	(22.1)	$	3,976.2
Net income	—	—		—	—		—		100.2		—		100.2
Other comprehensive income, net of tax	—	—		—	—		—		—		1.0		1.0
Dividends declared on common stock ($0.3650 per share)	—	—		—	—		—		(73.1)		—		(73.1)
Stock-based compensation	—	—		—	—		2.9		—		—		2.9
Balance at June 30, 2019	200.2	$	2.0	—	$	—	$	1,121.4	$	2,904.9	$	(21.1)	$	4,007.2
Net income	—	—		—	—		—		250.9		—		250.9
Other comprehensive income, net of tax	—	—		—	—		—		—		0.7		0.7
Dividends declared on common stock ($0.3875 per share)	—	—		—	—		—		(77.5)		—		(77.5)
Stock-based compensation	—	—		—	—		4.9		—		—		4.9
Balance at September 30, 2019	200.2	$	2.0	—	$	—	$	1,126.3	$	3,078.3	$	(20.4)	$	4,186.2

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part hereof.

OGE ENERGY CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.Summary of Significant Accounting Policies

The Company's significant accounting policies are detailed in "Note 1. Summary of Significant Accounting Policies" in the Company's 2019 Form 10-K. Changes to the Company's accounting policies as a result of adopting ASU 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Information" are incorporated within "Allowance for Uncollectible Accounts Receivables" below and discussed in Note 2.

Organization

The Company is a holding company with investments in energy and energy services providers offering physical delivery and related services for both electricity and natural gas primarily in the south-central U.S. The Company conducts these activities through two business segments: (i) electric utility and (ii) natural gas midstream operations. The accounts of the Company and its wholly-owned subsidiaries are included in the Condensed Consolidated Financial Statements. All intercompany transactions and balances are eliminated in consolidation. The Company generally uses the equity method of accounting for investments where its ownership interest is between 20 percent and 50 percent and it lacks the power to direct activities that most significantly impact economic performance.

The electric utility segment generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas. Its operations are conducted through OG&E and are subject to regulation by the OCC, the APSC and the FERC. OG&E was incorporated in 1902 under the laws of the Oklahoma Territory and is a wholly-owned subsidiary of the Company. OG&E is the largest electric utility in Oklahoma, and its franchised service territory includes Fort Smith, Arkansas and the surrounding communities. OG&E sold its retail natural gas business in 1928 and is no longer engaged in the natural gas distribution business.

Basis of Presentation

The Condensed Consolidated Financial Statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures are adequate to prevent the information presented from being misleading.

In the opinion of management, all adjustments necessary to fairly present the consolidated financial position of the Company at September 30, 2020 and December 31, 2019, the consolidated results of its operations for the three and nine months ended September 30, 2020 and 2019 and its consolidated cash flows for the nine months ended September 30, 2020 and 2019 have been included and are of a normal, recurring nature except as otherwise disclosed. Management also has evaluated the impact of events occurring after September 30, 2020 up to the date of issuance of these Condensed Consolidated Financial Statements, and these statements contain all necessary adjustments and disclosures resulting from that evaluation.

Due to seasonal fluctuations and other factors, the Company's operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any future period. The Condensed Consolidated Financial Statements and Notes thereto should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in the Company's 2019 Form 10-K.

Accounting Records

The accounting records of OG&E are maintained in accordance with the Uniform System of Accounts prescribed by the FERC and adopted by the OCC and the APSC. Additionally, OG&E, as a regulated utility, is subject to accounting principles for certain types of rate-regulated activities, which provide that certain incurred costs that would otherwise be charged to expense can be deferred as regulatory assets, based on the expected recovery from customers in future rates. Likewise, certain actual or anticipated credits that would otherwise reduce expense can be deferred as regulatory liabilities, based on the expected flowback to customers in future rates. Management's expected recovery of deferred costs and flowback of deferred credits generally results from specific decisions by regulators granting such ratemaking treatment.

OG&E records certain incurred costs and obligations as regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is probable that the costs or obligations will be included in amounts allowable for recovery or refund in future rates.

The following table is a summary of OG&E's regulatory assets and liabilities.


	September 30,		December 31,
(In millions)	2020		2019
REGULATORY ASSETS
Current:
SPP cost tracker under recovery (A)	$	4.6	$	—
Generation Capacity Replacement rider under recovery (A)	1.2		3.7
Fuel clause under recoveries	—		39.5
Other (A)	9.7		5.5
Total current regulatory assets	$	15.5	$	48.7
Non-current:
Benefit obligations regulatory asset	$	150.2	$	167.2
Deferred storm expenses	70.2		65.5
Sooner Dry Scrubbers	19.9		20.6
Smart Grid	13.1		18.4
Unamortized loss on reacquired debt	9.9		10.6
Arkansas deferred pension expenses	8.4		8.0
Pension tracker	8.1		2.3
COVID-19 deferred expenses	4.9		—
Other	16.9		13.4
Total non-current regulatory assets	$	301.6	$	306.0
REGULATORY LIABILITIES
Current:
Fuel clause over recoveries	$	39.6	$	4.8
Oklahoma demand program rider over recovery (B)	5.8		2.0
Reserve for tax refund and interim surcharge (B)	1.3		12.7
SPP cost tracker over recovery (B)	—		2.6
Other (B)	4.9		6.9
Total current regulatory liabilities	$	51.6	$	29.0
Non-current:
Income taxes refundable to customers, net	$	875.5	$	899.2
Accrued removal obligations, net	318.9		318.5

Other	5.0		5.8
Total non-current regulatory liabilities	$	1,199.4	$	1,223.5

(A)Included in Other Current Assets in the Condensed Consolidated Balance Sheets.

(B)Included in Other Current Liabilities in the Condensed Consolidated Balance Sheets.

In response to the COVID-19 pandemic, the OCC and APSC issued orders allowing OG&E to defer certain expenses related to its COVID-19 response. For additional information about these orders, see Note 14 and "Item 2. Management's Discussion and Analysis - Recent Developments."

Management continuously monitors the future recoverability of regulatory assets. When in management's judgment future recovery becomes impaired, the amount of the regulatory asset is adjusted, as appropriate. If OG&E were required to discontinue the application of accounting principles for certain types of rate-regulated activities for some or all of its operations, it could result in writing off the related regulatory assets or liabilities, which could have significant financial effects.

Allowance for Uncollectible Accounts Receivable

Customer balances are generally written off if not collected within six months after the final billing date. The allowance for uncollectible accounts receivable for OG&E is generally calculated by multiplying the last six months of electric revenue by the provision rate, which is based on a 12-month historical average of actual balances written off and is adjusted for current conditions and supportable forecasts as necessary. To the extent the historical collection rates, when incorporating forecasted conditions, are not representative of future collections, there could be an effect on the amount of uncollectible expense recognized, such as in response to COVID-19 impacts. Also, a portion of the uncollectible provision related to fuel within the Oklahoma jurisdiction is being recovered through the fuel adjustment clause. The allowance for uncollectible accounts receivable is a reduction to Accounts Receivable in the Condensed Consolidated Balance Sheets and is included in the Other Operation and Maintenance in the Condensed Consolidated Statements of Income.

New business customers are required to provide a security deposit in the form of cash, bond or irrevocable letter of credit that is refunded when the account is closed. New residential customers whose outside credit scores indicate an elevated risk are required to provide a security deposit that may be refunded based on customer protection rules defined by the OCC and the APSC. The payment behavior of all existing customers is continuously monitored, and, if the payment behavior indicates sufficient risk within the meaning of the applicable utility regulation, customers will be required to provide a security deposit.

The Company considered COVID-19 pandemic impacts when calculating its reserve on accounts receivable as of September 30, 2020, as further discussed in "Item 2. Management's Discussion and Analysis - Recent Developments."

Investment in Unconsolidated Affiliates

The Company's investment in Enable is considered to be a variable interest entity because the owners of the equity at risk in this entity have disproportionate voting rights in relation to their obligations to absorb the entity's expected losses or to receive its expected residual returns. However, the Company is not considered the primary beneficiary of Enable since it does not have the power to direct the activities of Enable that are considered most significant to the economic performance of Enable; therefore, the Company accounts for its investment in Enable using the equity method of accounting. Under the equity method, the investment will be adjusted each period for contributions made, distributions received and the Company's share of the investee's comprehensive income as adjusted for basis differences. The Company's maximum exposure to loss related to Enable is limited to the Company's equity investment in Enable at September 30, 2020 as presented in Note 12. The Company evaluates its equity method investments for impairment when events or changes in circumstances indicate there is a loss in value of the investment that is other than a temporary decline. When indicators exist, the fair value is estimated and compared to the investment carrying value, and if any impairment is judgmentally determined to be other than temporary, the carrying value of the investment is written down to fair value.

The Company determined, effective March 31, 2020, that an other than temporary decline in the value of the Company's investment in Enable had occurred. Further information detailing the results of the Company's impairment analysis and fair value measurement can be found in Notes 4 and 5.

The Company considers distributions received from Enable, which do not exceed cumulative equity in earnings subsequent to the date of investment, to be a return on investment and are classified as operating activities in the Condensed Consolidated Statements of Cash Flows. The Company considers 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 Condensed Consolidated Statements of Cash Flows.

Accumulated Other Comprehensive Income (Loss)

The following tables summarize changes in the components of accumulated other comprehensive income (loss) attributable to the Company during the nine months ended September 30, 2020 and 2019. All amounts below are presented net of tax.



(In millions)	Pension Plan and Restoration of Retirement Income Plan		Postretirement Benefit Plans	Other Comprehensive Loss from Unconsolidated Affiliates				Total
Balance at December 31, 2019	$	(35.1)		$	7.8	$	(0.6)		$	(27.9)
Other comprehensive loss before reclassifications	—			—		(0.9)			(0.9)
Amounts reclassified from accumulated other comprehensive income (loss)	2.9			(1.3)		—			1.6
Settlement cost	1.5			—		—			1.5

Balance at September 30, 2020	$	(30.7)		$	6.5	$	(1.5)		$	(25.7)



(In millions)	Pension Plan and Restoration of Retirement Income Plan		Postretirement Benefit Plans			Other Comprehensive Loss from Unconsolidated Affiliates	Total
Balance at December 31, 2018	$	(38.8)		$	9.9		$	—	$	(28.9)
Other comprehensive loss before reclassifications	—			—			(0.6)		(0.6)
Amounts reclassified from accumulated other comprehensive income (loss)	2.6			(1.4)			—		1.2
Settlement cost	7.9			—			—		7.9


Balance at September 30, 2019	$	(28.3)		$	8.5		$	(0.6)	$	(20.4)

The following table summarizes significant amounts reclassified out of accumulated other comprehensive income (loss) by the respective line items in net income (loss) during the three and nine months ended September 30, 2020 and 2019.


Details about Accumulated Other Comprehensive Income (Loss) Components	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)								Affected Line Item in the Consolidated Statements of Income
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2020		2019		2020		2019









Amortization of Pension Plan and Restoration of Retirement Income Plan items:
Actuarial losses	$	(1.2)	$	(1.2)	$	(3.8)	$	(3.4)	(A)

Settlement cost	(1.8)		(1.1)		(2.1)		(10.5)		(A)
	(3.0)		(2.3)		(5.9)		(13.9)		Income (Loss) Before Taxes
	(0.8)		(0.6)		(1.5)		(3.4)		Income Tax Expense (Benefit)
	$	(2.2)	$	(1.7)	$	(4.4)	$	(10.5)	Net Income (Loss)

Amortization of postretirement benefit plans items:
Prior service credit	$	0.6	$	0.6	$	1.7	$	1.7	(A)
Actuarial gains	—		—		0.1		0.1		(A)

	0.6		0.6		1.8		1.8		Income (Loss) Before Taxes
	0.2		0.2		0.5		0.4		Income Tax Expense (Benefit)
	$	0.4	$	0.4	$	1.3	$	1.4	Net Income (Loss)









Total reclassifications for the period, net of tax	$	(1.8)	$	(1.3)	$	(3.1)	$	(9.1)	Net Income (Loss)

(A)These accumulated other comprehensive income (loss) components are included in the computation of net periodic benefit cost (see Note 11 for additional information).

2.Accounting Pronouncements

Recently Adopted Accounting Standards

The following table provides an overview of recently adopted accounting pronouncements and their impacts on the Company.


ASU Number and Name	Description	Date of Adoption	Financial Statements and Disclosures Impact
ASU 2016-13, "Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Information"	This standard requires entities to measure all expected credit losses of financial assets held at a reporting date based on historical experience, current conditions and reasonable and supportable forecasts in order to record credit losses in a more timely manner.	January 1, 2020	Utilizing a modified-retrospective approach, the Company determined its only financial instrument requiring measurement under ASU 2016-13 is trade receivables. The Company considers both future economic conditions and historical data to measure the reserve for trade receivables under this standard and determined no adjustments to its reserve were necessary upon adoption.
ASU 2018-15, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)"	The standard aligns requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.	January 1, 2020	The new standard did not have a material effect on the Company's financial statements upon adoption. Prospectively, the Company records applicable capitalized implementation costs in Other Current Assets and related amortization expense in Other Operation and Maintenance.
ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework"	The standard removes, adds or modifies disclosure requirements that impact all levels of the fair value hierarchy, as well as investments measured using the net asset value practical expedient.	January 1, 2020	The Company applied the guidance on a retrospective or prospective basis, depending on the requirement, and did not experience a significant impact on its financial statement disclosures.
ASU 2018-14, "Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)"	The standard removes, adds or clarifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.	January 1, 2020	The Company applied the guidance on a retrospective basis and did not experience a significant impact on its financial statement disclosures.
ASU 2020-04, "Reference Rate Reform (Topic 848)"	This standard provides optional expedients and exceptions, if certain criteria are met, for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.	January 1, 2020	The guidance did not have a material impact upon adoption, nor does the Company expect a material impact in the future, on its consolidated financial statements.

3.Revenue Recognition

The following table disaggregates the Company's revenues from contracts with customers by customer classification. The Company's operating revenues disaggregated by customer classification can be found in "OG&E (Electric Utility) Results of Operations" within "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations."



	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Residential	$	294.9	$	318.9	$	664.6	$	692.4
Commercial	156.7		172.9		361.0		383.7
Industrial	59.3		66.8		145.5		172.0
Oilfield	50.6		58.6		127.2		156.9
Public authorities and street light	57.8		65.7		133.1		150.2
System sales revenues	619.3		682.9		1,431.4		1,555.2
Provision for rate refund	4.8		(2.3)		3.2		(2.9)
Integrated market	18.0		12.8		33.7		29.8
Transmission	35.0		36.7		109.0		112.6
Other	10.7		9.1		22.9		23.0
Revenues from contracts with customers	$	687.8	$	739.2	$	1,600.2	$	1,717.7

4.Investment in Unconsolidated Affiliates and Related Party Transactions

At September 30, 2020, the Company owned 111.0 million common units, or 25.5 percent, of Enable's outstanding common units. On September 30, 2020, Enable's common unit price closed at $4.14. The Company recorded equity in earnings of unconsolidated affiliates of $15.8 million for the three months ended September 30, 2020 and equity in losses of unconsolidated affiliates of $703.8 million for the nine months ended September 30, 2020, compared to equity in earnings of unconsolidated affiliates of $38.3 million and $104.8 million for the three and nine months ended September 30, 2019, respectively. Equity in earnings (losses) of unconsolidated affiliates includes the Company's share of Enable's earnings adjusted for the amortization of the basis difference of the Company's original investment in Enogex LLC and its underlying equity in the net assets of Enable, as well as any impairment the Company records on its investment in Enable. Equity in earnings (losses) of unconsolidated affiliates is also adjusted for the elimination of the Enogex Holdings fair value adjustments. These amortizations may also include gain or loss on dilution, net of proportional basis difference recognition. For more information concerning the formation of Enable and the Company's accounting for its investment in Enable, see Note 5 within "Item 8. Financial Statements and Supplementary Data" in the Company's 2019 Form 10-K.

The Company evaluates its equity method investment for impairment when factors indicate that a decline in the value of its investment has occurred and the carrying amount of its investment may not be recoverable. An impairment loss, based on the excess of the carrying value over estimated fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Effective March 31, 2020, the Company estimated the fair value of its investment in Enable was below the book value and concluded the decline in value was not temporary due to the severity of the decline and the recent rapid deterioration, as well as the near term future outlook, of the midstream oil and gas industry. Accordingly, the Company recorded a $780.0 million impairment on its investment in Enable in March 2020, which is included in Equity in Earnings (Losses) of Unconsolidated Affiliates in the Company's 2020 Condensed Consolidated Income Statement. Further information concerning the fair value method used to measure the impairment on the Company's investment in Enable can be found in Note 5.

Summarized unaudited financial information for 100 percent of Enable is presented below at September 30, 2020 and December 31, 2019 and for the three and nine months ended September 30, 2020 and 2019.


	September 30,		December 31,
Balance Sheet	2020		2019
(In millions)
Current assets	$	373	$	389
Non-current assets	$	11,402	$	11,877
Current liabilities	$	644	$	780
Non-current liabilities	$	4,055	$	4,077


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Income Statement	2020		2019		2020		2019
(In millions)
Total revenues	$	596	$	699	$	1,759	$	2,229
Cost of natural gas and NGLs	$	250	$	263	$	653	$	958
Operating income	$	100	$	175	$	326	$	507
Net income (loss)	$	(173)	$	123	$	(35)	$	351

The following table reconciles the Company's equity in earnings (losses) of unconsolidated affiliates for the three and nine months ended September 30, 2020 and 2019. For further discussion of Enable's net income (loss), see "Item 2. Management's Discussion and Analysis - Results of Operations - OGE Holdings (Natural Gas Midstream Operations)."



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In millions)	2020			2019			2020			2019
Enable net income (loss)	$	(173.0)		$	123.0		$	(35.0)		$	351.1
OGE Energy's percent ownership at period end	25.5		%	25.5		%	25.5		%	25.5		%
OGE Energy's portion of Enable net income (loss)	$	(44.0)		$	31.2		$	(8.9)		$	89.4



Amortization of basis difference and dilution recognition (A)	59.8			7.1			85.1			15.4
Impairment of OGE Energy's equity method investment in Enable	—			—			(780.0)			—
Equity in earnings (losses) of unconsolidated affiliates (B)	$	15.8		$	38.3		$	(703.8)		$	104.8

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

(B) For the three and nine months ended September 30, 2020, Enable recorded a $225.0 million impairment on its SESH equity method investment, which is included in their net loss for each period. Enable estimated the fair value of this equity method investment was below the carrying value at September 30, 2020 and concluded the decline in value was other than temporary due to the expiration of a transportation contract and the current status of renewal negotiations. The impairment ran through OGE Energy's portion of Enable net income (loss) and was offset by basis differences that flow through the amortization of basis difference and dilution recognition line item above.

The following table reconciles the difference between OGE Energy's investment in Enable and its underlying equity in the net assets of Enable (basis difference) from December 31, 2019 to September 30, 2020. The basis difference is being amortized over approximately 30 years.


(In millions)
Basis difference at December 31, 2019	$	652.5
Amortization of basis difference (A)	(86.1)
Impairment of OGE Energy's equity method investment in Enable	780.0

Basis difference at September 30, 2020	$	1,346.4

(A) Includes proportional basis difference recognition due to dilution.

On April 1, 2020, Enable announced a 50 percent reduction to its quarterly distribution in order to strengthen its balance sheet and increase its annualized retained cash flow. See "Item 2. Management's Discussion and Analysis - Recent Developments" for further discussion of the Company's response.

On November 3, 2020, Enable announced a quarterly dividend distribution of $0.16525 per unit on its outstanding common units, which is unchanged from the previous quarter and a decrease from the beginning of the year dividend distribution of $0.33050 per unit. If cash distributions to Enable's unitholders exceed $0.330625 per unit in any quarter, the general partner will receive increasing percentages, up to 50 percent, of the cash Enable distributes in excess of that amount. The Company is entitled to 60 percent of those "incentive distributions." In certain circumstances, the general partner has the right to reset the minimum quarterly distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable's cash distributions at the time of the exercise of this reset election.

Distributions received from Enable were $18.3 million and $36.7 million during the three months ended September 30, 2020 and 2019, respectively, and $73.3 million and $107.3 million during the nine months ended September 30, 2020 and 2019, respectively.

Related Party Transactions

The Company charges operating costs to OG&E and Enable based on several factors, and 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.

The Company and Enable

The Company and Enable are currently parties to several agreements whereby the Company provides specified support services to Enable, such as certain information technology, payroll and benefits administration. Under these agreements, the Company charged operating costs to Enable of $0.1 million during both the three months ended September 30, 2020 and 2019 and $0.3 million during both the nine months ended September 30, 2020 and 2019.

Pursuant to a seconding agreement, the Company provides seconded employees to Enable to support Enable's operations. As of September 30, 2020, 78 employees that participate in the Company's defined benefit and retirement plans are seconded to Enable. The Company billed Enable for reimbursement of $3.5 million and $3.6 million during the three months ended September 30, 2020 and 2019, respectively, and $13.6 million and $20.0 million during the nine months ended September 30, 2020 and 2019, respectively, under the seconding agreement for employment costs. If the seconding agreement was terminated, and those employees were no longer employed by the Company, and lump sum payments were made to those employees, the Company would recognize a settlement or curtailment of the pension/retiree health care charges, which would increase expense at the Company by $15.3 million. Settlement and curtailment charges associated with the Enable seconded employees are not reimbursable to the Company by Enable. The seconding agreement can be terminated by mutual agreement of the Company and Enable or solely by the Company upon 120 days' notice.

The Company had accounts receivable from Enable for amounts billed for support services, including the cost of seconded employees, of $1.4 million as of September 30, 2020 and $0.8 million as of December 31, 2019, which are included in Accounts Receivable in the Company's Condensed Consolidated Balance Sheets.

OG&E and Enable

Enable provides gas transportation services to OG&E pursuant to an agreement that grants 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 purchases gas from Enable when Enable's deliveries exceed OG&E's pipeline receipts. Enable purchases gas from OG&E when OG&E's pipeline receipts exceed Enable's deliveries. The following table summarizes related party transactions between OG&E and Enable during the three and nine months ended September 30, 2020 and 2019.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2020		2019		2020		2019
Operating revenues:
Electricity to power electric compression assets	$	4.5	$	4.5	$	11.7	$	12.1
Cost of sales:
Natural gas transportation services	$	9.3	$	9.4	$	23.4	$	33.5

Natural gas purchases (sales)	$	3.2	$	(1.1)	$	2.2	$	(5.4)

5.Fair Value Measurements

The classification of the Company's fair value measurements requires judgment regarding the degree to which market data is observable or corroborated by observable market data. GAAP establishes a fair value hierarchy that prioritizes the inputs used to measure fair value based on observable and unobservable data. The hierarchy categorizes the inputs into three levels, with the highest priority given to quoted prices in active markets for identical unrestricted assets or liabilities (Level 1), and the lowest priority given to unobservable inputs (Level 3). Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels defined in the fair value hierarchy are as follows:

Level 1 inputs are quoted prices in active markets for identical unrestricted assets or liabilities that are accessible at the measurement date.

Level 2 inputs are inputs other than quoted prices in active markets included within Level 1 that are either directly or indirectly observable at the reporting date for the asset or liability for substantially the full term of the asset or liability. Level 2 inputs include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 inputs are prices or valuation techniques for the asset or liability that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). Unobservable inputs reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

The Company had no financial instruments measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019. The following table summarizes the carrying amount and fair value of the Company's financial instruments at September 30, 2020 and December 31, 2019.


	September 30,				December 31,
	2020				2019
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Classification
Long-term Debt (including Long-term Debt due within one year):
OG&E Senior Notes	$	3,349.0	$	4,116.5	$	3,050.3	$	3,500.4	Level 2
OG&E Industrial Authority Bonds	$	135.4	$	135.4	$	135.4	$	135.4	Level 2
Tinker Debt	$	9.5	$	10.6	$	9.5	$	10.0	Level 3

Nonrecurring Fair Value Measurements

As further discussed in Note 4, the Company recorded an impairment on its investment in Enable in March 2020. The nonrecurring fair value measurement consisted of calculating a 20-trading day volume weighted average price for Enable's common units through March 31, 2020. This method of valuation was determined to be representative of the fair value of Enable's common units as it incorporated market prices during the period and reduced the impact of volatility that a single day could represent. The Company concluded that this valuation method resulted in a Level 3 nonrecurring fair value measurement.

6.Stock-Based Compensation

The following table summarizes the Company's pre-tax compensation expense and related income tax benefit during the three and nine months ended September 30, 2020 and 2019 related to the Company's performance units and restricted stock units.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Performance units:
Total shareholder return	$	1.9	$	2.3	$	5.6	$	6.8
Earnings per share	0.2		2.3		0.5		3.2
Total performance units	2.1		4.6		6.1		10.0
Restricted stock units	0.3		0.3		0.6		0.8
Total compensation expense	$	2.4	$	4.9	$	6.7	$	10.8


Income tax benefit	$	0.6	$	1.3	$	1.7	$	2.8

During the three and nine months ended September 30, 2020, the Company purchased 150,000 and 405,000 shares of its common stock, respectively. During March 2020 and August 2020, 247,073 and an immaterial number of these shares, respectively, were used to satisfy payouts of earned performance units and restricted stock unit grants pursuant to the Company's Stock Incentive Plan. The Company intends to use the remaining shares to satisfy payouts of earned performance units and restricted stock unit grants pursuant to its Stock Incentive Plan. The shares were purchased at an average cost of $38.04 and $33.14 per share on the open market during March 2020 and August 2020, respectively. The Company records treasury stock purchases at cost. Treasury stock is presented as a reduction of stockholders' equity in the Company's 2020 Condensed Consolidated Balance Sheet.

During the nine months ended September 30, 2020, there was an immaterial number of shares of new common stock issued pursuant to the Company's Stock Incentive Plan to satisfy restricted stock unit grants.

7.Income Taxes

The Company files consolidated income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal tax or state and local examinations by tax authorities for years prior to 2016. Income taxes are generally allocated to each company in the affiliated group 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 the Company's effective tax rate.

8.Common Equity

Automatic Dividend Reinvestment and Stock Purchase Plan

The Company issued no shares of common stock under its Automatic Dividend Reinvestment and Stock Purchase Plan during the three and nine months ended September 30, 2020.

Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to the Company by the weighted-average number of the Company's common shares outstanding during the period. In the calculation of diluted earnings (loss) per share, weighted-average shares outstanding are increased for additional shares that would be outstanding if potentially dilutive securities were converted to common stock. Potentially dilutive securities for the Company consist of performance units and restricted stock units. The following table calculates basic and diluted earnings (loss) per share for the Company.


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions except per share data)	2020		2019		2020		2019
Net income (loss)	$	177.4	$	250.9	$	(228.5)	$	398.2
Average common shares outstanding:
Basic average common shares outstanding	200.1		200.2		200.1		200.1
Effect of dilutive securities:
Contingently issuable shares (performance and restricted stock units)	0.3		0.6		—		0.5
Diluted average common shares outstanding	200.4		200.8		200.1		200.6
Basic earnings (loss) per average common share	$	0.89	$	1.25	$	(1.14)	$	1.99
Diluted earnings (loss) per average common share	$	0.89	$	1.25	$	(1.14)	$	1.98
Anti-dilutive shares excluded from earnings per share calculation	—		—		0.3		—

9.Long-Term Debt

At September 30, 2020, the Company was in compliance with all of its debt agreements.

OG&E Industrial Authority Bonds

OG&E has tax-exempt pollution control bonds with optional redemption provisions that allow the holders to request repayment of the bonds on any business day. The bonds, which can be tendered at the option of the holder during the next 12 months, are included in the following table.


Series			Date Due	Amount
				(In millions)
0.30%	-	5.35%	Garfield Industrial Authority, January 1, 2025	$	47.0
0.33%	-	4.31%	Muskogee Industrial Authority, January 1, 2025	32.4
0.30%	-	5.35%	Muskogee Industrial Authority, June 1, 2027	56.0
Total (redeemable during next 12 months)				$	135.4

All of these bonds are subject to an optional tender at the request of the holders, at 100 percent of the principal amount, together with accrued and unpaid interest to the date of purchase. The bond holders, on any business day, can request repayment of the bond by delivering an irrevocable notice to the tender agent stating the principal amount of the bond, payment instructions for the purchase price and the business day the bond is to be purchased. The repayment option may only be exercised by the holder of a bond for the principal amount. When a tender notice has been received by the trustee, a third-party remarketing agent for the bonds will attempt to remarket any bonds tendered for purchase. This process occurs once per week. Since the original issuance of these series of bonds in 1995 and 1997, the remarketing agent has successfully remarketed all tendered bonds. If the remarketing agent is unable to remarket any such bonds, OG&E is obligated to repurchase such unremarketed bonds. As OG&E has both the intent and ability to refinance the bonds on a long-term basis and such ability is supported by an ability to consummate the refinancing, the bonds are classified as Long-term Debt in the Company's Condensed Consolidated Balance Sheets. OG&E believes that it has sufficient liquidity to meet these obligations.

Issuance of Long-Term Debt

In April 2020, OG&E issued $300.0 million of 3.25 percent senior notes due April 1, 2030. The proceeds from the issuance were added to OG&E's general funds to be used for general corporate purposes, including to fund ongoing capital expenditures and working capital.

10.Short-Term Debt and Credit Facilities

The Company holds short-term debt through revolving credit facilities and term credit agreements maturing in one year or less. As of September 30, 2020, the Company had no short-term debt as compared to $112.0 million of short-term debt at December 31, 2019.

The Company borrows on a short-term basis, as necessary, by the issuance of commercial paper and borrowings under its revolving credit agreements and term credit agreement. In April 2020, the Company entered into a $75.0 million floating rate unsecured one-year term credit agreement and borrowed the full $75.0 million, in order to preserve financial flexibility in response to COVID-19. Advances under this agreement were used to refinance existing indebtedness and for working capital and general corporate purposes of the Company. The term credit agreement contained substantially the same covenants as the Company's existing $450.0 million revolving credit agreement. In September 2020, the Company repaid the $75.0 million borrowed under the term credit agreement.

The following table provides information regarding the Company's revolving credit agreements at September 30, 2020.


	Aggregate		Amount		Weighted-Average
Entity	Commitment		Outstanding (A)		Interest Rate			Expiration
(In millions)
OGE Energy (B)	$	450.0	$	—	—	%	(D)	March 8, 2023
OG&E (C)	450.0		0.3		1.15	%	(D)	March 8, 2023
Total	$	900.0	$	0.3	1.15	%

(A)Includes direct borrowings under the revolving credit agreements, commercial paper borrowings and letters of credit at September 30, 2020.

(B)This bank facility is available to back up the Company's commercial paper borrowings and to provide revolving credit borrowings. This bank facility can also be used as a letter of credit facility.

(C)This bank facility is available to back up OG&E's commercial paper borrowings and to provide revolving credit borrowings. This bank facility can also be used as a letter of credit facility.

(D)Represents the weighted-average interest rate for the outstanding borrowings under the revolving credit agreements, commercial paper borrowings and letters of credit.

The Company's ability to access the commercial paper market could be adversely impacted by a credit ratings downgrade or major market disruptions. Pricing grids associated with the Company's credit facilities could cause annual fees and borrowing rates to increase if an adverse rating impact occurs. The impact of any future downgrade could include an increase in the costs of the Company's short-term borrowings, but a reduction in the Company's credit ratings would not result in any defaults or accelerations. Any future downgrade could also lead to higher long-term borrowing costs and, if below investment grade, would require the Company to post collateral or letters of credit.

OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur up to $800.0 million in short-term borrowings at any one time for a two-year period beginning January 1, 2019 and ending December 31, 2020. OG&E has requested renewal of this authority for an additional two-year period and expects to receive approval prior to the expiration of its current authority.

11.Retirement Plans and Postretirement Benefit Plans

In accordance with ASC Topic 715, "Compensation - Retirement Benefits," a one-time settlement charge is required to be recorded by an organization when lump sum payments or other settlements that relieve the organization from the responsibility for the pension benefit obligation during the plan year exceed the service cost and interest cost components of the organization's net periodic pension cost. During the nine months ended September 30, 2020, the Company experienced an increase in both the number of employees electing to retire and the amount of lump sum payments paid to such employees upon retirement, which resulted in the Company recording pension settlement charges of $12.8 million. The pension settlement charge did not require a cash outlay by the Company and did not increase the Company's total pension expense over time, as the charge was an acceleration of costs that otherwise would be recognized as pension expense in future periods.

Net Periodic Benefit Cost

The following table presents the net periodic benefit cost components, before consideration of capitalized amounts, of the Company's Pension Plan, Restoration of Retirement Income Plan and postretirement benefit plans that are included in the Condensed Consolidated Financial Statements. Service cost is presented within Other Operation and Maintenance, and the remaining net periodic benefit cost components as listed in the table below are presented within Other Net Periodic Benefit Expense in the Company's Condensed Consolidated Statements of Income. OG&E recovers specific amounts of pension and postretirement medical costs in rates approved in its Oklahoma rate reviews. In accordance with approved orders, OG&E defers the difference between actual pension and postretirement medical expenses and the amount approved in its last Oklahoma rate review as a regulatory asset or regulatory liability. These amounts have been recorded in the Pension tracker in the regulatory assets and liabilities table in Note 1 and within Other Net Periodic Benefit Expense in the Company's Condensed Consolidated Statements of Income.


	Pension Plan								Restoration of Retirement Income Plan
	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
(In millions)	2020		2019		2020		2019		2020		2019		2020		2019

Service cost	$	3.3	$	3.4	$	9.8	$	9.7	$	0.2	$	0.1	$	0.6	$	0.3
Interest cost	4.2		4.6		13.4		15.5		0.1		0.1		0.2		0.3
Expected return on plan assets	(9.4)		(9.5)		(28.0)		(27.1)		—		—		—		—
Amortization of net loss	4.3		4.4		12.7		13.0		0.1		0.1		0.4		0.3

Settlement cost	12.1		2.8		12.1		23.4		0.4		0.4		0.7		0.4
Total net periodic benefit cost	14.5		5.7		20.0		34.5		0.8		0.7		1.9		1.3
Less: Amount paid by unconsolidated affiliates	0.5		0.5		1.6		2.2		0.1		0.1		0.1		0.1
Net periodic benefit cost	$	14.0	$	5.2	$	18.4	$	32.3	$	0.7	$	0.6	$	1.8	$	1.2

(A)

In addition to the net periodic benefit cost amounts recognized, as presented in the table above, for the Pension and Restoration of Retirement Income Plans for the three and nine months ended September 30, 2020 and 2019, the Company recognized the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Increase (decrease) of pension expense to maintain allowed recoverable amount in Oklahoma jurisdiction (A)	$	2.4	$	1.5	$	5.7	$	(0.2)
Deferral of pension expense related to pension settlement charges:
Oklahoma jurisdiction (A)	$	10.8	$	2.3	$	11.1	$	14.0
Arkansas jurisdiction (A)	$	1.0	$	0.2	$	1.0	$	1.3

(A) Included in the pension regulatory asset or liability in each jurisdiction, as indicated in the regulatory assets and liabilities table in Note 1.



	Postretirement Benefit Plans
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2020		2019		2020		2019
Service cost	$	0.1	$	0.1	$	0.2	$	0.2
Interest cost	1.0		1.2		3.1		4.2
Expected return on plan assets	(0.5)		(0.5)		(1.4)		(1.4)

Amortization of net loss	0.5		0.5		1.5		1.5
Amortization of unrecognized prior service cost (A)	(2.1)		(2.1)		(6.3)		(6.3)


Total net periodic benefit cost	(1.0)		(0.8)		(2.9)		(1.8)
Less: Amount paid by unconsolidated affiliates	(0.2)		(0.2)		(0.6)		(0.5)
Net periodic benefit cost	$	(0.8)	$	(0.6)	$	(2.3)	$	(1.3)

(A)Unamortized prior service cost is amortized on a straight-line basis over the average remaining service period to the first eligibility age of participants who are expected to receive a benefit and are active at the date of the plan amendment.

In addition to the net periodic benefit income amounts recognized, as presented in the table above, for the postretirement benefit plans for the three and nine months ended September 30, 2020 and 2019, the Company recognized the following:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Increase of postretirement expense to maintain allowed recoverable amount in Oklahoma jurisdiction (A)	$	0.4	$	0.1	$	1.2	$	0.9

(A) Included in the Pension tracker, as presented in the regulatory assets and liabilities table in Note 1.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2020		2019		2020		2019
Capitalized portion of net periodic pension benefit cost	$	0.9	$	0.9	$	2.7	$	2.7
Capitalized portion of net periodic postretirement benefit cost	$	—	$	—	$	0.1	$	0.1

Pension Plan Funding

In August 2020, the Company contributed $20.0 million to its Pension Plan. No additional contributions are expected in 2020.

12.Report of Business Segments

The Company reports its operations in two business segments: (i) the electric utility segment, which is engaged in the generation, transmission, distribution and sale of electric energy and (ii) the natural gas midstream operations segment. Intersegment revenues are recorded at prices comparable to those of unaffiliated customers and are affected by regulatory considerations. The following tables summarize the results of the Company's business segments during the three and nine months ended September 30, 2020 and 2019.



Three Months Ended September 30, 2020	Electric Utility		Natural Gas Midstream Operations		Other Operations		Eliminations		Total
(In millions)
Operating revenues	$	702.1	$	—	$	—	$	—	$	702.1
Cost of sales	209.1		—		—		—		209.1
Other operation and maintenance	110.1		0.3		(0.7)		—		109.7
Depreciation and amortization	100.5		—		—		—		100.5


Taxes other than income	23.9		0.2		0.7		—		24.8
Operating income (loss)	258.5		(0.5)		—		—		258.0
Equity in earnings of unconsolidated affiliates	—		15.8		—		—		15.8
Other income (expense)	0.6		(0.7)		(0.5)		(0.2)		(0.8)
Interest expense	39.5		—		0.5		(0.2)		39.8
Income tax expense	20.1		4.5		31.2		—		55.8
Net income (loss)	$	199.5	$	10.1	$	(32.2)	$	—	$	177.4
Investment in unconsolidated affiliates	$	—	$	355.8	$	21.0	$	—	$	376.8
Total assets	$	10,323.3	$	358.7	$	109.6	$	(294.0)	$	10,497.6



Three Months Ended September 30, 2019	Electric Utility		Natural Gas Midstream Operations		Other Operations		Eliminations		Total
(In millions)
Operating revenues	$	755.4	$	—	$	—	$	—	$	755.4
Cost of sales	234.0		—		—		—		234.0
Other operation and maintenance	130.0		0.6		(0.8)		—		129.8
Depreciation and amortization	94.1		—		—		—		94.1
Taxes other than income	22.3		0.1		0.8		—		23.2
Operating income (loss)	275.0		(0.7)		—		—		274.3
Equity in earnings of unconsolidated affiliates	—		38.3		—		—		38.3
Other income (expense)	(0.1)		(0.6)		0.6		(1.2)		(1.3)
Interest expense	38.0		—		2.8		(1.2)		39.6
Income tax expense	9.7		8.5		2.6		—		20.8
Net income (loss)	$	227.2	$	28.5	$	(4.8)	$	—	$	250.9
Investment in unconsolidated affiliates	$	—	$	1,159.1	$	16.8	$	—	$	1,175.9
Total assets	$	10,019.7	$	1,161.5	$	108.3	$	(205.8)	$	11,083.7



Nine Months Ended September 30, 2020	Electric Utility		Natural Gas Midstream Operations		Other Operations		Eliminations		Total
(In millions)
Operating revenues	$	1,636.9	$	—	$	—	$	—	$	1,636.9
Cost of sales	481.5		—		—		—		481.5
Other operation and maintenance	348.8		1.2		(2.8)		—		347.2
Depreciation and amortization	292.2		—		—		—		292.2


Taxes other than income	72.8		0.4		3.1		—		76.3
Operating income (loss)	441.6		(1.6)		(0.3)		—		439.7
Equity in losses of unconsolidated affiliates (A)	—		(703.8)		—		—		(703.8)
Other income (expense)	2.9		(0.7)		2.5		(1.4)		3.3
Interest expense	115.7		—		4.6		(1.4)		118.9
Income tax expense (benefit)	30.5		(167.2)		(14.5)		—		(151.2)
Net income (loss)	$	298.3	$	(538.9)	$	12.1	$	—	$	(228.5)
Investment in unconsolidated affiliates	$	—	$	355.8	$	21.0	$	—	$	376.8
Total assets	$	10,323.3	$	358.7	$	109.6	$	(294.0)	$	10,497.6

(A)In March 2020, the Company recorded a $780.0 million impairment on its investment in Enable, as further discussed in Notes 4 and 5.



Nine Months Ended September 30, 2019	Electric Utility		Natural Gas Midstream Operations		Other Operations		Eliminations		Total
(In millions)
Operating revenues	$	1,759.1	$	—	$	—	$	—	$	1,759.1
Cost of sales	625.3		—		—		—		625.3
Other operation and maintenance	370.3		1.3		(3.0)		—		368.6
Depreciation and amortization	260.8		—		—		—		260.8


Taxes other than income	66.8		0.4		3.2		—		70.4
Operating income (loss)	435.9		(1.7)		(0.2)		—		434.0
Equity in earnings of unconsolidated affiliates	—		104.8		—		—		104.8
Other income (expense)	4.0		(8.4)		2.3		(2.2)		(4.3)
Interest expense	103.7		—		8.6		(2.2)		110.1
Income tax expense (benefit)	14.9		18.0		(6.7)		—		26.2
Net income	$	321.3	$	76.7	$	0.2	$	—	$	398.2
Investment in unconsolidated affiliates	$	—	$	1,159.1	$	16.8	$	—	$	1,175.9
Total assets	$	10,019.7	$	1,161.5	$	108.3	$	(205.8)	$	11,083.7

13.Commitments and Contingencies

Except as set forth below, in Note 14 and under "Environmental Laws and Regulations" in Item 2 of Part I and in Item 1 of Part II of this Form 10-Q, the circumstances set forth in Notes 15 and 16 to the Consolidated Financial Statements included in the Company's 2019 Form 10-K appropriately represent, in all material respects, the current status of the Company's material commitments and contingent liabilities.

Environmental Laws and Regulations

The activities of OG&E are subject to numerous stringent and complex federal, state and local laws and regulations governing environmental protection. These laws and regulations can change, restrict or otherwise impact OG&E's business activities in many ways, including the handling or disposal of waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative, civil and

criminal penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Management believes that all of its operations are in substantial compliance with current federal, state and local environmental standards.

Environmental regulation can increase the cost of planning, design, initial installation and operation of OG&E's facilities. Management continues to evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a competitive market.

Other

In the normal course of business, the Company is confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to assess the claim. If, in management's opinion, the Company has incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the appropriate accounting entries are reflected in the Company's Condensed Consolidated Financial Statements. At the present time, based on currently available information, the Company believes that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to its financial statements and would not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.

14.Rate Matters and Regulation

Except as set forth below, the circumstances set forth in Note 16 to the Consolidated Financial Statements included in the Company's 2019 Form 10-K appropriately represent, in all material respects, the current status of the Company's regulatory matters.

Completed Regulatory Matters

APSC Proceedings

Arkansas 2019 Formula Rate Plan Filing

OG&E filed its second evaluation report under its Formula Rate Plan in October 2019. On February 28, 2020, the APSC approved a settlement agreement among OG&E, the General Staff of the APSC and the Office of the Arkansas Attorney General providing for a $5.2 million revenue increase, with rates effective April 1, 2020. The settling parties agreed that the Series I grid modernization projects are prudent in both action and cost and that the Series II grid modernization projects are prudent in action only and the determination of prudence of costs will be reserved until the actual historical costs are reviewed. The settling parties also agreed that OG&E will no longer use projections for the remaining initial term or extension of its current Formula Rate Plan and that all costs will be included for recovery for the first time in the historical year.

Order Regarding COVID-19

On April 10, 2020, the APSC issued Order No. 1 related to COVID-19 and the provision of safe, adequate and reliable utility service at just and reasonable rates. Among other things, the APSC ordered the suspension of customer disconnects for non-payment during the pendency of the Arkansas Governor's emergency declaration or until the directive is rescinded by the APSC, neither of which have occurred yet, although the APSC has requested comments as to whether the moratorium should be lifted. The order encourages companies to provide reasonable payment arrangements once the suspension is lifted. The APSC also authorized utilities to establish regulatory assets to record costs resulting from the suspension of disconnections. These regulatory assets will be reviewed in future proceedings for reasonableness. The APSC ordered the General Staff of the APSC to consult with utilities to create a quarterly report to be used to report the costs incurred and saved that have been booked to the regulatory asset. OG&E is monitoring the regulatory activity regarding COVID-19 at the APSC and will consider the request for additional regulatory action by the APSC as needed.

On May 1, 2020, OG&E filed a Request for Additional Actions and Tariff Deviation seeking relief from the Arkansas General Service Rules and OG&E's Terms and Conditions under the tariff, in order to allow for: more flexible deferred payment agreements for all customer classes, suspension of increased deposits due to non-payment and suspension of the removal of customers from certain billing and extended due date plans for late payments. In addition, OG&E requested that incremental expenses, such as additional personal protective equipment, increased sanitation efforts at facilities, implementing health-screening processes and securing temporary facilities for potential sequestration of critical operation personnel, be tracked in a regulatory asset. OG&E noted that all possible cost categories are not known currently and reserved the right to file subsequent requests as needed.

On May 27, 2020, the APSC issued an order approving OG&E's request to deviate from the specified terms in the Arkansas General Service Rules and OG&E's Terms and Conditions to allow deferred payment arrangements to be offered to all customer classes and have more flexible payment arrangements. OG&E is authorized to record the expenses requested in its regulatory asset to defer and seek future recovery. The APSC found that because each utility has different cost recovery mechanisms and the magnitude of the utilities' expenses are unknown at this time, the APSC finds that it is premature to decide the exact recovery mechanism for any utility for COVID-19 related costs.

Environmental Compliance Plan Rider

In May 2019, OG&E filed an environmental compliance plan rider in Arkansas to recover its investment for the environmentally mandated costs associated with the Sooner Dry Scrubbers project and the conversion of Muskogee Units 4 and 5 to natural gas. The filing initiated an interim surcharge, subject to refund, that began with the first billing cycle of June 2019. OG&E had been reserving the amounts collected through the interim surcharge, pending APSC approval of OG&E's filing. A hearing on the merits was held in December 2019. Parties submitted additional briefs to the APSC in March 2020, which were requested due to certain intervenors questioning whether a company can utilize an environmental compliance plan rider while also being regulated under a formula rate plan. The APSC Staff concurred with OG&E that the rider may run concurrently with a formula rate plan, and the Arkansas Attorney General and other intervenors were in opposition. On July 31, 2020, OG&E's request to recover its investment for these environmentally mandated costs through the interim surcharge was not approved, as the APSC indicated OG&E could otherwise recover this investment, such as through the Formula Rate Plan Rider. As of September 30, 2020, OG&E has returned $5.3 million to customers that had been reserved for refund and has included those costs for recovery in its 2020 Formula Rate Plan filing.

OCC Proceedings

OCC Public Utility Division Motion Regarding COVID-19

On April 28, 2020, the Director of the Public Utility Division filed an application requesting an order from the OCC authorizing action in response to COVID-19. The application requested that the OCC authorize the State's utilities to record as a regulatory asset increased bad debt expenses, costs associated with expanded payment plans, waived fees and incremental expenses that are directly related to the suspension of or delay in disconnection of service beginning March 15, 2020, which coincides with the issuance of the Oklahoma Governor's emergency declaration. The application also requested that the OCC allow utilities to defer additional expenses associated with ensuring the continuity of utility service, such as additional personal protective equipment, increased sanitation efforts at facilities, implementing heath-screening processes and securing temporary facilities for potential sequestration of critical operation personnel. The application asked the OCC to consider in future proceedings whether each utility's request for recovery of these regulatory assets is reasonable and necessary and to consider issues such as the incremental bad debt experienced over normal periods, the appropriate period of recovery for any approved amount of regulatory asset, any amount of carrying costs and other related matters.

On May 7, 2020, the OCC ordered that each utility is authorized to record as a regulatory asset any increased bad debt expense, cost associated with expanded payment plans, waived fees and incremental expenses that are directly related to the suspension of or delay in disconnection of service beginning March 15, 2020 until September 2020, unless otherwise ordered by the OCC. The OCC will consider in future proceedings whether each utility's request for recovery of these regulatory assets is reasonable and necessary. The OCC will also consider issues such as the incremental bad debt experienced over normal periods, appropriate period of recovery for any approved amount of regulatory assets, any amounts of carrying costs thereon and other related matters. The OCC also authorized utilities to defer expenses associated with ensuring continuity of service and protecting utility personnel, customers and the general public.

Pending Regulatory Matters

Various proceedings pending before state or federal regulatory agencies are described below. Unless stated otherwise, OG&E cannot predict when the regulatory agency will act or what action the regulatory agency will take. OG&E's financial results are dependent in part on timely and adequate decisions by the regulatory agencies that set OG&E's rates.

FERC Proceedings

Order for Sponsored Transmission Upgrades within SPP

Under the SPP Open Access Transmission Tariff, costs of participant-funded, or "sponsored," transmission upgrades may be recovered from other SPP customers whose transmission service depends on capacity enabled by the upgrade. The SPP

Open Access Transmission Tariff required the SPP to charge for these upgrades beginning in 2008, but the SPP had not been charging its customers for these upgrades due to information system limitations. However, the SPP had informed participants in the market that these charges would be forthcoming. In July 2016, the FERC granted the SPP's request to recover the charges not billed since 2008. The SPP subsequently billed OG&E for these charges and credited OG&E related to transmission upgrades that OG&E had sponsored, which resulted in OG&E being a net receiver of sponsored upgrade credits. The majority of these net credits were refunded to customers through OG&E's various rate riders that include SPP activity with the remaining amounts retained by OG&E.

Several companies that were net payers of Z2 charges sought rehearing of the FERC's July 2016 order; however, in November 2017, the FERC denied the rehearing requests. In January 2018, one of the impacted companies appealed the FERC's decision to the U.S. Court of Appeals for the District of Columbia Circuit. In July 2018, that court granted a motion requested by the FERC that the case be remanded back to the FERC for further examination and proceedings. In February 2019, the FERC reversed its July 2016 order and November 2017 rehearing denial, ruled that the SPP violated its tariff to charge for the 2008 - 2015 period in 2016, held that the SPP tariff provision that prohibited those charges could not be waived and ordered the SPP to develop a plan to refund the payments but not to implement the refunds until further ordered to do so. In response, in April 2019, OG&E filed a request for rehearing with the FERC, and in May 2019, OG&E filed a FERC 206 complaint against the SPP, alleging that the SPP's forced unwinding of the revenue credit payments to OG&E would violate the provisions of the Sponsored Upgrade Agreement and of the applicable tariff. OG&E's filing requested that the FERC rule that the SPP is not entitled to seek refunds or in any other way seek to unwind the revenue credit payments it had paid to OG&E pursuant to the Sponsored Upgrade Agreement. The SPP's response to OG&E's filing agreed that OG&E should be entitled to keep its Z2 payments and argued that the SPP should not be held responsible for those payments if refunds are ordered. Further, the SPP has requested the FERC to negotiate a global settlement with all impacted parties, including other project sponsors who, like OG&E, have also filed complaints at FERC contending that the payments they have received cannot properly be unwound.

On February 20, 2020, the FERC denied OG&E's request for rehearing of its February 2019 order, denying the waiver and ruling that the SPP must seek refunds from project sponsors for Z2 payments for the 2008 through 2015 period and pay them back to transmission owners. The FERC also denied the SPP's request for a stay and for institution of settlement procedures. The FERC stated it would not institute settlement procedures unless parties on both sides of the matter requested them. The FERC did not rule on OG&E's complaint or the complaints of other project sponsors, or consider the SPP's refund plan. The FERC thus has not set any date for payment of refunds. On March 2, 2020, OG&E petitioned the U.S. Court of Appeals for the District of Columbia Circuit for review of the FERC's order denying the waiver and requiring refunds. The appeal will likely be decided by the second quarter of 2021.

The Company cannot predict the outcome of this proceeding based on currently available information, and as of September 30, 2020 and at present time, the Company has not reserved an amount for a potential refund. If the reversal of the July 2016 FERC order remains intact, OG&E estimates it would be required to refund $13.0 million, which is net of amounts paid to other utilities for upgrades and would be subject to interest at the FERC-approved rate. If refunds were required, recovery of these upgrade credits would shift to future periods. Of the $13.0 million, the Company would be impacted by $5.0 million in expense that initially benefited the Company in 2016, and OG&E customers would incur a net impact of $8.0 million in expense through rider mechanisms or the FERC formula rate.

On January 31, 2020, the FERC acted on an SPP proposal to eliminate Attachment Z2 revenue crediting and replace it with a different rate mechanism that would provide project sponsors, such as OG&E, the same level of recovery, and rejected the proposal to the extent it would limit recovery to the amount of the upgrade sponsor's directly assigned upgrade costs with interest. The SPP resubmitted a proposal on April 29, 2020 without this limited recovery, and with the alternative rate mechanism, and the FERC approved it on June 30, 2020, effective July 1, 2020. No party sought rehearing of the order, and it is now final. This order would only prospectively impact OG&E and its recovery of any future upgrade costs that it may incur as a project sponsor. All of the existing projects that are eligible to receive revenue credits under Attachment Z2, which includes the $13.0 million at issue in OG&E's appeal as discussed above, will continue to do so.

APSC Proceedings

Arkansas 2020 Formula Rate Plan Filing

On October 1, 2020, OG&E filed its third evaluation report under its Formula Rate Plan. If approved, new rates will be effective April 1, 2021.

Net Metering Order

On June 1, 2020, the APSC revised its net-metering rules. The revised rules retained 1:1 full credit for net excess generation of residential customers and commercial customers up to 1 MW without demand charges. For larger commercial customers, 1 MW to 20 MW, the APSC found that some cost shifting to non-net-metering customers may occur. While the rules retain 1:1 full credit for net excess generation, they allow for a grid charge. The grid charge is initially set at zero; however, a utility may request approval to revise the grid charge based on evidence that an unreasonable cost shift to non-net-metering customers is occurring. OG&E does not currently have a significant number of net-metering customers in Arkansas. OG&E is reviewing its existing net-metering tariffs considering the new rules and will request the APSC approve any changes that are believed to be necessary.

Disconnection Procedures Related to COVID-19

On September 17, 2020, the APSC issued Order No. 9 inviting comments from all jurisdictional utilities and any other interested stakeholders on specific questions related to whether a moratorium on service terminations should be lifted and if so, how the resumption of disconnections should occur. The APSC also ordered utilities to submit a detailed "Transitional Plan" outlining how utilities propose to reinstate routine service disconnection activities and collection of past due amounts once the moratorium is lifted. OG&E submitted its proposed Transitional Plan on October 14, 2020. The APSC General Staff is directed to file reports addressing the adequacy of Investor Owned Utilities' Transitional Plans by November 5, 2020.

Arkansas Solar

On July 29, 2020, OG&E submitted its application for a Certificate of Public Convenience and Necessity to construct and operate a five megawatt solar generation facility near Branch, Arkansas. On September 30, 2020, the parties reached a unanimous settlement agreement relating to the filing. The terms of the settlement, which is subject to approval by the APSC, are as follows: (i) parties agree that OG&E has complied with Arkansas law and rules of practice and procedure and recommend granting a Certificate of Public Convenience and Necessity for the construction, ownership and operation of the project and associated tariffs; (ii) OG&E agrees that it would not seek cost recovery until its next general rate review or Formula Rate Plan filing; (iii) OG&E agrees to keep detailed records of final cost, for review at such time that cost recovery is sought, including all cost variance estimates, whereby a determination of prudency of cost may be made; and (iv) OG&E agrees to reserve 50 percent of the total expected energy produced for residential customers for the first 90 days of the program's initial subscription period. OG&E is awaiting a final order from the APSC, which is expected by the end of November 2020.

OCC Proceedings

Oklahoma Grid Enhancement Plan

On February 24, 2020, OG&E filed an application with the OCC for approval of a mechanism that allows for interim recovery of the costs associated with its grid enhancement plan. The plan includes approximately $800.0 million of strategic, data-driven investments, over five years, covering grid resiliency, grid automation, communication systems and technology platforms and applications. On May 19, 2020, the OCC temporarily suspended the procedural schedule in light of various conditions related to the COVID-19 pandemic and the uncertainty surrounding the method and date in which the hearing on the merits may occur. On July 9, 2020, a prehearing conference was held before the Administrative Law Judge to establish a procedural schedule and lift the stay ordered on May 19, 2020. On July 23, 2020, the OCC issued an order approving the amended procedural schedule and thereby lifting the stay.

On October 5, 2020, OG&E filed a Joint Stipulation and Settlement Agreement that included the following key terms: (i) cost recovery through a rider mechanism will be limited to projects placed in service in 2020 and 2021, capped at a revenue requirement of $7.0 million annually and only include communication, automation and technology systems projects; (ii) no operation and maintenance expense will be included in the rider mechanism; (iii) the rider mechanism will terminate by the issuance of a final order in OG&E's next general rate review or October 31, 2022, whichever occurs first; (iv) the rider mechanism rate of return will be capped at OG&E's current cost of capital; and (v) all cost recovery is subject to true-up and refund in OG&E's next general rate review. On October 8, 2020, a hearing on the agreement was held. The Administrative Law Judge recommended approval of the Joint Stipulation and Settlement Agreement and directed OG&E to prepare a draft order, on which the OCC is scheduled to deliberate on November 5, 2020.

Any capital investment falling outside the criteria of the rider mechanism will be included in OG&E's next general rate review for recovery.

2019 Oklahoma Fuel Prudency

On June 16, 2020, the Public Utility Division Staff filed their application initiating the review of the 2019 fuel adjustment clause and prudence review and on October 7, 2020, filed their recommendation for a finding of prudency for calendar year 2019. A hearing on the merits is scheduled for December 3, 2020.

Oklahoma Retail Electric Supplier Certified Territory Act Causes

Several rural electric cooperative electricity suppliers have filed complaints with the OCC alleging that OG&E has violated the Oklahoma Retail Electric Supplier Certified Territory Act. OG&E believes it is lawfully serving customers specifically exempted from this act and has presented evidence and testimony to the OCC supporting its position. There have been five complaint cases initiated at the OCC, and the OCC has issued decisions on each of them. The OCC ruled in favor of the electric cooperatives in three of those cases and ruled in favor of OG&E in two of those cases. All five of those cases have been appealed to the Oklahoma Supreme Court, where they have been made companion cases but will be individually briefed and have individual final decisions.

If the Oklahoma Supreme Court ultimately were to find that some or all of the customers being served are not exempted from the Oklahoma Retail Electric Supplier Certified Territory Act, OG&E would have to evaluate the recoverability of some plant investments made to serve these customers. The total amount of OG&E's plant investments made to serve the customers in all five cases is approximately $28.0 million, of which $11.7 million applies to the three cases where the OCC ruled in favor of the electric cooperatives. In addition to the evaluation of the recoverability of the investments, OG&E may also be required to reimburse certified territory suppliers for an amount of lost revenue. The amount of such lost revenue would depend on how the OCC calculates the revenue requirement but could range from approximately $13.0 million to $20.0 million for all five cases, of which $1.1 million to $1.8 million would apply to the three cases where the OCC ruled in favor of the electric cooperatives.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Introduction

The natural gas midstream operations segment represents the Company's investment in Enable through wholly-owned subsidiaries and ultimately OGE Holdings. Enable was formed in 2013, and its general partner is equally controlled by the Company and CenterPoint, who each have 50 percent management ownership. Based on the 50/50 management ownership, with neither company having control, the Company accounts for its interest in Enable using the equity method of accounting. Enable is primarily engaged in the business of gathering, processing, transporting and storing natural gas. Enable's natural gas gathering and processing assets are strategically located in four states and serve natural gas production in the Anadarko, Arkoma and Ark-La-Tex Basins. Enable also owns crude oil gathering assets in the Anadarko and Williston Basins. Enable has intrastate natural gas transportation and storage assets that are located in Oklahoma as well as interstate assets that extend from western Oklahoma and the Texas Panhandle to Louisiana, from Louisiana to Illinois and from Louisiana to Alabama. As disclosed in the Company's 2019 Form 10-K, Enable is subject to a number of risks, including contract renewal risk, the reliance on the drilling and production decisions of others and the volatility of natural gas, NGLs and crude oil prices. The effects of COVID-19, including negative impacts on demand and commodity prices, could exacerbate these risks. If any of those risks were to occur, the Company's business, financial condition, results of operations or cash flows could be materially adversely affected.

Overview

Company Strategy

The Company's mission, through OG&E and the Company's equity interest in Enable, is to fulfill its critical role in the nation's electric utility and natural gas midstream pipeline infrastructure and meet individual customer's needs for energy and related services, focusing on safety, efficiency, reliability, customer service and risk management. The Company's corporate strategy is to continue to maintain its existing business mix and diversified asset position of its regulated electric utility business and interest in a publicly traded midstream company, while providing competitive energy products and services to customers as well as seeking growth opportunities in both businesses.

Additionally, the Company wants to achieve a premium valuation of its businesses relative to its peers, grow earnings per share with a stable earnings pattern, create a high-performance culture and achieve desired outcomes with target stakeholders. The Company's financial objectives include a long-term annual earnings growth rate for OG&E of four to six percent on a weather-normalized basis, maintaining a strong credit rating as well as projecting dividend increases to be consistent with utility earnings growth. The Company also utilizes cash distributions from its investment in Enable to help fund its capital needs and support future dividend growth. The Company believes it can accomplish these financial objectives by, among other things, pursuing multiple avenues to build its business, maintaining a diversified asset position, continuing to develop a wide range of skills to succeed with changes in its industries, providing products and services to customers efficiently, managing risks effectively and having strong regulatory and legislative relationships.

Recent Developments

COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to spread throughout the U.S. and world. In an effort to contain COVID-19 or slow its spread, the U.S. federal, state and local governments enacted various measures, including orders to close or place restrictions on businesses not deemed "essential," enact "shelter in place" restrictions on residents and practice social distancing when engaging in essential activities. The COVID-19 outbreak has adversely impacted global markets and activity, including the energy industry, and it is impossible to predict the ultimate impact of the COVID-19 pandemic, as the situation continues to evolve. In Oklahoma City, OG&E's largest service territory, the mayor's "shelter in place" order required residents to stay home except for certain "essential" activities and closed down restaurant dining rooms, personal care services and other businesses that posed a high risk for spreading COVID-19. The order was effective from March 16, 2020 to April 30, 2020. Beginning May 1, 2020, Oklahoma City began its phased "re-opening," and there are currently no city-wide or state-wide "shelter in place" restrictions.

The Company's current and potential future responses to the COVID-19 impacts on its employees, customers and shareholders are further discussed below.

•The Company's top priority is to protect its employees and their families, as well as its customers. The Company is taking all precautionary measures as directed by health authorities and local and national governments. The Company continues to monitor the outbreak of COVID-19 and whether any occupancy reductions or closures are necessary to help ensure the health and safety of its employees and customers. In order to promote the safety of the Company's employees and the continuity of utility service, the Company implemented health-screening processes and increased sanitation efforts at its facilities and secured additional personal protective equipment, among other additional measures taken. The OCC and the APSC both issued accounting orders allowing the Company to defer these incremental costs incurred for recovery.

•As a precautionary measure in order to increase the Company's cash position and preserve financial flexibility in light of current uncertainty resulting from the COVID-19 pandemic, the Company entered into a one-year $75.0 million term loan agreement in April 2020. The full $75.0 million was repaid in September 2020. Further, OG&E issued $300.0 million in senior notes in April 2020.

•In March 2020, President Trump signed into U.S. federal law the Coronavirus Aid, Relief, and Economic Security Act, or the "CARES Act," which is aimed at addressing the economic disruption resulting from the COVID-19 pandemic and providing certain tax relief to businesses in the U.S. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of the employer portion of FICA payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The Company concluded that the financial impact of the provisions it adopted is immaterial.

•The Company voluntarily suspended all disconnects for nonpayment, effective March 16, 2020, and on June 25, 2020 announced that it would reinstate disconnects for nonpayment in Oklahoma, effective July 6, 2020. The Company also announced that it will provide broad payment options to customers who repay their past due balances, including a six-month installment plan and the Average Monthly Billing plan which would spread past due balances over a 12-month period. The Arkansas disconnection moratorium is still in place. The Company adjusted its reserve on accounts receivable as of September 30, 2020 in light of the current expected credit loss model (ASU 2016-13) and the COVID-19 pandemic. The adjustment, which was $1.0 million, incorporated concerns of continued slower customer payment due to unemployment. The Company deferred this credit reserve amount to a regulatory asset, as both the OCC and the APSC issued accounting orders allowing the Company to seek recovery of incremental bad debt resulting from COVID-19. The Company will continue to monitor the reserve as it gains better clarity on the impacts of COVID-19 on its customers and business.

•The Company is also monitoring customer usage to determine any impact on load forecasts, in terms of both energy and demand usage. While other customer classes have experienced declines due to COVID-19, residential MWh sales have increased by 3.3 percent on a weather-adjusted basis for the nine months ended September 30, 2020 compared to the same period in 2019, likely due to more customers spending a higher percentage of time at home as a result of the pandemic. However, weather-adjusted commercial MWh sales, as well as industrial MWh sales, have improved since the second quarter, likely aided by the expiration of Oklahoma City's "shelter in place" restrictions in May 2020. Oilfield MWh sales have also improved since the second quarter. Due to different customer characteristics, the contribution to margin varies by customer class and applicable tariffs. The below table presents a one percent annual gross margin sensitivity by class, based on the gross margin guidance the Company provided in its 2019 Form 10-K. The Company believes providing this analysis based on annual gross margin is relevant due to its seasonality of earnings. This analysis only incorporates retail gross margin and excludes transmission and other gross margin sensitivities.


Customer Class	1% Annual Margin Sensitivity (In millions)
Residential	$	6.5
Commercial	$	3.6
Industrial	$	1.3
Oilfield	$	1.1
Public authorities	$	1.2

•Beginning in March 2020, oil and natural gas commodity prices have experienced extreme volatility, primarily attributable to decreased demand resulting from the COVID-19 pandemic and the actions of the Organization of Petroleum Exporting Countries and other oil exporting nations. On April 1, 2020, Enable announced its plan to reduce its quarterly distributions to its shareholders by 50 percent. This change in distribution, which should help strengthen Enable's balance sheet and increase its annualized cash flows, is supported by the Company. The Company does not foresee the need to access equity markets as a result of this reduction in distributions from Enable.

October 2020 Ice Storm

On October 26, 2020, a major ice storm moved into the Company's territory where three separate waves of sleet, freezing rain and high winds caused significant damage to the system resulting in approximately 422,000 outages. The Company's restoration personnel, including contractors and mutual assistance crews, are working to restore power. Operation and maintenance expense incurred during the ice-storm restoration will be deferred to a regulatory asset and subsequently submitted for recovery in rates.

Equity Investment in Enable

Effective March 31, 2020, the Company estimated the fair value of its investment in Enable was below the book value and concluded the decline in value was not temporary due to the severity of the decline and recent rapid deterioration, as well as the near term future outlook, of the midstream oil and gas industry. Accordingly, the Company recorded a $780.0 million impairment on its investment in Enable in March 2020. Further discussion can be found in Notes 4 and 5 in "Item 1. Financial Statements."

During the nine months ended September 30, 2020, Enable recorded goodwill, long-lived asset and equity method investment impairments and a loss on retirement that impacted the Company's equity in earnings of unconsolidated affiliates, as adjusted for basis differences. Further discussion of these impacts can be found in "Results of Operations - OGE Holdings (Natural Gas Midstream Operations)."

Regulatory Matters

Further discussion can be found in Note 14 within "Item 1. Financial Statements."

Arkansas 2019 Formula Rate Plan Filing

APSC Order Regarding COVID-19

certain incremental expenses, such as additional personal protective equipment, increased sanitation efforts at facilities, implementing health-screening processes and securing temporary facilities for potential sequestration of critical operation personnel, and seek future recovery. The APSC found that it is premature to decide at this time the exact recovery mechanism for any utility for COVID-19 related costs.

OCC Public Utility Division Motion Regarding COVID-19

On May 7, 2020, the OCC ordered that the State's utilities, including OG&E, are authorized to record as a regulatory asset any increased bad debt expense, cost associated with expanded payment plans, waived fees and incremental expenses that are directly related to the suspension of or delay in disconnection of service beginning March 15, 2020 until September 2020, unless otherwise ordered by the OCC. The OCC will consider in future proceedings whether each utility's request for recovery of these regulatory assets is reasonable and necessary. The OCC will also consider issues such as the incremental bad debt experienced over normal periods, appropriate period of recovery for any approved amount of regulatory assets, any amounts of carrying costs thereon and other related matters. The OCC also authorized utilities to defer expenses associated with ensuring continuity of service and protecting utility personnel, customers and the general public.

APSC Environmental Compliance Plan Rider

Summary of Operating Results

Three Months Ended September 30, 2020 as compared to the Three Months Ended September 30, 2019

Net income was $177.4 million, or $0.89 per diluted share, during the three months ended September 30, 2020 as compared to net income of $250.9 million, or $1.25 per diluted share, during the same period in 2019. The decrease in net income of $73.5 million, or $0.36 per diluted share, is further discussed below.

•A decrease in net income at OG&E of $27.7 million, or $0.13 per diluted share of the Company's common stock, was primarily due to lower gross margin driven by milder weather and lower sales partially impacted by COVID-19, higher depreciation and amortization expense due to additional assets being placed into service and higher income tax expense, partially offset by lower other operation and maintenance expense.

•A decrease in net income at OGE Holdings of $18.4 million, or $0.09 per diluted share of the Company's common stock, was primarily due to a decrease in equity in earnings of Enable driven by the impact of the Company's share of Enable's SESH equity method investment impairment recorded in September 2020, as adjusted for basis differences, and decreased net income from Enable's gathering and processing business resulting from lower natural gas gathered and processed volumes, partially offset by lower income tax expense.

•An increase in net loss of other operations (holding company) of $27.4 million, or $0.14 per diluted share of the Company's common stock, was primarily due to higher income tax expense driven by the partial elimination of the income tax benefit recorded in March 2020 related to the impairment recorded on the Company's investment in Enable. The income tax benefit impact is due to a consolidating income tax adjustment related to the interim period that will continue to eliminate in the ordinary course of business over the remainder of the year, as discussed in the Company's first quarter 2020 Form 10-Q.

Nine Months Ended September 30, 2020 as compared to the Nine Months Ended September 30, 2019

Net loss was $228.5 million, or $1.14 per diluted share, during the nine months ended September 30, 2020 as compared to net income of $398.2 million, or $1.98 per diluted share, during the same period in 2019. The decrease in net income of $626.7 million, or $3.12 per diluted share, is further discussed below.

•A net loss at OGE Holdings of $538.9 million, or $2.69 per diluted share of the Company's common stock, during the nine months ended September 30, 2020 compared to net income of $76.7 million, or $0.38 per diluted share of the Company's common stock, during the nine months ended September 30, 2019 was primarily due to a decrease

in equity in earnings of Enable related to the impairment of the Company's investment in Enable recorded in March 2020, partially offset by an income tax benefit related to the impairment charge and lower other expense. The decrease in equity in earnings of Enable was also impacted by the Company's share of Enable's SESH equity method investment impairment recorded in September 2020, as adjusted for basis differences, and decreased net income from Enable's gathering and processing business resulting from lower natural gas gathered and processed volumes.

•A decrease in net income at OG&E of $23.0 million, or $0.11 per diluted share of the Company's common stock, was primarily due to higher depreciation and amortization expense due to additional assets being placed into service, gross margin reductions from milder weather and COVID-19 impacts, higher income tax expense and higher interest expense driven by increased long-term debt outstanding. These decreases to net income were partially offset by increases to gross margin driven by recovery of additional assets placed into service through the expiration of the cogeneration credit rider and lower other operation and maintenance expense.

•An increase in net income of other operations (holding company) of $11.9 million, or $0.06 per diluted share of the Company's common stock, was primarily due to higher income tax benefit driven by the impairment recorded in March 2020 on the Company's investment in Enable and lower interest expense. The income tax benefit impact is due to a consolidating income tax adjustment related to the interim period that will continue to eliminate in the ordinary course of business over the remainder of the year, as discussed in the Company's first quarter 2020 Form 10-Q.

2020 Outlook

Key assumptions for 2020 include:

OG&E

The Company projects OG&E to earn approximately $336 million to $340 million, or $1.68 to $1.70 per average diluted share, a decrease from the previously issued guidance of approximately $346 million to $357 million of net income, or $1.72 to $1.78 per average diluted share, in 2020. The updated projections for 2020 are based on the following:

•normal weather patterns are experienced for the remainder of the year;

•gross margin on revenues of approximately $1.482 billion to $1.484 billion;

•operating expenses of approximately $956 million to $958 million with operation and maintenance expenses comprising approximately 49 percent of the total;

•net interest expense of approximately $155 million which assumes a $2 million allowance for borrowed funds used during construction reduction to interest expense;

•net other income of approximately $1 million including approximately $4.9 million of allowance for equity funds used during construction; and

•an effective tax rate of approximately 9.4 percent.

OGE Holdings

The Company projects a net loss from its ownership interest in Enable for 2020 to be approximately ($526) million to ($518) million, or ($2.63) to ($2.59) per average diluted share, a decrease from the previously issued guidance of ($519) million to ($511) million, or ($2.59) to ($2.55) per average diluted share. Cash distributions are approximately $93 million. Ongoing earnings are projected to be between $64 million and $72 million of net income, or $0.32 to $0.36 per average diluted share. Ongoing earnings and ongoing earnings per average diluted share are non-GAAP financial measures; further discussion and reconciliations in accordance with GAAP can be found under "Non-GAAP Financial Measures" below.

Consolidated OGE

The Company's 2020 guidance has changed from a net loss of approximately ($173) million to ($154) million, or ($0.87) to ($0.77) per average diluted share, to a net loss of approximately ($190) million to ($178) million, or ($0.95) to ($0.89) per average diluted share. Ongoing earnings are projected to be between approximately $400 million to $412 million of net income, or $2.00 to $2.06 per average diluted share. Ongoing earnings and ongoing earnings per average diluted share are non-GAAP financial measures; further discussion and reconciliations in accordance with GAAP can be found under "Non-GAAP Financial Measures" below. The guidance is based on the following assumptions:

•approximately 200 million average diluted shares outstanding;

•an effective tax rate of approximately 41 percent and a 13 percent effective tax rate on ongoing earnings; and

•breakeven results are projected at the holding company, which is unchanged.

Non-GAAP Financial Measures

The Company

"Ongoing earnings" and "ongoing earnings per average diluted share" are defined by the Company as GAAP Net Income (Loss) and GAAP Earnings (Loss) per Average Diluted Share adjusted to exclude certain non-cash charges and the associated tax impacts. These financial measures excluded a non-cash charge of $780.0 million, or $3.90 per average diluted share, associated with the impairment of the Company's investment in Enable, which the Company's management considers an unusual and infrequent event. Management believes that ongoing earnings and ongoing earnings per average diluted share provide a more meaningful comparison of earnings results and are more representative of the Company's fundamental core earnings power. The Company's management uses ongoing earnings and ongoing earnings per average diluted share internally for financial planning and analysis, for reporting of results to the Board of Directors and when communicating its earnings outlook to analysts and investors.

Reconciliations of ongoing earnings and ongoing earnings per average diluted share for the three and nine months ended September 30, 2020 are below.



	OG&E (Electric Utility)		OGE Holdings (Natural Gas Midstream Operations) (B)		Other Operations (C)		Consolidated Total
Three months ended September 30, 2020
(In millions)
GAAP net income (loss)	$	199.5	$	10.1	$	(32.2)	$	177.4
Enable investment impairment charge	—		—		—		—
Tax effect	—		—		29.6		29.6
Ongoing earnings	$	199.5	$	10.1	$	(2.6)	$	207.0

GAAP net income (loss) per average diluted share	$	1.00	$	0.05	$	(0.16)	$	0.89
Enable investment impairment charge per share	—		—		—		—
Tax effect per share	—		—		0.15		0.15
Ongoing earnings per average diluted share	$	1.00	$	0.05	$	(0.01)	$	1.04

Nine months ended September 30, 2020
(In millions)
GAAP net income (loss)	$	298.3	$	(538.9)	$	12.1	$	(228.5)
Enable investment impairment charge (A)	—		780.0		—		780.0
Tax effect	—		(190.4)		(6.8)		(197.2)
Ongoing earnings	$	298.3	$	50.7	$	5.3	$	354.3

GAAP net income (loss) per average diluted share	$	1.49	$	(2.69)	$	0.06	$	(1.14)
Enable investment impairment charge per share (A)	—		3.90		—		3.90
Tax effect per share	—		(0.95)		(0.03)		(0.98)
Ongoing earnings per average diluted share	$	1.49	$	0.26	$	0.03	$	1.78

(A) Does not include a $16.9 million pre-tax charge recorded during the nine months ended September 30, 2020 for the Company's share of Enable's goodwill, long-lived asset and equity method investment impairments and loss on retirements, as adjusted for basis differences, as the Company's management does not consider these events unusual and infrequent.

(B) Tax effect and tax effect per share are calculated utilizing OGE Holdings' statutory tax rate for the nine months ended September 30, 2020.

(C) As a result of the impairment of the Company's investment in Enable, other operations' GAAP net income (loss) and GAAP earnings (loss) per average diluted share include a tax benefit impact due to a consolidating income tax adjustment related to the interim period that will continue to eliminate in the ordinary course of business over the remainder of the year.

Reconciliations of ongoing earnings and ongoing earnings per average diluted share included in the 2020 Outlook are below.


	Twelve Months Ended December 31, 2020 (A)
OGE Holdings (In millions)
GAAP net loss	$	(522)
Enable investment impairment charge (B)	780
Tax effect	(190)
Ongoing earnings	$	68

OGE Holdings
GAAP net loss per average diluted share	$	(2.61)
Enable investment impairment charge per share (B)	3.90
Tax effect per share	(0.95)
Ongoing earnings per average diluted share	$	0.34

Consolidated OGE (In millions)
GAAP net loss	$	(184)
Enable investment impairment charge (B)	780
Tax effect	(190)
Ongoing earnings	$	406

Consolidated OGE
GAAP net loss per average diluted share	$	(0.92)
Enable investment impairment charge per share (B)	3.90
Tax effect per share	(0.95)
Ongoing earnings per average diluted share	$	2.03

(A) Based on the midpoint of earnings guidance for 2020.

(B) Represents the impairment that the Company recorded on its equity investment in Enable in March 2020.

OG&E

Gross margin is defined by OG&E as operating revenues less cost of sales. Cost of sales, as reflected on the income statement, includes fuel, purchased power and certain transmission expenses. Gross margin is a non-GAAP financial measure because it excludes depreciation and amortization and other operation and maintenance expenses. Expenses for fuel and purchased power are recovered through fuel adjustment clauses, and as a result, changes in these expenses are offset in operating revenues with no impact on net income. OG&E believes gross margin provides a more meaningful basis for evaluating its operations across periods than operating revenues because gross margin excludes the revenue effect of fluctuations in these expenses. Gross margin is used internally to measure performance against budget and in reports for management and the Board of Directors. OG&E's definition of gross margin may be different from similar terms used by other companies. Further, gross margin is not intended to replace operating revenues as determined in accordance with GAAP as an indicator of operating performance. For a reconciliation of gross margin to revenue, which is the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three and nine months ended September 30, 2020 and 2019, see "OG&E (Electric Utility) Results of Operations" below.

Detailed below is a reconciliation of gross margin to revenue included in the 2020 Outlook.




(In millions)	Twelve Months Ended December 31, 2020 (A)
Operating revenues	$	2,108
Cost of sales	625
Gross margin	$	1,483

(A)Based on the midpoint of OG&E earnings guidance for 2020.

Enable

Gross margin is defined by Enable as total revenues minus costs of natural gas and NGLs, excluding depreciation and amortization. Total revenues consist of the fees that Enable charges its customers and the sales price of natural gas and NGLs that Enable sells. The cost of natural gas and NGLs consists of the purchase price of natural gas and NGLs that Enable purchases. Enable deducts the cost of natural gas and NGLs from total revenues to arrive at a measure of the core profitability of their mix of fee-based and commodity-based customer arrangements. Gross margin allows for meaningful comparison of the operating results between Enable's fee-based revenues and Enable's commodity-based contracts which involve the purchase or sale of natural gas, NGLs and/or crude oil. In addition, the Company believes gross margin allows for a meaningful comparison of the results of Enable's commodity-based activities across different commodity price environments because it measures the spread between the product sales price and cost of products sold. Enable's definition of gross margin may be different from similar terms used by other companies. Further, gross margin is not intended to replace operating revenues as determined in accordance with GAAP as an indicator of operating performance. For a reconciliation of gross margin to revenue, which is the most directly comparable financial measure calculated and presented in accordance with GAAP, for the three and nine months ended September 30, 2020 and 2019, see "OGE Holdings (Natural Gas Midstream Operations) Results of Operations" below.

Results of Operations

The following discussion and analysis presents factors that affected the Company's consolidated results of operations for the three and nine months ended September 30, 2020 as compared to the same periods in 2019 and the Company's consolidated financial position at September 30, 2020. Due to seasonal fluctuations and other factors, the Company's operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any future period. The following information should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto. Known trends and contingencies of a material nature are discussed to the extent considered relevant.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions except per share data)	2020		2019		2020		2019
Net income (loss)	$	177.4	$	250.9	$	(228.5)	$	398.2
Basic average common shares outstanding	200.1		200.2		200.1		200.1
Diluted average common shares outstanding	200.4		200.8		200.1		200.6
Basic earnings (loss) per average common share	$	0.89	$	1.25	$	(1.14)	$	1.99
Diluted earnings (loss) per average common share	$	0.89	$	1.25	$	(1.14)	$	1.98
Dividends declared per common share	$	0.40250	$	0.38750	$	1.17750	$	1.11750

Results by Business Segment


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2020		2019		2020		2019
Net income (loss):
OG&E (Electric Utility)	$	199.5	$	227.2	$	298.3	$	321.3
OGE Holdings (Natural Gas Midstream Operations) (A)	10.1		28.5		(538.9)		76.7
Other operations (A)(B)	(32.2)		(4.8)		12.1		0.2
Consolidated net income (loss)	$	177.4	$	250.9	$	(228.5)	$	398.2

(A)In March 2020, the Company recorded a $780.0 million impairment on its investment in Enable, as further discussed in Notes 4 and 5 in "Item 1. Financial Statements." Other operations includes a tax benefit impact due to a consolidating income tax adjustment related to the interim period that will continue to eliminate in the ordinary course of business over the remainder of the year.

(B)Other operations primarily includes the operations of the holding company and consolidating eliminations.

The following discussion of results of operations by business segment includes intercompany transactions that are eliminated in the Condensed Consolidated Financial Statements.

OG&E (Electric Utility)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(Dollars in millions)	2020		2019		2020		2019
Operating revenues	$	702.1	$	755.4	$	1,636.9	$	1,759.1
Cost of sales	209.1		234.0		481.5		625.3
Other operation and maintenance	110.1		130.0		348.8		370.3
Depreciation and amortization	100.5		94.1		292.2		260.8
Taxes other than income	23.9		22.3		72.8		66.8
Operating income	258.5		275.0		441.6		435.9
Allowance for equity funds used during construction	1.1		1.0		3.7		3.7
Other net periodic benefit expense	(1.3)		(0.7)		(2.8)		(0.3)
Other income	1.1		2.0		3.7		4.5
Other expense	0.3		2.4		1.7		3.9
Interest expense	39.5		38.0		115.7		103.7
Income tax expense	20.1		9.7		30.5		14.9
Net income	$	199.5	$	227.2	$	298.3	$	321.3
Operating revenues by classification:
Residential	$	302.7	$	328.0	$	683.4	$	710.0
Commercial	160.3		176.6		370.5		396.7
Industrial	60.5		68.1		148.8		176.0
Oilfield	51.1		59.4		129.2		159.5
Public authorities and street light	59.0		67.0		136.2		154.3
Sales for resale	—		—		—		0.1
System sales revenues	633.6		699.1		1,468.1		1,596.6
Provision for rate refund	4.8		(2.3)		3.2		(2.9)
Integrated market	18.0		12.8		33.7		29.8
Transmission	35.0		36.7		109.0		112.6
Other	10.7		9.1		22.9		23.0
Total operating revenues	$	702.1	$	755.4	$	1,636.9	$	1,759.1
Reconciliation of gross margin to revenue:
Operating revenues	$	702.1	$	755.4	$	1,636.9	$	1,759.1
Cost of sales	209.1		234.0		481.5		625.3
Gross margin	$	493.0	$	521.4	$	1,155.4	$	1,133.8
MWh sales by classification (In millions)
Residential	3.0		3.2		7.4		7.6
Commercial	1.9		2.1		4.9		5.1
Industrial	1.1		1.2		3.1		3.4
Oilfield	1.1		1.2		3.2		3.5
Public authorities and street light	0.9		1.0		2.2		2.4

System sales	8.0		8.7		20.8		22.0
Integrated market	0.7		0.3		1.5		0.9
Total sales	8.7		9.0		22.3		22.9
Number of customers	865,259		855,904		865,259		855,904
Weighted-average cost of energy per kilowatt-hour (In cents)
Natural gas	2.137		1.943		1.935		2.234
Coal	1.772		2.025		1.838		2.005
Total fuel	1.931		1.857		1.787		2.002
Total fuel and purchased power	2.302		2.528		2.058		2.616
Degree days (A)
Heating - Actual	29		—		1,980		2,277
Heating - Normal	19		19		2,023		2,023
Cooling - Actual	1,163		1,477		1,745		1,958
Cooling - Normal	1,382		1,382		2,021		2,021

(A)Degree days are calculated as follows: The high and low degrees of a particular day are added together and then averaged. If the calculated average is above 65 degrees, then the difference between the calculated average and 65 is expressed as cooling degree days, with each degree of difference equaling one cooling degree day. If the calculated average is below 65 degrees, then the difference between the calculated average and 65 is expressed as heating degree days, with each degree of difference equaling one heating degree day. The daily calculations are then totaled for the particular reporting period.

OG&E's net income decreased $27.7 million, or 12.2 percent, and $23.0 million, or 7.2 percent, during the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019. Primary drivers for these decreases in net income are further discussed below.

Gross margin decreased $28.4 million, or 5.4 percent, and increased $21.6 million, or 1.9 percent, during the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019. The below factors contributed to the changes in gross margin.


	$ Change

(In millions)	Three Months Ended		Nine Months Ended
Quantity impacts (primarily weather) (A)	$	(34.4)	$	(30.4)
Industrial and oilfield sales	(3.8)		(8.5)
Non-residential demand and related revenues	(3.8)		(6.3)
Other	(0.1)		(2.0)
Price variance (B)	9.8		59.7
New customer growth	3.9		9.1


Change in gross margin (C)	$	(28.4)	$	21.6

(A)Decreased primarily due to a 21.3 percent and 10.9 percent decrease in cooling degree days for the three and nine months ended September 30, 2020, respectively, as well as a 13.0 percent decrease in heating degree days for the nine months ended September 30, 2020.

(B)Increased for the nine months ended September 30, 2020 primarily due to recovery of additional assets placed into service through the expiration of the cogeneration credit rider in the second half of 2019.

(C)Gross margin for both the three and nine months ended September 30, 2020 was impacted by COVID-19, particularly as seen in the negative impacts within industrial and oilfield sales and non-residential demand and related revenues.

Cost of sales for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. The actual cost of fuel used in electric generation and certain purchased power costs are passed through to OG&E's customers through fuel adjustment clauses. The fuel adjustment clauses are subject to periodic review by the OCC and the APSC. OG&E's cost of sales decreased $24.9 million, or 10.6 percent, and $143.8 million, or 23.0 percent, during the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019. The below factors contributed to the changes in cost of sales.


	$ Change				% Change

(In millions)	Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
Fuel expense (A)	$	18.5	$	(15.0)	16.7	%	(5.6)	%
Purchased power costs:
Purchases from SPP (B)	(38.6)		(116.5)		(46.7)	%	(49.0)	%
Cogeneration (C)	(2.9)		(14.6)		(100.0)	%	(100.0)	%
Wind (D)	(2.7)		1.4		(19.9)	%	3.5	%
Other	(0.3)		(0.3)		(5.2)	%	(3.5)	%
Transmission expense	1.1		1.2		6.6	%	2.3	%
Change in cost of sales	$	(24.9)	$	(143.8)

(A)Increased primarily due to higher fuel usage related to the generating assets utilized and decreased primarily due to lower fuel costs related to the generating assets utilized during the three and nine months ended September 30, 2020, respectively.

(B)Decreased primarily due to lower market prices as a result of decreased fuel costs for generators along with decreased MWhs purchased of 27.5 percent and 12.1 percent for the three and nine months ended September 30, 2020, respectively.

(C)Decreased primarily due to the expiration of cogeneration contracts in 2019.

(D)Decreased primarily due to a decrease of 19.1 percent in MWs purchased and increased primarily due to an increase of 4.7 percent in MWs purchased during the three and nine months ended September 30, 2020, respectively.

Other operation and maintenance expense decreased $19.9 million, or 15.3 percent, and $21.5 million, or 5.8 percent, during the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019. The below factors contributed to the changes in other operation and maintenance expense.


	$ Change				% Change

(In millions)	Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
Contract technical and construction services	$	(6.9)	$	(13.1)	(50.8)	%	(33.2)	%
Capitalized labor	(4.5)		(6.5)		(16.8)	%	(8.1)	%
Other	(4.2)		(5.3)		(5.9)	%	(2.6)	%
Payroll and benefits	(2.7)		0.9		(4.4)	%	0.5	%
Materials and supplies	(1.0)		(4.3)		(15.0)	%	(21.5)	%
New expenses related to River Valley power plant (A)	(0.6)		6.8		(10.5)	%	(97.8)	%







Change in other operation and maintenance expense (B)	$	(19.9)	$	(21.5)

(A)Additional other operation and maintenance expenses related to the purchase of the River Valley plant are primarily recovered through a rider mechanism, as approved by the OCC in 2019.

(B)OG&E has been focused on reducing other operation and maintenance activities in light of COVID-19. Further, certain incremental expenses incurred by OG&E related to its COVID-19 response have been deferred and are included in the regulatory assets and liabilities table in Note 1 within "Item 1. Financial Statements."

Depreciation and amortization expense increased $6.4 million, or 6.8 percent, and $31.4 million, or 12.0 percent, during the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019, primarily due to additional assets being placed into service. The increase during the nine months ended September 30, 2020 was also impacted by depreciation expense for the Sooner Dry Scrubbers no longer being deferred to a regulatory asset.

Taxes other than income increased $1.6 million, or 7.2 percent, and $6.0 million, or 9.0 percent, during the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019, primarily due to increased ad valorem taxes.

Interest on long-term debt increased $12.2 million, or 12.0 percent, during the nine months ended September 30, 2020, as compared to the same period in 2019, primarily due to increased long-term debt outstanding and interest expense for the Sooner Dry Scrubbers no longer being deferred to a regulatory asset.

Income tax expense increased $10.4 million and $15.6 million during the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019, primarily due to reduced tax credit generation and amortization of net unfunded deferred taxes, partially offset by reduced taxes on lower pretax income.

OGE Holdings (Natural Gas Midstream Operations)


	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions)	2020		2019		2020		2019
Operating revenues	$	—	$	—	$	—	$	—
Cost of sales	—		—		—		—
Other operation and maintenance	0.3		0.6		1.2		1.3



Taxes other than income	0.2		0.1		0.4		0.4
Operating loss	(0.5)		(0.7)		(1.6)		(1.7)
Equity in earnings (losses) of unconsolidated affiliates (A)	15.8		38.3		(703.8)		104.8
Other expense	0.7		0.6		0.7		8.4

Income (loss) before taxes	14.6		37.0		(706.1)		94.7
Income tax expense (benefit)	4.5		8.5		(167.2)		18.0


Net income (loss) attributable to OGE Holdings	$	10.1	$	28.5	$	(538.9)	$	76.7

(A)In March 2020, the Company recorded a $780.0 million impairment on its investment in Enable, as further discussed in Notes 4 and 5 in "Item 1. Financial Statements."

Reconciliation of Equity in Earnings (Losses) of Unconsolidated Affiliates

See Note 4 within "Item 1. Financial Statements" for the reconciliation of Enable's net income to OGE Energy's equity in earnings (losses) of unconsolidated affiliates and the reconciliation of the difference between OGE Energy's investment in Enable and its underlying equity in the net assets of Enable (basis difference).

Enable Results of Operations and Operating Data

The following tables present summarized financial information of Enable for the three and nine months ended September 30, 2020 and 2019.


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2020		2019		2020		2019
Reconciliation of gross margin to revenue:
Total revenues	$	596	$	699	$	1,759	$	2,229
Cost of natural gas and NGLs	250		263		653		958
Gross margin	$	346	$	436	$	1,106	$	1,271
Operating income	$	100	$	175	$	326	$	507
Net income (loss)	$	(173)	$	123	$	(35)	$	351


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2020	2019	2020	2019
Natural gas gathered volumes - TBtu/d	4.07	4.47	4.25	4.54
Natural gas processed volumes - TBtu/d (A)	2.06	2.49	2.18	2.52
NGLs sold - MBbl/d (B)(C)	138.55	118.29	127.66	131.49
Crude oil and condensate gathered volumes - MBbl/d	138.02	132.99	121.38	120.17
Transported volumes - TBtu/d	4.78	5.97	5.58	6.22

(A)Includes volumes under third-party processing arrangements.

(B)Excludes condensate.

(C)NGLs sold includes volumes of NGLs withdrawn from inventory or purchased for system balancing purposes.

OGE Holdings' net income decreased $18.4 million, or 64.6 percent, for the three months ended September 30, 2020 as compared to the same period in 2019, primarily due to a decrease in equity in earnings of Enable of $22.5 million, partially offset by a decrease in income tax expense. OGE Holdings' net loss of $538.9 million compared to net income of $76.7 million during the nine months ended September 30, 2020 and 2019, respectively, was primarily due to the impairment recorded in March 2020 on the Company's investment in Enable, which is discussed in more detail in Notes 4 and 5 in "Item 1. Financial Statements." The following table presents summarized information regarding Enable's income statement changes for the three and nine months ended September 30, 2020, as compared to the same periods in 2019, and the corresponding impact those changes had on the Company's equity in earnings of Enable.


	Three Months Ended				Nine Months Ended

(In millions)	Income Statement Change at Enable		Impact to Company's Equity in Earnings		Income Statement Change at Enable		Impact to Company's Equity in Earnings
Gross margin	$	(90.0)	$	(23.0)	$	(165.0)	$	(42.1)
Impairments of property, plant and equipment and goodwill (A)	$	—	$	—	$	28.0	$	(4.4)
Operation and maintenance, General and administrative (B)	$	(12.0)	$	3.1	$	(3.0)	$	3.3
Depreciation and amortization	$	(3.0)	$	0.8	$	(9.0)	$	2.3
Equity in earnings (losses) of equity method affiliate, net (C)	$	(227.0)	$	(12.0)	$	(223.0)	$	(11.0)

(A)Included in the $28.0 million of impairments recorded by Enable is a $12.0 million goodwill impairment and a $16.0 million impairment for certain long-lived assets in their gathering and processing business segment. These certain long-lived assets are jointly-owned by Enable, which reduces the impairment's impact by 50 percent on the Company's equity in earnings. The Company recorded a $4.4 million pre-tax charge for its share of Enable's goodwill and long-lived asset impairments, as adjusted for basis differences.

(B)Included in Enable's operation and maintenance and general and administrative expenses for the nine months ended September 30, 2020 is a $20.0 million loss on retirement of an Ark-La-Tex gathering system in their gathering and processing business segment. The Company recorded a $1.0 million pre-tax charge for its share of Enable's loss on retirement, as adjusted for basis differences.

(C)Included in Enable's equity in earnings (losses) of equity method affiliate, net for the three and nine months ended September 30, 2020 is a $225.0 million impairment on Enable's SESH equity method investment in their transportation and storage business segment. The Company recorded a $11.5 million pre-tax charge for its share of Enable's equity method investment impairment, as adjusted for basis differences.

Enable's gathering and processing business segment reported decreases in operating income of $81.0 million and $199.0 million for the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019. The following table presents summarized information regarding Enable's gathering and processing business segment income statement changes for the three and nine months ended September 30, 2020, as compared to the same periods in 2019, and the corresponding impact those changes had on the Company's equity in earnings of Enable.

The decreases in Enable's gathering and processing business segment operating income were primarily due to the following:


	Three Months Ended				Nine Months Ended

(In millions)	Income Statement Change at Enable		Impact to Company's Equity in Earnings		Income Statement Change at Enable		Impact to Company's Equity in Earnings
Gross margin	$	(85.0)	$	(21.7)	$	(164.0)	$	(41.8)
Operating and maintenance, General and administrative (A)	$	(2.0)	$	0.5	$	12.0	$	1.0
Depreciation and amortization	$	(2.0)	$	0.5	$	(6.0)	$	1.5
Impairments of property, plant and equipment and goodwill (B)	$	—	$	—	$	28.0	$	(4.4)

(A)Included in Enable's operation and maintenance and general and administrative expenses for the nine months ended September 30, 2020 is a $20.0 million loss on retirement of an Ark-La-Tex gathering system in their gathering and processing business segment. The Company recorded a $1.0 million pre-tax charge for its share of Enable's loss on retirement, as adjusted for basis differences.

(B)Included in the $28.0 million of impairments recorded by Enable is a $12.0 million goodwill impairment and a $16.0 million impairment for certain long-lived assets in their gathering and processing business segment. These certain long-lived assets are jointly-owned by Enable, which reduces the impairment's impact by 50 percent on the Company's equity in earnings. The Company recorded a $4.4 million pre-tax charge for its share of Enable's goodwill and long-lived asset impairments, as adjusted for basis differences.

Gathering and processing gross margin decreased for the three months ended September 30, 2020 primarily due to:

•a decrease in natural gas gathering fees due to lower gathered volumes, inclusive of continued producer shut-ins in the Anadarko Basin that ended during the third quarter, lower shortfall fees associated with the expiration of certain minimum volume commitment contracts in the Ark-La-Tex Basin and lower revenue associated with the third quarter 2019 amendment of certain minimum volume commitment contracts in the Arkoma Basin;

•a decrease in revenues from natural gas sales less the cost of natural gas due to lower sales volumes, partially offset by higher average sales prices;

•a decrease in changes in the fair value of natural gas, condensate and NGLs derivatives;

•a decrease in realized gains on natural gas, condensate and NGLs derivatives; and

•a decrease in processing service revenues due to lower processed volumes under fee-based arrangements, partially offset by higher consideration received from certain processing arrangements due to an increase in retained volumes at higher average market prices as well as an increase in the recognition of certain annual minimum processing fees; partially offset by

•an increase in revenues from NGLs sales less the cost of NGLs due to higher average sales prices for all NGLs products other than natural gasoline; and

•an increase in crude oil, condensate and produced water gathering revenues primarily due to an increase in gathered crude oil volumes in the Anadarko Basin, partially offset by a decrease in gathered crude oil volumes in the Williston Basin.

Gathering and processing gross margin decreased for the nine months ended September 30, 2020 primarily due to:

•a decrease in natural gas gathering fees due to lower gathered volumes in the Anadarko and Arkoma Basins, inclusive of continued producer shut-ins in the Anadarko Basin that ended during the third quarter, lower shortfall fees associated with the expiration of certain minimum volume commitment contracts in the Ark-La-Tex and Arkoma Basins and lower revenue associated with the third quarter 2019 amendment of certain minimum volume commitment contracts in the Arkoma Basin;

•a decrease in revenues from natural gas sales less the cost of natural gas due to lower average sales prices and lower sales volumes;

•a decrease in revenues from NGLs sales less the cost of NGLs due to lower volumes and lower average market prices for NGLs products;

•a decrease in processing service fees due to lower processed volumes under fee-based arrangements, partially offset by higher consideration received from certain processing arrangements due to an increase in retained volumes at lower average market prices as well as an increase in the recognition of certain annual minimum processing fees;

•a decrease in changes in the fair value of natural gas, condensate and NGLs derivatives; and

•a decrease in intercompany management fees; partially offset by

•an increase in realized gains on natural gas, condensate and NGLs derivatives; and

Enable's transportation and storage business segment reported increases in operating income of $6.0 million and $18.0 million for the three and nine months ended September 30, 2020, respectively, as compared to the same periods in 2019. The following table presents summarized information regarding Enable's transportation and storage business segment income statement changes for the three and nine months ended September 30, 2020, as compared to the same periods in 2019, and the corresponding impact those changes had on the Company's equity in earnings of Enable.

The increases in Enable's transportation and storage business segment operating income were primarily due to the following:


	Three Months Ended				Nine Months Ended


(In millions)	Income Statement Change at Enable		Impact to Company's Equity in Earnings		Income Statement Change at Enable		Impact to Company's Equity in Earnings
Gross margin	$	(5.0)	$	(1.3)	$	(1.0)	$	(0.3)
Operation and maintenance, General and administrative	$	(10.0)	$	2.6	$	(15.0)	$	3.8
Depreciation and amortization	$	(1.0)	$	0.3	$	(3.0)	$	0.8

Transportation and storage gross margin decreased for the three months ended September 30, 2020 primarily due to:

•a decrease in firm transportation and storage services due to lower interstate contracted capacity, partially offset by higher recognized rates subsequent to the settlement of the Mississippi River Transmission, LLC rate case;

•a decrease due to incremental lower of cost or net realizable value adjustments related to natural gas storage inventories; and

•a decrease in changes in the fair value of natural gas derivatives; partially offset by

•an increase in system management activities; and

•an increase in realized gains on natural gas derivatives.

Transportation and storage gross margin decreased for the nine months ended September 30, 2020 primarily due to:

•a decrease in volume-dependent transportation and storage revenues due to lower off-system intrastate transportation rates and lower transported volumes due to decreased production activity in the Anadarko Basin, partially offset by the recognition of revenue upon the settlement of the Mississippi River Transmission, LLC rate case;

•a decrease due to incremental lower of cost or net realizable value adjustments related to natural gas storage inventories;

•a decrease in revenues from NGLs sales less the cost of NGLs due to a decrease in average NGLs prices and lower volumes;

•a decrease in firm transportation and storage services due to lower interstate contracted capacity and lower rates on certain contracts for intrastate service with power generators, partially offset by an increase in recognized rates and the recognition of previously reserved revenue upon the settlement of the Mississippi River Transmission, LLC rate case; and

•a decrease in changes in the fair value of natural gas derivatives; partially offset by

•an increase in system management activities.

Enable's transportation and storage business segment net loss for the three and nine months ended September 30, 2020 included a $225.0 million impairment that Enable recorded on its SESH equity method investment. Enable estimated the fair value of this equity method investment was below the carrying value at September 30, 2020 and concluded the decline in value was other than temporary due to the expiration of a transportation contract and the current status of renewal negotiations. The Company recorded a $11.5 million pre-tax charge for its share of Enable's equity method investment impairment, as adjusted for basis differences.

OGE Holdings' income tax expense decreased $4.0 million, or 47.1 percent, during the three months ended September 30, 2020, as compared the same period in 2019, primarily due to lower pretax income.

OGE Holdings' income tax benefit was $167.2 million during the nine months ended September 30, 2020, as compared to income tax expense of $18.0 million during the same period in 2019. The change is primarily due to a tax benefit of $190.4

million related to the impairment recorded in March 2020 on the Company's investment in Enable, partially offset by state deferred tax adjustments related to the Company's investment in Enable.

Off-Balance Sheet Arrangements

There have been no significant changes in the Company's off-balance sheet arrangements from those discussed in the Company's 2019 Form 10-K. The Company has no off-balance sheet arrangements with equity method investments that would affect its liquidity.

Liquidity and Capital Resources

Cash Flows


	Nine Months Ended
	September 30,				2020 vs. 2019
(Dollars in millions)	2020		2019		$ Change		% Change
Net cash provided from operating activities (A)	$	525.3	$	418.0	$	107.3	25.7	%
Net cash used in investing activities (B)	$	(422.1)	$	(482.4)	$	60.3	(12.5)	%
Net cash used in financing activities (C)	$	(71.2)	$	(16.7)	$	(54.5)	*

* Change is greater than 100 percent variance.

(A)Increased primarily due to a decrease in payments for purchased power at OG&E.

(B)Decreased primarily due to environmental projects at OG&E that were completed and placed into service as well as fewer OG&E plant outages in 2020, partially offset by increased reliability projects.

(C)Increased primarily due to a decrease in borrowings of short-term debt, the purchase of treasury stock and an increase in dividends paid, partially offset by the payment of long-term debt by OG&E in January 2019.

Working Capital

Working capital is defined as the difference in current assets and current liabilities. The Company's working capital requirements are driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to and the timing of collections from customers, the level and timing of spending for maintenance and expansion activity, inventory levels and fuel recoveries. The following discussion addresses changes in working capital balances at September 30, 2020 compared to December 31, 2019.

Cash and Cash Equivalents increased $32.0 million, primarily due to normal business operations. The Company expects to use the cash over time for general corporate purposes.

Accounts Receivable and Accrued Unbilled Revenues increased $62.9 million, or 28.8 percent, primarily due to an increase in billings to OG&E's retail customers reflecting higher seasonal usage in September 2020 as compared to December 2019, as well as increased customer balances due to the disconnection moratorium related to COVID-19, as discussed in "Recent Developments - COVID-19 Pandemic."

Income Taxes Receivable decreased $10.0 million, or 91.7 percent, primarily due to current year tax expense accruals in excess of the prior accrued receivable.

Fuel Inventories decreased $9.8 million, or 21.2 percent, primarily due to decreased coal inventory.

Materials and Supplies increased $16.4 million, or 18.1 percent, primarily due to increased materials and supplies inventory acquired for upcoming projects.

Fuel Clause Under Recoveries decreased $39.5 million, primarily due to increased collections from customers and lower fuel costs.

Other Current Assets increased $6.3 million, or 25.8 percent, primarily due to an increase in under-recovered riders and SPP transmission formula rate along with prepayments associated with software expense, partially offset by decreased prepaid insurance.

Short-term Debt decreased $112.0 million, primarily due to the timing of operational needs. The Company borrows on a short-term basis, as necessary, by the issuance of commercial paper and borrowings under its revolving credit agreements and term credit agreement.

Accounts Payable decreased $71.7 million, or 36.8 percent, primarily due to the timing of vendor payments and lower fuel costs.

Accrued Taxes increased $36.5 million, or 87.1 percent, primarily due to the timing of ad valorem payments and deferment of the employer portion of FICA payroll taxes as allowed by the CARES Act.

Accrued Compensation decreased $6.7 million, or 16.5 percent, primarily due to lower accruals for incentive compensation due to 2019 payouts that occurred in the first quarter of 2020.

Fuel Clause Over Recoveries increased $34.8 million, primarily due to increased collections from customers and lower fuel costs.

Other Current Liabilities decreased $26.2 million, or 40.2 percent, primarily due to changes in amounts owed to OG&E customers which includes an $18.9 million reduction in SPP reserves related to the transmission formula rate.

Future Capital Requirements

The Company's primary needs for capital are related to acquiring or constructing new facilities and replacing or expanding existing facilities at OG&E. Other working capital requirements are expected to be primarily related to maturing debt, operating lease obligations, fuel clause under and over recoveries and other general corporate purposes. The Company generally meets its cash needs through a combination of cash generated from operations, short-term borrowings (through a combination of bank borrowings and commercial paper) and permanent financings.

Capital Expenditures

The Company's consolidated estimates of capital expenditures, which represent base maintenance capital expenditures plus capital expenditures for known and committed projects, for the years 2020 through 2024 are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2019 Form 10-K. Additional capital expenditures beyond those identified in the Company's 2019 Form 10-K, including additional incremental growth opportunities in electric transmission assets, will be evaluated based upon their impact upon achieving the Company's financial objectives. The Company remains on track for its approximately $575.0 million in capital investment planned for 2020 as disclosed in the Company's 2019 Form 10-K. However, the progression of, and global response to, the COVID-19 outbreak increases the risk of delays in construction activities and equipment deliveries related to the Company's capital projects, including potential delays in obtaining permits from government agencies, resulting in potential deferral of capital expenditures in future periods.

Financing Activities and Future Sources of Financing

Management expects that cash generated from operations, proceeds from the issuance of long- and short-term debt, proceeds from the sales of common stock to the public through the Company's Automatic Dividend Reinvestment and Stock Purchase Plan or other offerings and distributions from Enable will be adequate over the next three years to meet anticipated cash needs and to fund future growth opportunities. The Company utilizes short-term borrowings (through a combination of bank borrowings and commercial paper) to satisfy temporary working capital needs and as an interim source of financing capital expenditures until permanent financing is arranged. As indicated above, as a precautionary measure in order to increase the Company's cash position and preserve financial flexibility in light of current uncertainty resulting from the COVID-19 pandemic, the Company entered into a one-year $75.0 million term loan agreement in April 2020, which was repaid in September 2020. Further, OG&E issued $300.0 million in senior notes in April 2020. The disruption in the capital markets and the commercial paper markets caused by the COVID-19 outbreak could make additional financing more challenging, and there can be no assurance that the Company will be able to obtain such financing on commercially reasonable terms or at all.

Short-Term Debt and Credit Facilities

The Company borrows on a short-term basis, as necessary, by issuance of commercial paper and borrowings under its revolving credit agreements and term credit agreement.

The Company has unsecured five-year revolving credit facilities totaling $900.0 million ($450.0 million for the Company and $450.0 million for OG&E) that mature on March 8, 2023. These bank facilities can also be used as letter of credit facilities. The following table provides information about the Company's revolving credit agreements at September 30, 2020.


(Dollars in millions)	September 30, 2020
Balance of outstanding supporting letters of credit	$	0.3
Weighted-average interest rate of outstanding supporting letters of credit	1.15		%
Net available liquidity under revolving credit agreements	$	899.7
Balance of cash and cash equivalents	$	32.0

In April 2020, the Company entered into a $75.0 million floating rate unsecured one-year term credit agreement and borrowed the full $75.0 million, in order to preserve financial flexibility in response to COVID-19. Advances under this agreement were used to refinance existing indebtedness and for working capital and general corporate purposes of the Company. The term credit agreement contained substantially the same covenants as the Company's existing $450.0 million revolving credit agreement. In September 2020, the Company repaid the $75.0 million borrowed under the term credit agreement.

The following table highlights the Company's total short-term debt activity for the three and nine months ended September 30, 2020.


(Dollars in millions)	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
Average balance of short-term debt	$	56.3		$	99.5
Weighted-average interest rate of average balance of short-term debt	1.23		%	1.61		%
Maximum month-end balance of short-term debt	$	75.0		$	247.3

OG&E has the necessary regulatory approvals to incur up to $800.0 million in short-term borrowings at any one time for a two-year period beginning January 1, 2019 and ending December 31, 2020. OG&E has requested renewal of this authority for an additional two-year period and expects to receive approval prior to the expiration of its current authority. See Note 10 within "Item 1. Financial Statements" for further discussion of the Company's short-term debt activity.

Issuance of Long-Term Debt

Security Ratings

Access to reasonably priced capital is dependent in part on credit and security ratings. Generally, lower ratings lead to higher financing costs. Pricing grids associated with the Company's credit facilities could cause annual fees and borrowing rates to increase if an adverse rating impact occurs. The impact of any future downgrade could include an increase in the costs of the Company's short-term borrowings, but a reduction in the Company's credit ratings would not result in any defaults or accelerations. Any future downgrade could also lead to higher long-term borrowing costs and, if below investment grade, would require the Company to post collateral or letters of credit.

A security rating is not a recommendation to buy, sell or hold securities. Such rating may be subject to revision or withdrawal at any time by the credit rating agency, and each rating should be evaluated independently of any other rating.

On April 3, 2020, S&P's Global Ratings affirmed its issuer credit and commercial paper ratings, as listed in the Company's 2019 Form 10-K, for both the Company and OG&E. S&P's Global Ratings also affirmed both companies' stable outlooks. S&P's Global Ratings' affirmation follows the announcement that Enable will increase the level of cash it retains,

which effectively reduces dividend distributions for the Company by as much as half. However, S&P's Global Ratings indicated it does not expect the Company's credit quality to weaken materially, given the cushion in its current financial measures. Further, S&P's Global Ratings indicated they continue to view OG&E as insulated from the Company, reflecting the combination of OG&E's stronger stand-alone credit profile and sufficient separateness between OG&E and the Company.

On June 24, 2020, Moody's Investors Service issued an opinion to update its credit analysis for the Company and OG&E, in light of COVID-19 developments. Moody's Investors Service indicated it expects the Company and its subsidiaries, including OG&E, to be resilient to recessionary pressures related to COVID-19 because of the Company's and OG&E's primary rate regulated, essential service business model and cost recovery framework. Nevertheless, Moody's Investors Service indicated it is watching for electric usage declines, utility bill payment delinquency and the regulatory response to counter these effects on earnings and cash flow. Further, Moody's Investor Service indicated that the effects of the pandemic could result in financial metrics that are weaker than expected but see these issues as temporary and not reflective of the core operations or long-term financial or credit profile of the Company and OG&E. Moody's Investor Service indicated that it views OG&E's regulatory relationships in Oklahoma as generally supportive and is a key credit driver for both the Company and OG&E. Additionally, while Enable's quarterly distribution reduction is credit negative, Moody's Investor Service indicated the Company's financial metrics are expected to remain solid.

On July 27, 2020, S&P's Global Ratings issued their annual update for OG&E, indicating their issuer credit rating, commercial paper rating and outlook for OG&E are unchanged from those affirmed on April 3, 2020. In the update, S&P's Global Ratings indicated they believe OG&E is less vulnerable to volumetric decline caused by COVID-19 due to OG&E's limited commercial and industrial exposure, and any potential reduction in commercial and industrial load growth is expected to be mitigated by OG&E's large residential customer base. Further, S&P's Global Ratings indicated it expects OG&E to manage its regulatory risk effectively through its numerous constructive regulatory mechanisms.

On October 16, 2020, Fitch Ratings affirmed its long-term and short-term issuer credit ratings for both the Company and OG&E. The outlooks for both the Company and OG&E are stable. Fitch Ratings indicated that the Company's ratings and outlook primarily reflect the stable cash flows and earnings from OG&E, which help mitigate the operating risks and dividend distribution reduction from the Company's investment in Enable. Fitch Ratings also indicated that OG&E's overall supportive regulatory framework is a key ratings driver. Further, Fitch Ratings indicated that it expects the financial impact from COVID-19 to be manageable and that there are no major operational issues at this time. Fitch Ratings indicated that this expectation is supported by Oklahoma re-opening in May and regulatory recovery mechanisms approved by the OCC and the APSC for incremental bad debt expense and other incremental costs incurred during the Company's response to COVID-19.

Quarterly Distributions by Enable

Pursuant to the Enable Limited Partnership Agreement, during the three and nine months ended September 30, 2020, Enable made distributions of $18.3 million and $73.3 million to the Company, respectively. On April 1, 2020, Enable announced a 50 percent reduction to its quarterly distribution in order to strengthen its balance sheet and increase its annualized retained cash flow. The Company does not expect any changes to its operations or foresee the need to access the equity markets as a result of Enable's action.

Critical Accounting Policies and Estimates

The Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements contain information that is pertinent to Management's Discussion and Analysis. In preparing the Condensed Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Changes to these assumptions and estimates could have a material effect on the Company's Condensed Consolidated Financial Statements. However, the Company believes it has taken reasonable positions where assumptions and estimates are used in order to minimize the negative financial impact to the Company that could result if actual results vary from the assumptions and estimates.

In management's opinion, the areas of the Company where the most significant judgment is exercised for all Company segments include the determination of Pension Plan assumptions, income taxes, contingency reserves, asset retirement obligations and depreciable lives of property, plant and equipment. For the electric utility segment, significant judgment is also exercised in the determination of regulatory assets and liabilities and unbilled revenues. For the natural gas midstream segment, significant judgment is also exercised in the determination of any impairment of equity method investments. The selection, application and disclosure of the Company's critical accounting estimates have been discussed with the Company's Audit

Committee and are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2019 Form 10-K.

Impairment of Equity Method Investments

Investments in unconsolidated affiliates accounted for under the equity method are assessed for impairment when there are indicators of a loss in value, such as a lack of sustained earnings capacity or a current fair value less than the investment's carrying amount. When it is determined that an indicated impairment is other than temporary, an impairment charge is recognized for the difference between the investment's carrying value and its estimated fair value.

When determining whether a decline in value is other than temporary, management considers factors such as the duration and extent of the decline, the investee's financial condition and near-term prospects, and management's ability and intention to retain the investment for a period that allows for recovery. When estimating an investment's fair value, quoted market prices are utilized, as available, and other rights and privileges that are a feature or attribute of the investment security are considered, as appropriate. Different assumptions could affect the timing and the amount of an impairment of an investment in any period.

Effective March 31, 2020, the Company estimated the fair value of its investment in Enable was below the book value and concluded the decline in value was not temporary due to the severity of the decline and the recent rapid deterioration, as well as the near term future outlook, of the midstream oil and gas industry. Accordingly, the Company recorded a $780.0 million impairment on its investment in Enable in March 2020. Further discussion can be found in Notes 4 and 5 in "Item 1. Financial Statements."

Commitments and Contingencies

In the normal course of business, the Company is confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to assess the claim. If, in management's opinion, the Company has incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the appropriate accounting entries are reflected in the Company's Condensed Consolidated Financial Statements. At the present time, based on available information, the Company believes that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to its financial statements and would not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows. See Notes 13 and 14 within "Item 1. Financial Statements" for a discussion of the Company's commitments and contingencies.

Environmental Laws and Regulations

The activities of OG&E are subject to numerous, stringent and complex federal, state and local laws and regulations governing environmental protection. These laws and regulations can change, restrict or otherwise impact OG&E's business activities in many ways, including the handling or disposal of waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Management believes that all of its operations are in substantial compliance with current federal, state and local environmental standards. These environmental laws and regulations are also discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2019 Form 10-K.

Air

Federal Clean Air Act Overview

OG&E's operations are subject to the Federal Clean Air Act as amended and comparable state laws and regulations. These laws and regulations regulate emissions of air pollutants from various industrial sources, including electric generating units and also impose various monitoring and reporting requirements. Such laws and regulations may require that OG&E obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in

the increase of existing air emissions, obtain and strictly comply with air permits containing various emissions and operational limitations or install emission control equipment. OG&E likely will be required to incur certain capital expenditures in the future for air pollution control equipment and technology in connection with obtaining and maintaining operating permits and approvals for air emissions.

Cross-State Air Pollution Rule

On September 7, 2016, the EPA finalized an update to the 2011 Cross-State Air Pollution Rule. The new rule applies to ozone-season NOX emissions from power plants in 22 eastern states (including Oklahoma). The rule utilizes a cap and trade program for NOX emissions and went into effect on May 1, 2017 in Oklahoma. The 2016 rule reduces the 2011 Cross-State Air Pollution Rule emissions cap for all of OG&E's coal and gas facilities (except the River Valley and Frontier facilities which were not owned by OG&E until 2019) by 47 percent combined. OG&E and numerous other parties filed petitions for judicial and administrative review of the 2016 rule. On September 13, 2019, the U.S. Court of Appeals for the District of Columbia Circuit issued an opinion that partially remanded the Cross-State Air Pollution Rule update and also deferred a decision on our challenges to the rule pending an EPA review and decision on a separate administrative petition that we filed. Subsequently, all of OG&E's judicial challenges were voluntarily dismissed, but the administrative petitions for reconsideration remain pending at the EPA. On October 30, 2020, the EPA published a proposed rule to revise the 2016 update rule and address the 2019 remand. OG&E is currently reviewing the proposal, which does not propose any additional reductions in the emissions budget for Oklahoma based on a preliminary determination that the state does not cause or contribute to nonattainment of the ambient air quality standards in the relevant downwind areas.

The Company continues to monitor these processes and their possible impact on its operations but, at this time, cannot determine with any certainty whether they will cause a material impact to the Company's financial results. OG&E is in compliance with the 2016 rule requirements which remain in effect. The Company does not anticipate, at this time, additional capital expenditures for compliance with the 2016 rule.

Hazardous Air Pollutants Emission Standards

On February 16, 2012, the EPA published the final MATS rule regulating the emissions of certain hazardous air pollutants from electric generating units. The Company complied with the MATS rule by the April 16, 2016 deadline that applied to OG&E's coal units. On May 22, 2020, the EPA published a final rule which reconsidered certain elements of the 2012 rule in response to litigation in the D.C. Circuit Court. In the final rule, the EPA concluded that it is not "appropriate and necessary" to regulate MATS-related emissions from coal-fired units. Nonetheless, the EPA retained the emissions limits that were established in the 2012 rule, which remains in effect today. Petitions for judicial review of the final May 2020 rule have been filed at the D.C. Circuit Court.

National Ambient Air Quality Standards

The EPA is required to set NAAQS for certain pollutants considered to be harmful to public health or the environment. The Clean Air Act requires the EPA to review each NAAQS every five years. As a result of these reviews, the EPA periodically has taken action to adopt more stringent NAAQS for those pollutants. If any areas of Oklahoma were to be designated as not attaining the NAAQS for a particular pollutant, the Company could be required to install additional emission controls on its facilities to help the state achieve attainment with the NAAQS. As of September 30, 2020, no areas of Oklahoma had been designated as non-attainment for pollutants that are likely to affect the Company's operations.

The EPA proposed to designate part of Muskogee County, in which OG&E's Muskogee Power Plant is located, as non-attainment for the 2010 SO2 NAAQS on March 1, 2016, even though nearby monitors indicated compliance with the NAAQS. The proposed designation was based on modeling that did not reflect the conversion of two of the coal units at Muskogee to natural gas. The State of Oklahoma's monitoring preliminarily indicates that ambient SO2 emissions in the area are well within the NAAQS. After evaluation by Oklahoma and the EPA of the designation proposed in 2016, on August 13, 2020, the EPA notified Oklahoma that it intends to designate Muskogee County as attainment/unclassifiable. The EPA has indicated that it anticipates finalizing a designation at the end of 2020. At this time, the Company cannot determine with any certainty whether the proposed designation of Muskogee County will cause a material impact to the Company's financial results.

Climate Change and Greenhouse Gas Emissions

There is continuing discussion and evaluation of possible global climate change in certain regulatory and legislative arenas. The focus is generally on emissions of greenhouse gases, including CO2, sulfur hexafluoride and methane, and whether these emissions are contributing to the warming of the earth's atmosphere. On November 4, 2019, President Trump announced that the U.S. has officially notified the United Nations that the U.S. will withdraw from the "Paris Agreement" on climate change after having announced in 2017 that the U.S. would begin negotiations to re-enter the agreement with different terms. A new agreement may result in future additional emissions reductions in the U.S.; however, it is not possible to determine what the international legal standards for greenhouse gas emissions will be in the future and the extent to which these commitments will be implemented through the Clean Air Act or any other existing statutes and new legislation.

If legislation or regulations are passed at the federal or state levels in the future requiring mandatory reductions of CO2 and other greenhouse gases on the Company's facilities, this could result in significant additional compliance costs that would affect the Company's future consolidated financial position, results of operations and cash flows if such costs are not recovered through regulated rates. Several states outside the area where the Company operates have passed laws, adopted regulations or undertaken regulatory initiatives to reduce the emission of greenhouse gases, primarily through the planned development of greenhouse gas emission inventories and/or regional greenhouse gas cap and trade programs.

OG&E's current business strategy has resulted in reduced carbon dioxide emissions by over 40 percent compared to 2005 levels, and during the same period, emissions of ozone-forming NOx have been reduced by approximately 75 percent and emissions of SO2 have been reduced by approximately 90 percent. OG&E expects to further reduce carbon dioxide emissions to 50 percent of 2005 levels by 2030. To comply with the EPA's MATS rule and Regional Haze Rule FIP, OG&E converted two coal-fired generating units at the Muskogee Station to natural gas, among other measures. OG&E's deployment of Smart Grid technology helps to reduce the peak load demand. OG&E is also deploying more renewable energy sources that do not emit greenhouse gases. OG&E's service territory borders one of the nation's best wind resource areas, and OG&E has leveraged its geographic position to develop renewable energy resources and completed transmission investments to deliver the renewable energy. The SPP has authorized the construction of transmission lines capable of bringing renewable energy out of the wind resource areas in western Oklahoma, the Texas Panhandle and western Kansas to load centers by planning for more transmission to be built in the area. In addition to increasing overall system reliability, these new transmission resources should provide greater access to additional wind resources that are currently constrained due to existing transmission delivery limitations.

On July 8, 2019, the EPA published the Affordable Clean Energy rule. Numerous parties, not including OG&E, have filed petitions for judicial review of the Affordable Clean Energy rule in the U.S. Court of Appeals for the District of Columbia Circuit. Oral argument was held on October 8, 2020. The Affordable Clean Energy rule requires states, including Oklahoma, to develop emission limitations for carbon dioxide for each existing coal-fired utility boiler within the state, including all of OG&E's coal units, and submit a compliance and implementation plan to the EPA by July 2022. The EPA will approve or disapprove the proposed state plan within 18 months of submittal and develop a federal implementation plan if the proposed state plan is disapproved. At this time, the Company cannot determine with any certainty whether the implementation plan will cause a material impact to its financial results.

EPA Startup, Shutdown and Malfunction Policy

On May 22, 2015, the EPA issued a final rule to address the provisions in the SIPs of 36 states (including Oklahoma) regarding the treatment of emissions that occur during startup, shutdown and malfunction operations. The final rule clarifies the EPA's Startup, Shutdown and Malfunction Policy. Although judicial challenges to the rule are ongoing, the ODEQ submitted a SIP revision for the EPA's approval on November 7, 2016 to comply with this rule. This rule has resulted in permit modifications for certain OG&E units and applications remain pending for other units. The Company does not anticipate capital expenditures, or a material impact to its consolidated financial position, results of operations or cash flows, as a result of adoption of this rule.

Regional Haze Regulation - Second Planning Period

In January 2017, the EPA finalized a rule that would revise certain provisions of the Regional Haze Rule. Notably, the EPA extended the due date for the second Regional Haze implementation period by three years to 2021 and made changes to the provisions for impacts to national parks and other protected wilderness areas. Petitions for Reconsideration to the EPA were filed by industry groups. While not acting on the petitions, the EPA announced on January 17, 2018 that it intends to commence a notice-and-comment rulemaking revisiting certain aspects of the rule. During 2019, the EPA released technical resources to assist states in developing SIPs, including a significant non-binding guidance document and updated atmospheric modeling which will allow states to better account for international emissions affecting regional haze in the U.S. On July 1, 2020, the ODEQ notified OG&E that the Horseshoe Lake generating units are to be included in the state's evaluation of visibility impairment impacts to the Wichita Mountains. OG&E conducted an analysis of all potential control measures for NOx on these units and submitted it to the ODEQ on September 15, 2020. The ODEQ will identify any cost-effective control measures in a Regional Haze SIP, to be submitted to the EPA for approval by July 31, 2021. It is unknown at this time what the outcome, or any potential material impacts, will be from the evaluations by OG&E, the ODEQ and the EPA.

Endangered Species

Certain federal laws, including the Bald and Golden Eagle Protection Act, the Migratory Bird Treaty Act and the Endangered Species Act, provide special protection to certain designated species. These laws and any state equivalents provide for significant civil and criminal penalties for unpermitted activities that result in harm to or harassment of certain protected animals and plants, including damage to their habitats. If such species are located in an area in which the Company conducts operations, or if additional species in those areas become subject to protection, the Company's operations and development projects, particularly transmission, wind or pipeline projects, could be restricted or delayed, or the Company could be required to implement expensive mitigation measures.

Vegetation Management

On July 10, 2020, the U.S. Department of Agriculture – Forest Service published a final rule which updates procedures for creating operating plans and agreements for powerline facility maintenance and vegetation management within and abutting the linear boundary of a special use authorization for a powerline facility within Forest Service lands. This rule codifies the memorandum of understanding between utilities such as OG&E and the Forest Service regarding vegetation management best practices. All companies will be required to have an approved operating plan or agreement with the Forest Service. OG&E will be required to submit a draft operating plan to the Forest Service by August 10, 2023 for ongoing maintenance and vegetation management activities located within the Ozark National Forest in Arkansas.

Waste

OG&E's operations generate wastes that are subject to the Federal Resource Conservation and Recovery Act of 1976 as well as comparable state laws which impose detailed requirements for the handling, storage, treatment and disposal of waste.

In 2015, the EPA finalized a rule under the Federal Resource Conservation and Recovery Act for the handling and disposal of coal combustion residuals or coal ash. The rule regulates coal ash as a solid waste rather than a hazardous waste, which would have made the management of coal ash more costly. In August 2019, the EPA proposed revisions to the 2015 coal ash rule in response to the D.C. Circuit Court of Appeals issuing a decision regarding the ongoing Coal Combustion Residuals litigation. The proposed changes do not appear to be material to OG&E at this time. OG&E completed the clean closure of one regulated inactive coal ash impoundment in August 2019.

On June 28, 2018, the EPA approved the State of Oklahoma's application for a state coal ash permitting program that will operate in lieu of the federal coal ash program promulgated under the Federal Resource Conservation and Recovery Act. On September 26, 2018, a citizen suit was filed against the EPA in the U.S. District Court in the District of Columbia concerning the final approval, which was decided upon in the EPA's favor on April 15, 2020 and has subsequently been appealed.

The Company currently recycles and provides approximately 89 percent of its ash to the concrete and cement industries for use as a component within their products. Using fly ash in this way enables aggregate manufacturers to minimize their impact on the environment by avoiding the need to extract and process other natural resources.

The Company has sought and will continue to seek pollution prevention opportunities and to evaluate the effectiveness of its waste reduction, reuse and recycling efforts. The Company obtains refunds from the recycling of scrap metal, salvaged transformers and used transformer oil. Additional savings are expected to be gained through the reduction and/or avoidance of

disposal costs and the reduction in material purchases due to the reuse of existing materials. Similar savings are anticipated in future years.

Water

OG&E's operations are subject to the Federal Clean Water Act and comparable state laws and regulations. These laws and regulations impose detailed requirements and strict controls regarding the discharge of pollutants into state and federal waters.

The EPA issued a final rule on May 19, 2014 to implement Section 316(b) of the Federal Clean Water Act, which requires that power plant cooling water intake structure location, design, construction and capacity reflect the best available technology for minimizing their adverse environmental impact via the impingement and entrainment of aquatic organisms. The ODEQ issued final permits on December 22, 2017 and August 22, 2018 for Muskogee Power Plant and Seminole Power Plant, respectively, in compliance with the final 316(b) rule, and OG&E did not incur any material costs associated with the rule's implementation at either location. OG&E expects to be able to provide a reasonable estimate of any material costs associated with the rule's implementation at other facilities following the future issuance of permits from the State of Oklahoma.

In 2015, the EPA issued a final rule addressing the effluent limitation guidelines for power plants under the Federal Clean Water Act. The final rule establishes technology- and performance-based standards that may apply to discharges of six waste streams including bottom ash transport water. Compliance with this rule will occur by 2023; however, on April 12, 2017, the EPA granted a Petition for Reconsideration of the 2015 Rule. On October 13, 2020, the EPA published a final rule to revise the technology-based effluent limitations for flue gas desulfurization waste water and bottom ash transport water. In light of the final rule, OG&E is evaluating what, if any, compliance actions are needed but is not able to quantify with any certainty what costs may be incurred. OG&E expects to be able to provide a reasonable estimate of any material costs associated with the rule's implementation following issuance of the permits from the State of Oklahoma.

On April 21, 2020, the EPA and U.S. Army Corps of Engineers published in the Federal Register "The Navigable Waters Protection Rule: Definition of Waters of the United States." This final rule replaces the repealed definition of waters of the U.S. from 2015. The effective date of this final rule will be June 22, 2020. The Company does not expect any material impacts as a result of this rule.

Since the purchase of the Redbud facility in 2008, OG&E's average use of treated municipal effluent for all of the needed cooling water at Redbud and McClain is approximately 2.6 billion gallons per year. This use of treated municipal effluent offsets the need for fresh water as cooling water, making fresh water available for other beneficial uses like drinking water, irrigation and recreation.

Site Remediation

The Comprehensive Environmental Response, Compensation and Liability Act of 1980 and comparable state laws impose liability, without regard to the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. Because OG&E utilizes various products and generates wastes that are considered hazardous substances for purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, OG&E could be subject to liability for the costs of cleaning up and restoring sites where those substances have been released to the environment. At this time, it is not anticipated that any associated liability will cause a significant impact to OG&E.

For further discussion regarding contingencies relating to environmental laws and regulations, see Note 13 within "Item 1. Financial Statements."

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have been no significant changes in the market risks affecting the Company from those discussed in the Company's 2019 Form 10-K.

Item 4. Controls and Procedures.

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the chief executive officer and chief financial officer, allowing timely decisions regarding required disclosure. As of the end of the period covered by this report, based on an evaluation carried out under the supervision and with the participation of the Company's management, including the chief executive officer and chief financial officer, of the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934), the chief executive officer and chief financial officer have concluded that the Company's disclosure controls and procedures are effective.

No change in the Company's internal control over financial reporting has occurred during the Company's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).

While remote work arrangements were temporarily implemented in response to the COVID-19 pandemic, the Company believes there have been no material changes to the processes and procedures that impact financial reporting. The Company continues to monitor potential internal control impacts of COVID-19 and plan accordingly to ensure the effectiveness of the Company's internal controls over financial reporting and disclosures.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Reference is made to Item 3 of Part I of the Company's 2019 Form 10-K for a description of certain legal proceedings presently pending. Except as described under "Environmental Laws and Regulations" within "Part I - Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," there are no new significant cases to report against the Company or its subsidiaries, and there have been no material changes in the previously reported proceedings.

Item 1A. Risk Factors.

Except as detailed below, there have been no significant changes in the Company's risk factors from those discussed in the Company's 2019 Form 10-K, which are incorporated herein by reference.

We face risks related to health epidemics and other outbreaks.

The outbreak of COVID-19 is a continually evolving situation around the globe that has adversely impacted economic activity and conditions worldwide. In particular, efforts to control the spread of COVID-19 have led to shutdowns of various facilities as well as disrupted supply chains around the world. Efforts to control the spread of COVID-19 have also resulted in remote work arrangements, increased unemployment, customer slow payment or non-payment and decreased commercial and industrial load. We expect these particular COVID-19 impacts will likely continue in the near future. We are continuing to monitor developments involving our workforce, customers and suppliers and cannot predict whether COVID-19 will have a material impact on our results of operations, financial condition and prospects. A slowdown of the United States' economic growth, demand for commodities and/or material changes in governmental policy has resulted to a certain extent and could continue to result in lower economic growth and lower demand for electricity in our key markets as well as the ability of various customers, contractors, suppliers and other business partners to fulfill their obligations, which could have a material adverse effect on our results of operations, financial condition and prospects. Further, the negative impacts on the economy could also adversely impact the market value of the assets that fund our pension plans, which could necessitate accelerated funding of the plans to meet minimum federal government requirements.

The effects of COVID-19 and concerns regarding its global spread have negatively impacted domestic and international demand for natural gas, NGLs and crude oil, which has and could continue to contribute to price volatility and materially and adversely affect Enable's customers' operations and future production, resulting in less demand for Enable's services and/or the reduction of commercial opportunities that might otherwise be available to Enable. In response to sharp declines in demand for oil and gas as well as commodity prices resulting from the economic impact of COVID-19, many producers have significantly reduced previously anticipated drilling and production and may make additional reductions in the future. Decreased demand for commodities as a result of COVID-19 impacted the valuation of our investment in Enable, resulting in an impairment charge in March 2020 that had a material adverse impact on our results of operations for the nine months ended September 30, 2020. Further, our operating cash flow is derived partially from cash distributions we receive from Enable. In response to current industry conditions, Enable reduced its dividend distribution by half, effective April 1, 2020. Prolonged decreased demand for commodities and/or further reductions in distributions from Enable could materially adversely affect our results of operations, financial condition and cash flows.

In addition, we cannot predict the ongoing impact that COVID-19 will have on our customers, suppliers, vendors and other business partners and each of their financial conditions; however, any material effect on these parties could adversely impact us. The impact of COVID-19 may also exacerbate other risks discussed in "Item 1A. Risk Factors" in the Company's 2019 Form 10-K, any of which could have a material effect on us. This situation is changing rapidly, and additional impacts may arise that we are not aware of currently.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

The following table contains information about the Company's purchases of its common stock during the third quarter of 2020.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan
7/1/20 - 7/31/20	—	$	—	N/A	N/A
8/1/20 - 8/31/20	150,000	$	33.14	150,000	N/A
9/1/20 - 9/30/20	—	$	—	N/A	N/A

N/A - not applicable

During the three months ended September 30, 2020, the Company purchased 150,000 shares of its common stock at an average cost of $33.14 per share on the open market. The Company intends to use the shares to satisfy payouts of earned performance units and restricted stock unit grants pursuant to the Company's Stock Incentive Plan.

Item 6. Exhibits.


Exhibit No.			Description



31.01			Certifications Pursuant to Rule 13a-14(a)/15d-14(a) As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01			Certification Pursuant to 18 U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


101.INS			Inline XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Schema Document.
101.PRE			Inline XBRL Taxonomy Presentation Linkbase Document.
101.LAB			Inline XBRL Taxonomy Label Linkbase Document.
101.CAL			Inline XBRL Taxonomy Calculation Linkbase Document.
101.DEF			Inline XBRL Definition Linkbase Document.
104			Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document (included in Exhibit 101).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			OGE ENERGY CORP.
			(Registrant)

By:			/s/ Sarah R. Stafford
			Sarah R. Stafford
			Controller and Chief Accounting Officer
			(On behalf of the Registrant and in her capacity as Chief Accounting Officer)

November 4, 2020