OGE ENERGY CORP. Commitments Disclosure

13. Commitments and Contingencies

Purchase Obligations and Commitments

OG&E Minimum Purchase Commitments

OG&E has coal contracts for purchases through December 31, 2027. OG&E may also purchase coal through spot purchases on an as-needed basis. As a participant in the SPP Integrated Marketplace, OG&E purchases its natural gas supply through short-term agreements. OG&E relies on a combination of natural gas base load agreements and call agreements, whereby OG&E has the right but not the obligation to purchase a defined quantity of natural gas, combined with day and intra-day purchases to meet the demands of the SPP Integrated Marketplace.

OG&E has natural gas transportation service contracts with Energy Transfer, ONEOK, Inc. and Southern Star, which grant these companies the responsibility of delivering natural gas to OG&E's generating facilities. The contracts with Energy Transfer end in December 2034, December 2038 and September 2045; the contracts with ONEOK, Inc. end in August 2037 and December 2045; and the contract with Southern Star ends in December 2034. OG&E also has natural gas storage agreements with ONEOK, Inc. for firm storage which ends in December 2045, and the Energy Transfer agreement for park and loan service ends in April 2027.

OG&E Estimated Wind Power Purchase Commitments

OG&E Capacity Commitments

The SPP requires its members, including OG&E, to maintain a generation planning reserve margin. Due to near-term generation requirements, OG&E entered into short-term power purchase agreements to meet its incremental capacity needs in each of the years through 2030 to address the planning reserve margin requirements.

OG&E Long-Term Service Agreement Commitments

OG&E has a long-term parts and service maintenance contract for the upkeep of the McClain Plant that is expected to run for the earlier of 128,000 factored-fired hours or 4,800 factored-fired starts. Based on historical usage and current expectations for future usage, this contract is expected to run until 2035. The contract requires payments based on both a fixed and variable cost component, depending on how much the McClain Plant is used.

OG&E has a long-term parts and service maintenance contract for the upkeep of the Redbud Plant for a maximum of the earlier of 144,000 factored-fired hours or 4,500 factored-fired starts. Based on historical usage and current expectations for future usage, this contract is expected to run until 2032. The contract requires payments based on both a fixed and variable cost component, depending on how much the Redbud Plant is used.

OG&E has a long-term parts and service maintenance contract for the upkeep of the Horseshoe Lake Plant Units 11 and 12 for a maximum of the earlier of 64,000 factored-fired hours or 2,500 factored-fired starts for each unit. Based on historical usage and current expectations for future usage, this contract is expected to run until 2044. The contract requires payments based on both a fixed and variable cost component, depending on how much the Horseshoe Lake Plant is used.

OG&E Generation Capacity Construction Commitments

OG&E has generation capacity construction projects at its existing Horseshoe Lake generating facility and Tinker Air Force Base. At Horseshoe Lake, OG&E is installing four combustion turbines with a total capacity of 896 MWs, of which 448 MWs (Units 11 and 12) is expected to be placed into service by late 2026 and the remaining 448 MWs (Units 13 and 14) is expected to be placed into service during 2029. At Tinker Air Force Base, OG&E is installing two combustion turbines with a combined capacity of 96 MWs which are expected to be placed into service in early 2026. OG&E also has a commitment related to the Frontier Energy Storage Project, which involves a purchase and sale agreement for a 300 MW battery storage facility in Oklahoma.

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 the Registrants' 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 the Registrants' 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 Registrants are 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 Registrants have 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 financial statements. If the assessment indicates that a potential loss is not probable but reasonably possible, the nature of the contingent matter, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. At the present time, based on currently available information, except as discussed below, the Registrants believe 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 their financial statements and would not have a material adverse effect on their financial position, results of operations or cash flows.

In July 2023, OG&E was named, along with its contractor, as a defendant in a lawsuit filed by an apartment owner and its insurance companies seeking in excess of $60.0 million in damages related to a fire at an apartment building under construction in Oklahoma City. Several additional defendants have also been named. OG&E disputes the claims in the lawsuit and intends to vigorously defend this action. If OG&E is ultimately deemed liable for damages in connection with this incident, OG&E believes its existing insurance policies will cover its costs, in excess of a required retention (the amount of which is not material), to satisfy any liability it may have. Due to the uncertain and developing nature of this litigation, the outcome cannot be predicted, and OG&E is unable to provide a range of possible loss in this matter.