Oklahoma Gas and Electric Company, a subsidiary of
OGE Energy Corporation
), has planned to execute an interim annual rate increase of $24
million with the new rates effective from June 1, 2012, for its
residential, commercial and industrial customers. However, in order
to offset the increase the energy company plans to file for a
reduction in fuel costs by $50 million annually that will finally
result in a net reduction of the bill amount for all customers.
If the Oklahoma Corporation Commission ("OCC") takes more than
six months for review and issuance of order in rate case
proceedings, then subject to reimbursement of the money, a utility
is allowed to implement interim rates.
The company had made its initial filing in July last year for
rate increase of approximately $73 million that if approved would
be effective in 2012. If approved, the request would increase the
average residential customer's monthly bill by approximately $6.50
per month. Larger commercial and industrial customers would
likewise suffer a rate increase. However, schools and small
businesses would see little or no increase. A hearing on the case
was done in December 2011.
These rate increase filings seek to recover investments of $500
million made by the company over the past several years for
electric system improvements. The company has made prudent
investments that have improved the quality of service, provided
customers with tools and information to better manage their energy
use and earned best-in-class distinction for customer satisfaction.
With plans to invest $3.7 billion over 2012-2016, the company is
pursuing an aggressive energy efficiency program, investing in
renewable energy technologies and upgrading its infrastructure.
OGE Energy is the largest electric utility in Oklahoma, with
well-positioned regulated utility and unregulated midstream gas
businesses. The company's midstream assets are strategically
located to benefit from strong growth in gas production in Oklahoma
and the Texas panhandle. Moreover, a rate increase being offset by
a decrease in fuel costs indicates that the company is not
oblivious to the plight of its customers who have to foot higher
However, we remain concerned about the volatility in its
commodity business and pending regulatory cases, along with the
unfavorable macro backdrop. The company presently retains a
short-term Zacks #2 Rank (Buy). We have a long-term Neutral
recommendation on the stock. The company mainly completes with
Williams Companies, Inc.
ENTERGY CORP (ETR): Free Stock Analysis Report
OGE ENERGY CORP (OGE): Free Stock Analysis
WILLIAMS COS (WMB): Free Stock Analysis Report
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