Cost recovery issue jeopardizes plant, OG&E says

Oklahoma City, OK, Aug. 29, 2007 — In a filing at the Oklahoma Corporation Commission, OG&E Electric Services said it supports findings by an administrative law judge that the proposed Red Rock generating unit will create significant customer savings and is the right choice for Oklahoma. The company, however, challenged a provision in the opinion that limits OG&E’s ability to adequately recover the costs associated with financing construction of the plant.

“Make no mistake, we were pleased by the judge’s rulings in many areas of our case,” said Steve Moore, OGE Energy Corp. chairman and CEO. “However, even though commissioners may vote to approve the plant, a failure to address the issue of inadequate cost recovery is, in effect, a vote against the plant.”

Moore explained that the immediate need for investment in ongoing electric system reliability projects and environmental upgrades to its coal- and gas-fired generating units will demand large investments. He added that the company must maintain the financial flexibility to fund those projects.

“This isn’t about earnings. Earnings won’t increase as a result of the recovery mechanism,” Moore said. “It’s about maintaining the financial flexibility necessary to ensure that we are able to execute on our proposed plan to invest more than $3 billion over the next six years to enhance reliability, improve environmental technology and provide power for our state’s growing economy.”

He added that the pay-as-you-go option for Red Rock was preferred in a survey of OG&E’s customers and will save customers millions of dollars while ensuring that bills do not increase dramatically when the plant comes on line in 2012.

OG&E, along with Public Service Co. of Oklahoma and the Oklahoma Municipal Power Authority, has proposed to build a coal-fired generating unit at its Sooner Power Plant, which is located near Red Rock, OK. The $1.8 billion project is expected to be complete in 2012.

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