Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following combined discussion is separately filed by OGE Energy and OG&E. However, OG&E does not make any representations as to information related solely to OGE Energy or the subsidiaries of OGE Energy other than itself.
Overview
OGE Energy is a holding company whose primary investment provides electricity in Oklahoma and western Arkansas. OGE Energy's electric company operations are conducted through its wholly-owned subsidiary, OG&E, which generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas and are reported through OGE Energy's electric company business segment. OG&E's rates 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 the largest electric company in Oklahoma, with a franchised service territory that 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.
The accounts of OGE Energy and its wholly-owned subsidiaries, including OG&E, are included in OGE Energy's consolidated financial statements. All intercompany transactions and balances are eliminated in such consolidation.
Recent Developments
OG&E's Regulatory Matters
On March 27, 2025, the OCC issued a final order approving the settlement agreement relating to OG&E's 2023 general rate review and approved the ALJ report on the remaining one MW issue with one exception. OG&E also issued its 2025 IRP to the OCC and APSC and has filed for and/or received preapproval, in both Oklahoma and Arkansas, of certain generation and capacity investments identified by OG&E's IRP and related request for proposals process. These matters, as well as other regulatory matters, are discussed in Note 14 within "Item 8. Financial Statements and Supplementary Data."
Legislative Matters
Federal
On July 4, 2025, the legislation known as the “One Big Beautiful Bill” was signed into law, which includes significant changes to federal tax law and other regulatory provisions that may impact the Registrants. The Registrants will consider the legislation’s provisions, such as changes to tax credits for renewables, and the potential impact on future investment decisions.
Oklahoma
In May 2025, SB 998 was passed into law and became effective August 29, 2025. This legislation allows rate-regulated retail electric service providers, such as OG&E, to receive CWIP recovery of new natural gas generation capacity, if those proposed generation sources are approved by the OCC under existing statutory review procedures, and sets specific timelines for the OCC to review proposed projects. SB 998 also allows utilities to establish a regulatory asset to defer 90 percent of depreciation expense and return associated with qualified plant investments, that are not classified as transmission or new generation, for recovery over an allowed 20-year period in a future rate review filing. OG&E began deferring such costs to a regulatory asset in September 2025, as further discussed in Note 1 within "Item 8. Financial Statements and Supplementary Data."
Arkansas
In March 2025, Act 373 was signed into law by the Governor of Arkansas. Act 373 enables rate-regulated retail electric providers, such as OG&E, to receive CWIP recovery of "strategic investments," including (i) new electric generating facilities, including transportation and storage facilities for associated fuel, (ii) upgrades, expansions, or fuel conversions of electric generating facilities, including transportation and storage facilities for associated fuel, and (iii) new or upgraded electric transmission facilities, including substations. All projects are subject to review and approval by the APSC. Act 373 further authorizes use of a rider to recover approved strategic investments that are not being recovered through previously approved rates, upon approval of the project by the APSC.
Summary of OGE Energy 2025 Operating Results Compared to 2024
OGE Energy's net income was $470.7 million, or $2.32 per diluted share, in 2025 as compared to $441.5 million, or $2.19 per diluted share, in 2024. The increase in net income of $29.2 million, or $0.13 per diluted share, in 2025 as compared to 2024 is further discussed below.
An increase in net income at OG&E of $29.9 million, or $0.14 per diluted share of OGE Energy's common stock, was primarily due to higher operating revenues (excluding the impact of recoverable fuel, purchased power and direct transmission expense not impacting earnings) driven by the recovery of capital investments, which offset the impact of milder weather, partially offset by higher depreciation and amortization expense driven by additional assets being placed into service, operation and maintenance expense, income tax expense, and interest expense driven by OG&E's senior notes issuances in August 2024 and April 2025.
An increase in net loss of other operations of $0.7 million, or $0.01 per diluted share of OGE Energy's common stock, was primarily due to higher interest expense, partially offset by higher net other income driven by a one-time benefit related to activity at OGE Energy's legacy midstream operations and a higher income tax benefit.
A more detailed discussion regarding the financial performance for the year ended December 31, 2025 as compared to December 31, 2024 can be found under "Results of Operations" below. A discussion of the financial performance for the year ended December 31, 2024 compared to December 31, 2023 for OGE Energy and OG&E can be found within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of the Registrants' 2024 Form 10-K .
202 6 Outlook
Key assumptions for the 2026 outlook are discussed below.
OGE Energy is projected to earn approximately $494 million to $514 million, or $2.38 to $2.48 per average diluted share, with a midpoint of approximately $504 million, or $2.43 per average diluted share in 2026 and is based off the following assumptions:
OGE Energy forecasts earnings for OG&E of approximately $533 million, or $2.57 per average diluted share;
OGE Energy forecasts a loss of approximately $30 million for other operations (primarily the holding company), or a loss of $0.14 per average diluted share;
OG&E experiences normal weather patterns for the year; OG&E has significant seasonality in its earnings; OG&E typically shows minimal earnings in the first and fourth quarters with a majority of its earnings in the third quarter due to the seasonal nature of air conditioning demand;
total retail load growth of approximately 4 to 6 percent;
operating expenses of approximately $1.228 billion to $1.238 billion, with operation and maintenance expenses comprising approximately 45 percent of the total;
net interest expense of approximately $256 million to $261 million which assumes a $14 million allowance for borrowed funds used during construction reduction to interest expense, and assumes a debt issuance at OG&E of approximately $300 million;
other income of approximately $24 million including $26 million of allowance for equity funds used during construction;
an effective consolidated tax rate of approximately 16.8 percent; and
approximately 207.3 million average diluted shares outstanding.
Results of Operations
The following discussion and analysis presents factors that affected the Registrants' results of operations for the years ended December 31, 2025 and 2024 and the Registrants' financial positions at December 31, 2025 and 2024. The following information should be read in conjunction with the financial statements and notes thereto. Known trends and contingencies of a material nature are discussed to the extent considered relevant.
OGE Energy
Year Ended December 31,
(In millions except per share data)
Net income
Basic average common shares outstanding
Diluted average common shares outstanding
Basic earnings per average common share
Diluted earnings per average common share
Dividends declared per common share
Results by Business Segment
Year Ended December 31,
(In millions)
Net income:
OG&E (Electric Company)
Other operations
OGE Energy net income
The following discussion of results of operations for OG&E includes intercompany transactions that are eliminated in OGE Energy's consolidated financial statements.
OG&E (Electric Company)
Year Ended December 31 (Dollars in millions)
Operating revenues
Fuel, purchased power and direct transmission expense
Other operation and maintenance
Depreciation and amortization
Taxes other than income
Operating income
Allowance for equity funds used during construction
Other net periodic benefit expense
Other income
Other expense
Interest expense
Income tax expense
Net income
Operating revenues by classification:
Residential
Commercial
Industrial
Oilfield
Public authorities and street light
System sales revenues
Provision for rate refund
Integrated market
Transmission
Other
Total operating revenues
MWh sales by classification (In millions)
Residential
Commercial
Industrial
Oilfield
Public authorities and street light
System sales
Integrated market
Total sales
Number of customers
Weighted-average cost of energy per kilowatt-hour (In cents)
Natural gas
Coal
Total fuel
Total fuel and purchased power
Degree days (A)
Heating - Actual
Heating - Normal
Cooling - Actual
Cooling - Normal
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. The calculation of heating and cooling degree normal days is based on a 30-year average and weighted on a jurisdictional split.
OG&E's net income increased $29.9 million, or 6.4 percent, in 2025 as compared to 2024. The following section discusses the primary drivers for the increase in net income in 2025 as compared to 2024.
Operating revenues increased $274.8 million, or 9.2 percent, primarily driven by the below factors.
(In millions)
$ Change
Fuel, purchased power and direct transmission expense (A)
Price variance (B)
Non-residential demand and related revenues
New customer growth
Guaranteed Flat Bill program (C)
Wholesale transmission revenue
Other
Industrial and oilfield sales
Quantity impacts (primarily weather) (D)
Change in operating revenues
These expenses are generally recoverable from customers through regulatory mechanisms and are offset in Fuel, Purchased Power and Direct Transmission Expense in the statements of income. The primary drivers of the changes in fuel, purchased power and direct transmission expense during the period are further detailed in the table below.
Increased primarily due to new rates effective July 1, 2024 resulting from the Oklahoma general rate review interim order received in November 2024 and finalized in March 2025.
The Guaranteed Flat Bill program allows qualifying customers the opportunity to purchase their electricity needs at a set monthly price for an entire year which can result in variances when actual fuel and purchased power prices differ from what is included in Guaranteed Flat Bill rates.
Decreased primarily due to a decrease of 11 percent in cooling degree days.
Fuel, purchased power and direct transmission expense for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. As described above, the actual cost of fuel used in electric generation and certain purchased power costs are generally recoverable from 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 fuel, purchased power and direct transmission expense increased $183.5 million, or 17.0 percent, primarily driven by the below factors.
(In millions)
$ Change
Fuel expense (A)
Purchased power costs:
Purchases from SPP (B)
Other
Capacity
Wind
Transmission expense
Change in fuel, purchased power and direct transmission expense
Increased primarily due to higher fuel costs related to the generating assets utilized during 2025.
Increased primarily due to higher market prices and increased MWhs purchased during 2025.
Other operation and maintenance expense increased $16.9 million, or 3.3 percent, primarily due to an increase in vegetation management activities, resulting from approvals in OG&E's most recent Oklahoma rate review, energy efficiency program activities and uncollectible accounts, partially offset by lower contract technical and construction services driven by the timing of certain projects.
Depreciation and amortization expense increased $20.3 million, or 3.8 percent, primarily due to additional assets being placed into service and increased amortization of certain regulatory assets, partially offset by deferrals of allowable depreciation and amortization expense of $12.7 million to a regulatory asset in accordance with SB 998 as further discussed in Note 1 within "Item 8. Financial Statements and Supplementary Data."
Net other income decreased $1.5 million, or 4.7 percent, primarily due to higher other net periodic benefit cost driven by changes to the level of pension expense included in base rates as a result of OG&E's most recent Oklahoma rate review, partially offset by increased interest income related to the carrying charge for the higher fuel under recovery balance in early 2025.
Interest expense increased $11.1 million, or 5.2 percent, primarily due to the $350.0 million in senior notes issuance in April 2025 and the full year effect of the issuance of $350.0 million in senior notes in August 2024, partially offset by a decrease in other interest expense related to borrowings under OG&E's revolving credit agreement during the second and third quarters of 2024, as well as the deferral of certain interest expense to a regulatory asset in accordance with SB 998.
Income tax expense increased $11.9 million, or 12.8 percent, primarily due to higher pretax income combined with an increase in other nondeductible items.
Liquidity and Capital Resources
Cash Flows
OGE Energy
Year Ended December 31 (In millions)
Change
Change
Net cash provided from operating activities (A)
Net cash used in investing activities (B)
Net cash (used in) provided from financing activities (C)
* Change is greater than 100 percent.
Changed primarily due to increased cash received from customers, including cash related to fuel recoveries, partially offset by increased payments for fuel and purchased power.
Changed primarily due to timing of power delivery, power supply and enterprise services projects.
Changed primarily due to a decrease in senior notes issuances in 2025 compared to 2024 and a decrease in commercial paper borrowings, partially offset by the equity issuance in November 2025.
Working Capital
Working capital is defined as the difference in current assets and current liabilities. OGE Energy'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 OG&E's customers, the level and timing of spending for maintenance and expansion activity, inventory levels and fuel recoveries. The following discussion addresses changes in OGE Energy's working capital balances at December 31, 2025 compared to December 31, 2024.
Accounts Receivable and Accrued Unbilled Revenues increased $108.8 million, or 34.5 percent, primarily due to an increase in billings to OG&E's retail customers reflecting higher usage in 2025 compared to 2024 and receivables related to customer connections.
Fuel Inventories decreased $36.3 million, or 24.5 percent, primarily due to net withdrawals of coal and natural gas, as well as a decrease in coal prices.
Fuel Clause Recoveries changed $130.5 million from an under recovery to an over recovery, primarily due to higher recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power.
Other Current Assets decreased $17.2 million, or 19.3 percent, primarily due to SPP security deposit refunds received during 2025, as well as a decrease in the SPP transmission formula rate true-up.
Short-term debt decreased $177.3 million, or 37.8 percent, primarily due to proceeds from OG&E's $350.0 million senior notes issuance in April 2025 and OGE Energy's equity issuance in November 2025, which proceeds were used to pay down short-term debt, partially offset by increased borrowings for general operating needs. The Registrants borrow on a short-term basis, as necessary, through the issuance of commercial paper.
Accounts Payable increased $44.9 million, or 14.7 percent, primarily due to timing of vendor payments, partially offset by a decrease in purchased power payables.
Customer Deposits increased $16.1 million, or 14.5 percent, primarily due to an increase in large commercial customers.
Long-Term Debt Due Within One Year decreased $32.4 million, or 100.0 percent, due to the repayment of the Muskogee industrial authority bonds that matured in January 2025.
2025 Capital Requirements, Sources of Financing and Financing Activities
In 2025, OGE Energy's primary sources of capital were cash generated from operations, the proceeds from the issuance of long- and short-term debt and proceeds from the issuance of common stock. Changes in working capital reflect the seasonal nature of OGE Energy's business, the revenue lag between billing and collection from customers and fuel inventories. See "Working Capital" for a discussion of significant changes in net working capital requirements as it pertains to operating cash flow and liquidity.
In addition, OGE Energy's liquidity was further enhanced in 2025 by FSAs, entered into in conjunction with OGE Energy's November 2025 public equity offering, which as of December 31, 2025 could have been physically settled with common shares in exchange for cash of $193.0 million. For more information concerning the FSAs, see Note 8 within "Item 8. Financial Statements and Supplementary Data."
Future Material Cash Requirements
OGE Energy's primary material cash requirements are related to acquiring or constructing new facilities and replacing or expanding existing facilities at OG&E. Other working capital requirements include items such as maturing debt, operating lease obligations, fuel clause under recoveries and other general corporate purposes. Further, working capital requirements can be seasonal. OGE Energy 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. OGE Energy believes its cash flows from operations, existing borrowing capacity, and access to debt and equity capital markets as needed, should be sufficient to satisfy our material cash requirements over the short-term and long-term.
Capital Expenditures
OGE Energy's estimates of capital expenditures, which represent base maintenance capital expenditures plus capital expenditures for known and committed projects, for the years 2026 through 2030 are presented in the following table. The capital investments are customer-focused and targeted to maintain and improve the safety, resiliency and reliability of OG&E's distribution and transmission grid and generation fleet, enhance the ability of OG&E's system to perform during extreme weather events and to serve OG&E's growing customer base.
(In millions)
Total
Transmission (A)(B)
Oklahoma distribution
Arkansas distribution
Generation reliability
Generation capacity projects (C)
Technology, fleet & facilities
Total
Transmission includes the Fort Smith to Muskogee transmission project discussed in Note 14 within "Item 8. Financial Statements and Supplementary Data," with projected capital expenditures of approximately $70 million in 2026, $80 million in 2027, $65 million in 2028, and $35 million in 2029.
Capital expenditures associated with the SPP's 2025 Integrated Transmission Plan, including the Seminole to Shreveport Transmission Line that is discussed in Note 14 within "Item 8. Financial Statements and Supplementary Data," will be included in OG&E's capital plan upon final notice to construct acceptances.
Generation capacity projects include the Tinker Air Force Base, Horseshoe Lake Units 11 and 12, and Horseshoe Lake Units 13 and 14 generation projects. Additional generation capacity projects will be included in OG&E's capital plan when final preapproval orders are received.
Additional capital expenditures beyond those identified in the table above, including additional incremental growth opportunities, will be evaluated based upon the requirements of OG&E's power supply, transmission and distribution operational teams and the expected resultant customer benefits. The annual level of investments in the transmission and distribution system could vary depending on the amount and timing of incremental generation capacity investments.
Contractual Obligations
The following table presents OGE Energy's total contractual obligations for the next five years at December 31, 2025. For further detail of OGE Energy's contractual obligations, which include operating leases, long-term debt and purchase obligations and commitments (including information for maturities beyond the next five years), see Notes 4, 9 and 13, respectively, within "Item 8. Financial Statements and Supplementary Data."
(In millions)
Total
Total contractual obligations
Amounts recoverable through fuel adjustment clause and other regulatory mechanisms (A)
Total contractual obligations, net
Includes expected recoveries of costs incurred for OG&E's railcar operating lease obligations, OG&E's minimum fuel purchase commitments, OG&E's expected wind purchase commitments and OG&E's capacity agreements.
The actual cost of fuel used in electric generation (which includes the operating lease obligations for OG&E's railcar leases shown in Note 4 within "Item 8. Financial Statements and Supplementary Data") and certain purchased power costs are passed on to OG&E's customers through fuel adjustment clauses and other regulatory mechanisms. Accordingly, while the cost of fuel related to operating leases and the vast majority of minimum fuel purchase commitments of OG&E noted in Notes 4 and 13, respectively, within "Item 8. Financial Statements and Supplementary Data" may increase capital requirements, such costs are generally recoverable through fuel adjustment clauses and have little, if any, impact on net capital requirements and future contractual obligations. OG&E's fuel adjustment clauses are subject to periodic review by the OCC and the APSC. Otherwise, as discussed above, OGE Energy expects to meet these cash requirement needs through cash generated from operations, short-term borrowings and permanent financings.
Pension and Postretirement Benefit Plans
At December 31, 2025, 14.5 percent of the Pension Plan investments were in listed common stocks with the balance primarily invested in corporate fixed income and other securities, U.S. Treasury notes and bonds and mutual funds, as presented in Note 11 within "Item 8. Financial Statements and Supplementary Data." During 2025, the actual return on the Pension Plan was $23.3 million, compared to an expected return on plan assets of $16.5 million. During the same time, corporate bond yields, which are used in determining the discount rate for future pension obligations, decreased. Funding levels are dependent on returns on plan assets and future discount rates. OGE Energy made contributions to its Pension Plan of $13.5 million in 2025 and $10.0 million in 2024. OGE Energy expects to contribute $15.0 million to the Pension Plan in 2026. OGE Energy could be required to make additional contributions if the value of its pension trust and postretirement benefit plan trust assets are adversely impacted by a major market disruption in the future.
The following table presents the status of OGE Energy's Pension Plan, the Restoration of Retirement Income Plan and the postretirement benefit plans at December 31, 2025 and 2024. These amounts have been recorded in Accrued Benefit Obligations with the offset in Accumulated Other Comprehensive Loss (except OG&E's portion, which is recorded as a regulatory asset as discussed in Note 1 within "Item 8. Financial Statements and Supplementary Data") in the balance sheets. The amounts in Accumulated Other Comprehensive Loss and those recorded as a regulatory asset represent a net periodic benefit cost to be recognized in the statements of income in future periods.
Pension Plan
Restoration of Retirement
Income Plan
Postretirement
Benefit Plans
December 31 (In millions)
Benefit obligations
Fair value of plan assets
Funded status at end of year
Common Stock Dividends
OGE Energy's dividend policy is reviewed by the Board of Directors at least annually and is based on numerous factors, including management's estimation of the long-term earnings power of its businesses. In 2025, the Board of Directors reviewed a recommendation from management of an increase in the quarterly dividend to $0.425 per share from $0.42125 per share and subsequently approved the recommendation to become effective with the dividend payment in October 2025.
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 settlement of the FSAs, sales of common stock to the public through public offerings and OGE Energy's Automatic Dividend Reinvestment and Stock Purchase Plan, or other offerings will be adequate over the next three years to meet anticipated cash needs and to fund future growth opportunities. OGE Energy 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.
Short-Term Debt and Credit Facilities
OGE Energy borrows on a short-term basis, as necessary, by issuance of commercial paper and borrowings under its revolving credit agreements.
OGE Energy has unsecured five-year revolving credit facilities totaling $1.1 billion ($550.0 million for OGE Energy and $550.0 million for OG&E), which can also be used as letter of credit facilities. OGE Energy also has a $120.0 million floating rate unsecured three-year credit agreement, of which $60.0 million is considered a revolving loan. The following table presents information about OGE Energy's revolving credit agreements as of December 31, 2025.
(Dollars in millions)
December 31, 2025
Balance of outstanding supporting letters of credit
Weighted-average interest rate of outstanding supporting letters of credit
Net available liquidity under revolving credit agreements, commercial paper borrowings and letters of credit
Balance of cash and cash equivalents
The following table presents information about OGE Energy's total short-term debt activity for the year ended December 31, 2025.
(Dollars in millions)
Year Ended December 31, 2025
Average balance of short-term debt
Weighted-average interest rate of average balance of short-term debt
Maximum month-end balance of short-term debt
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 $1.0 billion in short-term borrowings at any one time for a two-year period beginning January 1, 2025 and ending December 31, 2026.
Long-Term Debt
On April 1, 2025, OG&E issued $350.0 million of 5.80 percent senior notes due April 1, 2055. The proceeds from this issuance were added to OG&E's general funds and used for the repayment of short-term debt and borrowings under its revolving credit facility, and to fund OG&E's capital investment program and working capital needs.
In 2026, OG&E expects to issue approximately $300 million in long-term debt to help fund general operating needs.
Security Ratings
Moody's Investors Service
S&P's Global Ratings
Fitch Ratings
Rating
Outlook
Rating
Outlook
Rating
Outlook
OG&E Senior Notes
Negative
Negative
Stable
OG&E Commercial Paper
Negative
Negative
Stable
OGE Energy Senior Notes
Baa1
Negative
BBB
Stable
BBB+
Stable
OGE Energy Commercial Paper
Negative
Stable
Stable
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 OGE Energy'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 OGE Energy's short-term borrowings, but a reduction in OGE Energy'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 OGE Energy 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 14, 2025, Moody's Investors Service revised their ratings outlook on both OGE Energy and OG&E from stable to negative. Moody's Investors Service indicated that the revised outlook reflects pressure related to OG&E's capital expenditure plan and higher debt levels at the holding company.
On November 18, 2025, S&P's Global Ratings revised their ratings outlook on OG&E from stable to negative and affirmed their stable ratings outlook on OGE Energy. S&P's Global Ratings indicated the revised outlook for OG&E reflects the elevated wildfire exposure and the mitigation efforts needed to reduce such risks.
Future financing requirements may be dependent, to varying degrees, upon numerous factors such as general economic conditions, abnormal weather, load growth, commodity prices, acquisitions of other businesses and/or development of projects, actions by rating agencies, inflation, changes in environmental laws or regulations, rate increases or decreases allowed by regulatory agencies, new legislation, and market entry of competing electric power generators.
Common Stock
OGE Energy expects to issue between $15 million to $25 million of common stock from its Automatic Dividend Reinvestment and Stock Purchase Plan in 2026.
In November 2025, OGE Energy entered into a public offering of approximately $397 million (9,226,744 shares) of its common stock, which included 4,613,372 common shares that were issued and sold by OGE Energy to the underwriters and 4,613,372 common shares that are subject to FSAs. Total cash proceeds received in November 2025 related to the public offering was $192.4 million. Settlement of the FSAs, which is at OGE Energy's discretion, is expected to occur no later than 18 months following the completion of the offering.
See Note 8 within "Item 8. Financial Statements and Supplementary Data" for a discussion of OGE Energy's common stock activity.
Critical Accounting Policies and Estimates
The financial statements and notes thereto contain information that is pertinent to management's discussion and analysis. In preparing the 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Changes to these assumptions and estimates could have a material effect on the Registrants' financial statements. However, the Registrants believe they have taken reasonable positions where assumptions and estimates are used in order to minimize the negative financial impact to the Registrants that could result if actual results vary from the assumptions and estimates.
In management's opinion, the areas where the most significant judgment is exercised include the determination of pension and postretirement plan assumptions, income taxes, contingency reserves, and regulatory assets and liabilities. The selection, application and disclosure of the following critical accounting estimates have been discussed with the Audit Committee of OGE Energy's Board of Directors. The Registrants discuss their significant accounting policies, including those that do not require management to make difficult, subjective or complex judgments or estimates, in Note 1 within "Item 8. Financial Statements and Supplementary Data."
Pension and Postretirement Plan Assumptions
OGE Energy has a Pension Plan that covers certain employees, including OG&E's employees, hired before December 1, 2009. Effective December 1, 2009, OGE Energy's Pension Plan is no longer being offered to employees hired on or after December 1, 2009. OGE Energy also has defined benefit postretirement plans that cover certain employees, including OG&E's employees hired prior to February 1, 2000. Pension and other postretirement plan expenses and liabilities are determined on an actuarial basis and are affected by the market value of plan assets, estimates of the expected return on plan assets, assumed discount rates, and the level of funding. Actual changes in the fair market value of plan assets and differences between the actual return on plan assets and the expected return on plan assets could have a material effect on the amount of pension expense ultimately recognized. The Pension Plan rate assumptions are shown in Note 11 within "Item 8. Financial Statements and Supplementary Data." The assumed return on plan assets is based on management's expectation of the long-term return on the plan assets portfolio. The discount rate used to compute the present value of plan liabilities is based generally on rates of high-grade corporate bonds with maturities similar to the average period over which benefits will be paid. Funding levels are dependent on returns on plan assets and future discount rates. Higher returns on plan assets and an increase in discount rates will reduce funding requirements to the Pension Plan.
The following table presents the sensitivity of the Pension Plan funded status to these variables.
Change
Impact on Funded Status
Actual plan asset returns
+/- 1 percent
+/- $2.6 million
Discount rate
+/- 0.25 percent
+/- $4.7 million
Contributions
+/- $10 million
+/- $10.0 million
Income Taxes
The Registrants use the asset and liability method of accounting for income taxes. Under this method, a deferred tax asset or liability is recognized for the estimated future tax effects attributable to temporary differences between the financial statement basis and the tax basis of assets and liabilities, as well as tax credit carry forwards and net operating loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period of the change.
The application of income tax law is complex. Laws and regulations in this area are voluminous and often ambiguous. Interpretations and guidance surrounding income tax laws and regulations change over time. Accordingly, it is necessary to make judgments regarding income tax exposure. As a result, changes in these judgments can materially affect amounts the Registrants recognized in their financial statements. Tax positions taken by the Registrants on their income tax returns that are recognized in the financial statements must satisfy a more likely than not recognition threshold, assuming that the position will be examined by taxing authorities with full knowledge of all relevant information.
Contingency Reserves
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.
Regulatory Assets and Liabilities
OG&E, as a regulated electric company, 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. 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.
Accounting Pronouncements
See Note 2 within "Item 8. Financial Statements and Supplementary Data" for further discussion of recently adopted accounting standards and recently issued accounting standards that are not yet effective that could have a material impact on the Registrants' financial position, results of operations or cash flows upon adoption.
Commitments and Contingencies
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 disclosed in Note 13 within "Item 8. Financial Statements and Supplementary Data," the Registrants believe that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or would not be quantitatively material to their financial statements and would not have a material effect on their financial position, results of operations or cash flows. See Notes 13 and 14 within "Item 8. Financial Statements and Supplementary Data" and "Item 3. Legal Proceedings" for further discussion of the Registrants' 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 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.
Changes in presidential administrations can result in uncertainty regarding policy or initiatives relating to activities that may affect the environment. In March 2025, the EPA announced that it would begin reconsideration of numerous regulations, including several that apply to OG&E. The EPA has begun this process for certain regulations as described below and must adhere to the legal requirements for enacting, revising, repealing, or replacing agency regulations. Future developments, such as changes in existing laws, introduction of new laws or regulations, or the emergence of new facts or conditions, may result in significant costs for the Registrants.
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.
Air
OG&E's operations are subject to the Federal Clean Air Act of 1970, as amended, and comparable state laws and regulations. These laws regulate air pollutant emissions from industrial sources, including electric generating units, and require monitoring and reporting. These laws and regulations may require OG&E to secure pre-approval for constructing or modifying projects or facilities that are anticipated to generate air emissions or increase current emission levels. Additionally, OG&E may need to obtain and comply with air permits outlining specific emission and operational requirements or implement 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
In 2015, the EPA updated the ambient air standards for ozone. Although Oklahoma meets these standards, the Clean Air Act requires states to submit implementation plans to the EPA to ensure their emissions do not affect other states. Oklahoma submitted its SIP in 2018. However, in January 2023, the EPA disapproved the SIPs of 19 states, including Oklahoma. In response, the Oklahoma Attorney General, the ODEQ and OG&E filed petitions for review in March 2023. A stay on the EPA's disapproval was granted in July 2023. The timing of further action is currently unknown.
In a related matter, in April 2022, the EPA published a proposed FIP related to the "Good Neighbor" requirements intended to reduce interstate NO x emissions. OG&E commented on this proposed FIP in June 2022. By June 2023, the EPA finalized this plan for 23 states, including Oklahoma. This final Good Neighbor FIP would revise Oklahoma's NO x emissions budget for electric generating units, including OG&E's, starting in 2023. The emissions budget would decrease over time based on achievable reductions. OG&E estimated a 34.5 percent reduction by 2026 from 2023 levels and a 50 percent reduction by 2027 from 2021 levels. Following the FIP issuance, OG&E has been considering options to cut emissions at its generating units, including buying emission allowances, installing selective catalytic reduction systems, switching coal units to gas, or retiring and replacing capacity. OG&E submitted its final 2024 IRP to the OCC and APSC on March 29, 2024, which evaluates various compliance options related to the EPA's Good Neighbor FIP. Due to the uncertainty surrounding the SIP disapproval and FIP implementation, OG&E cannot determine the exact cost of compliance. The costs depend on the litigation outcome, chosen control strategies, regulatory approvals, and project timelines. However, OG&E estimated in mid-2023 that compliance costs could range from $2.4 billion to $2.8 billion, including $100 million to $300 million over the first 12 to 18 months following the FIP's effectiveness. OG&E plans to seek recovery of necessary environmental expenditures but cannot guarantee approval or timely recovery of all such expenditures. In October 2023, several petitioners sought a stay of the final FIP from the U.S. Supreme Court, pending review of the in the U.S. Court of Appeals for the District of Columbia. The U.S. Supreme Court granted the stay in June 2024. The EPA requested a in the case in February 2025, which was . In March 2025, the EPA sought to reconsider the rule without vacating it. The D.C. Circuit Court agreed to hold the case in abeyance in April 2025, requiring status reports every 90 days. The timing of further action is unknown.
The EPA has indicated that it intends to reconsider both the SIP disapprovals and the final FIP in a two-phase reconsideration rulemaking. In January 2026, the EPA proposed its "Phase 1" reconsideration of SIP disapprovals for several states. The EPA did not include the disapproved Oklahoma SIP in "Phase 1" but indicated that it intends to address the remaining states, including Oklahoma, in a separate action. The timing of further action is unknown.
New Source Performance Standards
In December 2024, the EPA published in the Federal Register a proposed rule that would revise the new source performance standards regulating NO x and SO 2 emissions from new, modified, and reconstructed stationary combustion turbines. OG&E participated with trade associations to submit comments on the proposed rule on April 15, 2025. On January 15, 2026, the EPA published in the Federal Register its final rule establishing NO x emissions standards for several subcategories of stationary combustion turbines based on the size, rates of utilization, design efficiency, and fuel type of these turbines. The rule applies to affected sources constructed, modified, or reconstructed after the December 2024 publication date. As only future, currently unknown activities are affected by this regulation, it is unknown what potential material impacts, if any, there will be from this final action by EPA.
Particulate Matter NAAQS
In February 2024, the EPA issued a final rule resulting from its reconsideration of the primary (health-based) and secondary (welfare-based) NAAQS for PM, which were set in 2013 and which the EPA declined to revise in 2020. The final rule lowers the primary annual PM 2.5 NAAQS from 12.0 µg/m 3 to 9.0 µg/m 3 and retains the other PM standards at their current levels, including the 24-hour PM 2.5 NAAQS. The EPA will determine which areas of the country meet the standards, such as making initial attainment and nonattainment designations, no later than two years after new standards are issued. States must develop and submit attainment plans no later than 18 months after the EPA finalizes nonattainment designations.
Litigation on the final rule is proceeding in the D.C. Circuit. A coalition of 24 states, including Oklahoma, filed challenges to the final rule, and a separate coalition of states and other stakeholders filed to intervene in these challenges on behalf of the EPA. A coalition of 22 state governors separately requested the EPA to pause implementation of the final rule.
The revised NAAQS could impact regional air quality goals and emission limits for emission sources; however, it is unknown at this time what, if any, potential material impacts to OG&E individual operating permit emission limits will result from the EPA actions.
Regional Haze
In July 2020, the ODEQ notified OG&E that the Horseshoe Lake generating units that were in-service at the time would be included in Oklahoma's second Regional Haze implementation period evaluation of visibility impairment impacts to the Wichita Mountains. OG&E submitted an analysis of all potential control measures for NO x on these units to the ODEQ. The ODEQ submitted a revised SIP to the EPA in August 2022. In February 2026, the EPA proposed to approve the Oklahoma SIP revision, and a 2024 consent decree requires the EPA to take final action no later than December 31, 2026. It is unknown at this time what the outcome, or any potential material impacts, if any, will be from the evaluations by OG&E, the ODEQ and the EPA.
Mercury and Air Toxics Standards
In April 2024, the EPA released the final revised Mercury and Air Toxics Standards regulation with a compliance date in July 2027. A coalition of states, including Oklahoma, challenged this rule in the D.C. Circuit Court and sought a stay, which was denied. This coalition of states then filed an emergency stay application with the U.S. Supreme Court, which was also denied. In April 2025, the EPA extended the compliance deadline to July 8, 2029. In June 2025, the EPA proposed to repeal the revised Mercury and Air Toxics Standards, which would remove the revised emission limit and monitoring requirements. In December 2025, the EPA sent to the OMB for review a rule finalizing the proposed repeal. The potential material impacts, if any, of further actions by the EPA or final action by the D.C. Circuit Court are currently unknown.
Greenhouse Gas
OG&E monitors developments in federal greenhouse gas (“GHG”) emissions regulations applicable to fossil fuel-fired electric generating units. Changes in legal standards, including the implementation of rules for the power sector finalized by the EPA in 2024 or the adoption of new regulations, could require significant capital investment and compliance expenditures. If such costs are not recoverable through regulated rates, OG&E’s financial position, results of operations, and cashflows could be materially affected.
In May 2024, the EPA issued final rules establishing (i) emission guidelines under Section 111(d) of the Clean Air Act for existing fossil fuel-fired steam generating units and (ii) revised standards of performance under Section 111(b) for new natural gas-fired combustion turbines. Under these rules, existing coal-fired units that intend to operate beyond 2039 must achieve 90 percent carbon capture by 2032. Units that plan to operate until 2039 must co-fire with natural gas at 40 percent by 2030. Units that retire by 2032 are exempt from these requirements. State compliance plans reflecting affected unit owners’ compliance decisions are required to be submitted to the EPA by May 2026.
OG&E’s existing natural gas-fired boilers satisfy the new standards and therefore require no additional compliance measures other than reporting. For new natural gas-fired combustion turbines commencing construction after May 23, 2023, the 2024 GHG rules establish three subcategories—baseload, intermediate-load, and low-load—based on capacity factor thresholds, all of which are subject to efficiency requirements. Baseload units, defined as units with capacity factors greater than 40 percent, are also required to achieve 90 percent CO₂ capture by January 1, 2032.
Significant litigation related to these 2024 GHG rules is ongoing. In February 2025, the D.C. Circuit placed the litigation in abeyance at the EPA’s request while the agency reconsiders the 2024 GHG rules.
In June 2025, the EPA proposed to repeal the 2024 GHG rules for both existing and new units or, alternatively, to repeal the 2024 GHG rules for existing units and rescind the carbon capture requirements applicable to new combustion turbines. OG&E submitted comments on the 2025 proposed rules individually and through trade associations. Although the EPA has initiated reconsideration and proposed repeal, the 2024 power sector GHG rules have not been stayed, and future compliance timelines remain in effect. If the new emission standards and guidelines are implemented, compliance costs could be significant. OG&E continues to monitor these developments and plan for compliance with 2024 GHG rules standards currently in effect.
Separately, in February 2026, the EPA released a final rule that rescinds the agency’s 2009 Endangerment Finding, which determined that GHG emissions endanger public health and welfare. While rescinding the Endangerment Finding would not directly alter the 2024 GHG regulations, it may result in increased regulatory uncertainty for the power sector as future generation needs are considered.
OG&E cannot predict the outcome of the EPA’s reconsideration process, the proposed repeal, or the pending litigation. However, the 2024 GHG rules remain in effect and could result in material compliance obligations and associated costs. OG&E continues to monitor these regulatory developments and evaluate potential impacts on its operations.
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 in an area in which OG&E conducts operations, or if additional species in those areas become subject to protection, OG&E's operations and development projects, particularly transmission, wind or solar projects, could be restricted or delayed, or OG&E could be required to implement expensive mitigation measures.
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.
Ash from OG&E's River Valley, Muskogee and Sooner facilities is recovered and reused off-site in various ways, including soil stabilization, landfill cover, road base construction and cement and concrete production. Reusing fly ash reduces the need to manufacture cement resulting in reductions in greenhouse gas emissions from cement and concrete production.
OG&E has sought and will continue to seek pollution prevention opportunities and to evaluate the effectiveness of its waste reduction, reuse and recycling efforts. In 2025, OG&E obtained refunds of $2.2 million from the recycling of scrap metal, salvaged transformers and used transformer oil. This figure does not include the additional savings 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.
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. In April 2024, the EPA released a supplemental effluent limitations guidelines rule. OG&E's installation of dry bottom ash handling technology at an affected facility complies with the 2024 rule requiring facilities to cease
discharging bottom ash transport water. OG&E is evaluating compliance options at another affected facility, and in December 2025, the EPA published a final rule revising the deadline to cease bottom ash transport water discharge to December 31, 2034.
OG&E has made investments in its infrastructure at Redbud and McClain that have led to OG&E's use of treated municipal effluent for cooling water at each plant, which 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. No associated liability is expected to significantly impact OG&E at this time.
