SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Large accelerated filer o

Non-accelerated filer þ (Do not check if a smaller reporting company)

Smaller reporting company o

Emerging growth company o

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

OKLAHOMA GAS AND ELECTRIC COMPANY

FOR THE QUARTER ENDED ~~SEPTEMBER~~JUNE 30, ~~2016~~2017

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



Abbreviation	Definition
~~2015~~2016 Form 10-K	Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016
ALJ	Administrative Law Judge
APSC	Arkansas Public Service Commission
ASU	Financial Accounting Standards Board Accounting Standards Update
~~AVEC~~	~~Arkansas Valley Electric Cooperative Corporation~~
CO₂	Carbon dioxide
CSAPR	Cross-State Air Pollution Rule
Dry Scrubbers	Dry flue gas desulfurization units with spray dryer absorber
ECP	Environmental Compliance Plan
Enable	Enable Midstream Partners, LP, a midstream partnership formed between OGE Energy and CenterPoint Energy, Inc.
EPA	U.S. Environmental Protection Agency
FASB	Financial Accounting Standards Board
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 United States
IRP	Integrated Resource Plan
kV	Kilovolt
MATS	Mercury and Air Toxics Standards
Mustang Modernization Plan	OG&E's plan to replace the soon-to-be retired Mustang steam turbines in late 2017 with ~~400~~462 MWs of new, efficient combustion turbines at the Mustang site in 2018 and 2019
MW	Megawatt
MWh	Megawatt-hour
NAAQS	National Ambient Air Quality Standards
NO_X	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	OGE Energy Corp., parent company of OG&E
Pension Plan	Qualified defined benefit retirement plan
~~Ppb~~ppb	Parts per billion
PUD	Public Utility Division of the Oklahoma Corporation Commission
QF	Qualified cogeneration facilities
Regional Haze Rule	The EPA's regional haze rule
Restoration of Retirement Income Plan	Supplemental retirement plan to the Pension Plan
SIP	State implementation plan
SO₂	Sulfur dioxide
SPP	Southwest Power Pool
System sales	Sales to OG&E's customers

FORWARD-LOOKING STATEMENTS

Except for the historical statements contained herein, the matters discussed in this Form 10-Q, including those matters discussed in "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",~~"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 in "Item 1A. Risk Factors" in OG&E's ~~2015~~2016 Form 10-K and "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" herein, factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:

the ability of OG&E and OGE Energy to access the capital markets and obtain financing on favorable terms as well as inflation rates and monetary fluctuations;

prices and availability of electricity, coal and natural gas;

business conditions in the energy industry;

competitive factors including the extent and timing of the entry of additional competition in the markets served by OG&E;

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;

the effect of retroactive ~~repricing~~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 OG&E's markets;

environmental laws, ~~and~~safety laws or regulations that may impact the cost of operations or restrict or change the way OG~~&E's~~&E ~~operations;~~operates its facilities;

creditworthiness of suppliers, customers and other contractual parties;

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

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; and

other risk factors listed in the reports filed by OG&E with the Securities and Exchange Commission including those listed in "Item 1A. Risk Factors" ~~and~~in~~Exhibit 99.01 to~~ OG&E's ~~2015~~2016 Form 10-K.

OG&E 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.

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED STATEMENTS OF CASH FLOWS



	Six Months Ended June 30,
(In millions)	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	102.4		$	78.4
Adjustments to reconcile net income to net cash provided from operating activities
Depreciation and amortization	128.4			155.1
Deferred income taxes and investment tax credits, net	46.5			32.7
Allowance for equity funds used during construction	(15.4		)	(5.3		)
Stock-based compensation expense	1.8			1.5
Regulatory assets	(15.6		)	(4.0		)
Regulatory liabilities	(0.2		)	(8.4		)
Other assets	(1.0		)	3.7
Other liabilities	3.7			(8.4		)
Change in certain current assets and liabilities
Accounts receivable, net	(12.0		)	10.0
Accrued unbilled revenues	(27.0		)	(37.4		)
Fuel, materials and supplies inventories	1.0			11.2
Fuel clause under recoveries	(56.1		)	—
Other current assets	8.0			(18.2		)
Accounts payable	2.1			(42.6		)
Accounts payable - affiliates	1.0			5.3
Income taxes payable - parent	4.2			0.4
Fuel clause over recoveries	—			(20.0		)
Other current liabilities	(37.4		)	(12.7		)
Net cash provided from operating activities	134.4			141.3
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (less allowance for equity funds used during construction)	(491.1		)	(331.1		)
Proceeds from sale of assets	0.3			0.2
Net cash used in investing activities	(490.8		)	(330.9		)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid on common stock	(65.0		)	(60.0		)
Proceeds from long-term debt	296.5			—
Increase in long-term revolver	160.0			—
Payment of long-term debt	(0.1		)	(110.1		)
Changes in advances with parent	(35.0		)	359.7
Net cash provided from financing activities	356.4			189.6
NET CHANGE IN CASH AND CASH EQUIVALENTS	—			—
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	—			—
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	—		$	—

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

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED BALANCE SHEETS

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

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED BALANCE SHEETS (Continued)

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

OKLAHOMA GAS AND ELECTRIC COMPANY

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY

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

OKLAHOMA GAS AND ELECTRIC COMPANY

NOTES TO CONDENSED FINANCIAL STATEMENTS

OG&E generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas. Its operations 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. 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. OG&E is a wholly-owned subsidiary of OGE Energy, an energy and energy services provider offering physical delivery and related services for both electricity and natural gas primarily in the south central United States.

Basis of Presentation

The Condensed Financial Statements included herein have been prepared by OG&E, 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, OG&E 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 financial position of OG&E at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, the results of its operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 and its cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016 have been included and are of a normal, recurring nature except as otherwise disclosed. Management also has evaluated the impact of events occurring after June 30, 2017 up to the date of issuance of these Condensed Financial Statements, and these statements contain all necessary adjustments and disclosures resulting from that evaluation.

Due to seasonal fluctuations and other factors, OG&E's operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016~~2017 or for any future period. The Condensed Financial Statements and Notes thereto should be read in conjunction with the audited Financial Statements and Notes thereto included in OG&E's ~~2015~~2016 Form 10-K.

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 at:

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, which could have significant financial effects.

Asset Retirement Obligations

OG&E has asset retirement obligations primarily associated with the removal of company-owned wind turbines on leased land, as well as the removal of asbestos from certain power generating stations.

The following table summarizes changes to OG&E's asset retirement obligations during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016.

~~Reclassifications~~

The December 31, 2015 Condensed Balance Sheet has been adjusted for the reclassification of $16.3 million of debt issuance costs from Total Deferred Charges and Other Assets to Long-Term Debt to be consistent with the 2016 presentation due to the adoption of ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs," in 2016.

Revenue from Contracts with Customers. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606).". The ~~new guidance was intended to be effective for fiscal years beginning after December 15, 2016. On July 9, 2015, the FASB decided to delay the effective date of the~~ new revenue standard ~~by one year. Reporting entities may choose to adopt the standard as of the original effective date. The deferral results in the new revenue standard being~~is effective for fiscal years, and interim periods within those fiscal years, beginning after December ~~15,~~ 2017. ~~The standard permits~~OG&E currently expects to apply the ~~use of either the~~modified retrospective ~~or cumulative effect~~ transition method. Currently, OG&E is not aware of any issues that would have a material impact on the timing of revenue recognition. OG&E is assessing the effect of this new guidance on its tariff-based sales, bundled arrangements and alternative revenue programs. At this time, OG&E has ~~yet to select~~concluded that the new standard will not have a ~~transition method or determine the~~material impact on its ~~Condensed Financial Statements, however,~~results of operations and financial position but believes that it will change the ~~impact is~~income statement presentation of revenues and will require new disclosures. OG&E does not ~~expected~~intend to ~~be material.~~early adopt the new guidance and will implement in the first quarter of 2018.

~~Consolidation~~. In February 2015, the FASB issued ASU 2015-02, "Consolidation (Topic 810)". The amendments in ASU 2015-02 affect reporting entities that are required to evaluate whether they should consolidate certain legal entities. The new standard modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities along with eliminating the presumption that a general partner should consolidate a limited partnership. The new standard is effective for fiscal years beginning after December 15, 2015. The adoption of this new standard did not result in the consolidation of any non-consolidated entities.

Leases. In February 2016, the FASB issued ASU 2016-02, ~~“Leases~~"Leases (Topic 842)”." The main difference between current lease accounting and Topic 842 is the recognition of right-to-use assets and lease liabilities by lessees for those leases classified as operating leases under current accounting guidance. Lessees, such as OG&E, will need to recognize a right-of-use asset and a lease liability for virtually all of their leases, other than leases that meet the definition of a short-term lease. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, ~~the~~ Topic 842 retains a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense, while finance leases will result in a front-loaded expense pattern, similar to current capital leases. Classification of operating and finance leases will be based on criteria that are largely similar to those applied in current lease guidance but without the explicit thresholds. The new guidance is effective for fiscal years beginning after December 2018. The new guidance must be adopted using a modified retrospective transition and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. OG&E has started evaluating its current lease contracts. OG&E has not determined the amount of impact on its Condensed Financial Statements, but it anticipates an increase in the recognition of right-of-use assets and lease liabilities.

~~Investments.~~ In March 2016, the FASB issued ASU 2016-07, "Investments-Equity Method and Joint Ventures; Simplifying the Transition to the Equity Method of Accounting (Topic 323)." The amendments in ASU 2016-07 eliminate the requirement to retroactively adopt the equity method of accounting for a qualifying equity method investment. ASU 2016-07 requires equity method investors to add the cost of acquiring the additional interest in the investee to the current basis of the investor's previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for equity method accounting. The amendments in this ASU are effective for the fiscal years and interim periods within those fiscal years, beginning after December 15, 2016. OG&E does not believe this ASU will have any effect on its Condensed Financial Statements.

Employee Share Based Payment Accounting. In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee ~~Share Based~~Share-Based Payment Accounting," which amends ~~ASC~~Accounting Standards Codification Topic 718, Compensation - Stock Compensation. ASU 2016-09 includes provisions intended to simplify various aspects related to how ~~share based~~share-based payments are accounted for and presented in the financial statements. The new guidance, among other requirements, ~~will require~~requires all of the tax effects related to ~~share based~~share-based payments at settlement (or expiration) to be recorded through the income statement. ~~Currently,~~Previously, tax benefits in excess of compensation cost, ~~(“windfalls”) are~~or windfalls, were recorded in equity, and tax deficiencies, ~~(“shortfalls”) are~~or shortfalls, were recorded in equity to the extent of previous windfalls and then to the income statement. ~~This change is required to be applied prospectively to all excess tax benefits and tax deficiencies resulting from settlements after the date of adoption of the ASU 2016-09.~~ Under the new guidance, the windfall tax benefit ~~will be~~is recorded when it arises, subject to normal valuation allowance considerations. This change is required to be applied on a modified retrospective basis, with a cumulative effect adjustment to opening retained earnings. All ~~tax related~~tax-related cash flows resulting from ~~share based~~share-based payments are to be reported as operating activities on the statement of cash flows, which is a change

from the ~~current~~previous requirement to present windfall tax benefits as an inflow from financing activities and an outflow from operating activities. ~~Either prospective or retrospective transition~~OG&E adopted this standard in the first quarter of ~~this provision is permitted. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. Early adoption~~2017. Going forward, tax benefits in excess of compensation costs previously recorded in equity will be ~~permitted in any interim or annual period, with any adjustments reflected~~recorded within the income statement, and all tax-related cash flows resulting from share-based payments will be recorded as an operating activity within the statement of ~~the beginning of the fiscal year of adoption. OG&E has not determined the impact on its Condensed Financial Statements, however, the impact is not expected to be material.~~cash flows.

~~Financial Instruments-Credit Losses.~~Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. In ~~June 2016,~~May 2017, the FASB issued ASU ~~No. 2016-13, “Financial Instruments-Credit Losses: Measurement~~2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of ~~Credit Losses~~Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." The new guidance is designed to improve the reporting of pension and other postretirement benefit costs by bifurcating the components of net benefit expense between those that are attributed to compensation for service and those that are not. The service cost component of benefit expense will continue to be presented within operating income, but entities will now be required to present the other components of benefit expense as non-operating within the income statement. Additionally, the new guidance only permits the capitalization of the service cost component of net benefit expense.

The accounting change is required to be applied on ~~Financial Instruments.”~~a retrospective basis for the presentation of components of net benefit cost and on a prospective basis for the capitalization of only the service cost component of net benefit costs. The amendment in this update 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 matter. ASU 2016-13 also amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. The standardnew guidance is effective for ~~interim and annual reporting periods beginning after December 15, 2019, although early adoption is permitted for interim and~~ annual periods beginning after December ~~15, 2018.~~2017, including interim periods within those annual periods. Early adoption is permitted, subject to certain conditions.

OG&E believes that the impact of the change in capitalization of only the service cost component of net periodic benefit costs will be immaterial from current practice. OG&E does not ~~believe this ASU~~intend to early adopt the new guidance and will ~~have any effect on its Condensed Financial Statements.~~implement the change in the first quarter of 2018.

OGE Energy charged operating costs to OG&E of $~~30.1~~33.1 million and $~~29.6~~34.9 million during the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016, respectively, and ~~$97.0~~$67.7 million and ~~$91.3~~$66.9 million ~~for~~during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. OGE Energy charges operating costs to OG&E based on several factors. Operating costs directly related to OG&E 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.

~~OG&E entered into a contract with~~ Enable ~~to provide~~provides gas transportation services ~~effective May 1, 2014.~~to OG&E pursuant to an agreement that expires in April 2019. This transportation agreement 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~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016.

During the ~~nine~~six months ended ~~September~~June 30, ~~2016~~ ~~and~~ ~~2015~~2017, OG&E declared no dividends to OGE Energy of ~~$125.0~~as compared to $60.0 million ~~and $90.0 million.~~ during the same period in 2016.

The classification of OG&E'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).

OG&E had no financial instruments measured at fair value on a recurring basis at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015.~~2016.

The ~~following table summarizes the fair value and carrying amount of~~ ~~OG&E's~~ ~~financial instruments~~ at ~~September 30, 2016~~ ~~and~~ ~~December 31, 2015~~.

September 30, 2016 December 31, 2015
(In millions) Carrying Amount Fair
Value Carrying Amount Fair
Value
Long-Term Debt
Senior Notes $ 2,385.0
$ 2,818.2
$ 2,493.9
$ 2,754.6
OG&E Industrial Authority Bonds 135.4
135.4
135.4
135.4
Tinker Debt 9.9
10.0
10.0
9.2

~~The~~ fair value of OG&E's long-term debt is based on quoted market prices and estimates of current rates available for similar issues with similar maturities and is classified as Level 2 in the fair value hierarchy with the exception of the Tinker Debt which fair value is based on calculating the net present value of the monthly payments discounted by OG&E's current borrowing rate and is classified as Level 3 in the fair value hierarchy.

The following table summarizes the fair value and carrying amount of OG&E's financial instruments at June 30, 2017 and December 31, 2016.



	June 30, 2017				December 31, 2016
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term Debt (including Long-term Debt due within one year)
Senior Notes	$	2,682.8	$	3,008.1	$	2,385.5	$	2,657.2
OG&E Revolving Credit Facility	160.0		160.0		—		—
OG&E Industrial Authority Bonds	135.4		135.4		135.4		135.4
Tinker Debt	9.8		9.6		9.9		9.5

The following table summarizes OG&E's pre-tax compensation expense and related income tax benefit during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 related to performance units and restricted stock for OG&E employees.

During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, OG&E issued an immaterial number of shares to satisfy restricted stock grants.

OG&E is a member of an affiliated group that files consolidated income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. With few exceptions, OG&E is no longer subject to U.S. Federal tax examinations by tax authorities for years prior to 2013 or state and local tax examinations by tax authorities for years prior to 2012. 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 are being amortized to income over the life of the related property. OG&E earns both Federal and Oklahoma state tax credits associated with production from its wind farms and earns Oklahoma state tax credits associated with its investments in electric generating facilities which further reduce OG&E's effective tax rate.


7.	Long-Term Debt

At ~~September~~June 30, ~~2016~~2017, OG&E was in compliance with all of its debt agreements.

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 as follows:

SERIES DATE DUE AMOUNT
(In millions)
0.05% - 0.84% Garfield Industrial Authority, January 1, 2025 $ 47.0
0.07% - 0.80% Muskogee Industrial Authority, January 1, 2025 32.4
0.05% - 0.82% Muskogee Industrial Authority, June 1, 2027 56.0
Total (redeemable during next 12 months) $ 135.4



SERIES			DATE DUE	AMOUNT
				(In millions)
0.65%	-	0.98%	Garfield Industrial Authority, January 1, 2025	$	47.0
0.65%	-	0.95%	Muskogee Industrial Authority, January 1, 2025	32.4
0.66%	-	0.97%	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~~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~~Long-term Debt in OG&E's Condensed Financial Statements. OG&E believes that it has sufficient liquidity to meet these obligations.

Issuance of New Long-Term Debt

In March 2017, OG&E issued $300.0 million of 4.15 percent senior notes due April 1, 2047. The proceeds from the issuance were used to repay short-term debt and were added to OG&E's general funds to be used for general corporate purposes, including to repay borrowings under the revolving credit facility, to fund the payment at maturity of OG&E's $125.0 million of 6.5 percent senior notes due July 15, 2017 and to fund ongoing capital expenditures and working capital.


8.	Short-Term Debt and Credit Facility

On March 8, 2017, OG&E entered into a new unsecured $450.0 million five-year revolving credit facility. The new facility is scheduled to terminate on March 8, 2022. However, OG&E has the right to request an extension of the revolving credit facility termination date under its facility for an additional one-year period, which can be exercised up to two times. All such extension requests are subject to majority lender group approval (and only the commitments of those lenders that consent to such extension (or that agree to replace any non-consenting lender) will be extended for such additional period).

Borrowings under OG&E’s new facility shall bear interest at rates equal to either the eurodollar base rate (reserve adjusted, if applicable), plus a margin of 0.69 percent to 1.275 percent, or an alternate base rate, plus a margin of 0.0 percent to 0.275 percent. OG&E’s new facility has a facility fee that ranges from 0.06 percent to 0.225 percent. Interest rate margins and facility fees are based on OG&E’s then-current senior unsecured credit ratings.

The new facility provides for issuance of letters of credit, provided that (i) the aggregate outstanding credit exposure shall not exceed the amount of the revolving credit facility and (ii) the aggregate outstanding stated amount of letters of credit issued under such facility shall not exceed a sublimit of $100.0 million. Advances under the new facility may be used to refinance existing indebtedness and for working capital and general corporate purposes, including commercial paper liquidity support, letters of credit, acquisitions and distributions.

The new facility is unsecured and, under certain circumstances, may be increased by up to $150.0 million, to a maximum revolving commitment limit of $600.0 million. Advances of revolving loans and letters of credit under the new facility are subject

to certain conditions precedent, including the accuracy of certain representations and warranties and the absence of any default or unmatured default.

The new facility has a financial covenant requiring that OG&E maintain a maximum debt to capitalization ratio of 65 percent, as defined in the facility. OG&E's new facility also contains covenants which restrict, among other things, mergers and consolidations, sales of all or substantially all assets, incurrence of liens and transactions with affiliates. OG&E's new facility is subject to acceleration upon the occurrence of any default, including, among others, payment defaults on such facility, breach of representations, warranties and covenants, acceleration of indebtedness (other than intercompany and non-recourse indebtedness) of $100.0 million or more in the aggregate, change of control (as defined in the new facility), nonpayment of uninsured judgments in excess of $100.0 million and the occurrence of certain Employee Retirement Income Security Act and bankruptcy events, subject where applicable to specified cure periods.

As of September 30, 2016, the commitment of $8.7 million of OG&E's credit facility was not extended and unless the non-extending lender is replaced in accordance with the terms of the credit facility, the commitment will expire December 13, 2017.

OGE Energy's and OG&E'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 OGE Energy's and OG&E'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 and OG&E's short-term borrowings, but a reduction in OGE Energy's and OG&E's credit ratings would not result in any defaults or accelerations. Any future downgrade of OG&E could also lead to higher long-term borrowing costs and, if below investment grade, would require OG&E 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, ~~2015~~2017 and ending December 31, ~~2016. 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.~~2018.


9.	Retirement Plans and Postretirement Benefit Plans

The details of net periodic benefit cost, before consideration of capitalized amounts, of OG&E's portion of OGE Energy's Pension Plan, the Restoration of Retirement Income Plan and the postretirement benefit plans included in the Condensed Financial Statements are as follows:

Net Periodic Benefit Cost


	Pension Plan												Restoration of Retirement Income Plan								Pension Plan												Restoration of Retirement Income Plan
	Three Months Ended						Nine Months Ended						Three Months Ended				Nine Months Ended				Three Months Ended						Six Months Ended						Three Months Ended					Six Months Ended
	September 30,												September 30,								June 30,												June 30,
(In millions)	2016 (B)			2015 (B)			2016 (C)			2015 (C)			2016 (B)		2015 (B)		2016 (C)		2015 (C)		2017 (A)			2016 (A)			2017 (B)			2016 (B)			2017 (A)		2016 (A)			2017 (B)		2016 (B)
Service cost	$	2.6		$	2.7		$	7.7		$	7.7		$	—	$	0.1	$	—	$	0.1	$	2.4		$	2.3		$	5.1		$	5.1		$	—	$	—		$	—	$	—
Interest cost	4.8			5.1			14.4			14.9			0.1		0.1		0.1		0.1		4.9			4.6			9.7			9.6			0.1		(0.1		)	0.1		—
Expected return on plan assets	(8.2		)	(8.9		)	(24.8		)	(27.4		)	—		—		—		—		(8.1		)	(8.2		)	(16.4		)	(16.6		)	—		—			—		—
Amortization of net loss	3.1			2.9			9.3			10.3			—		—		0.1		0.1		3.5			3.0			6.5			6.2			0.1		0.1			0.2		0.1
Amortization of unrecognized prior service cost (A)	—			0.1			—			0.4			—		—		—		—
Settlement	—			10.0			—			10.0			—		—		0.4		—		—			—			—			—			—		0.4			—		0.4
Net periodic benefit cost	$	2.3		$	11.9		$	6.6		$	15.9		$	0.1	$	0.2	$	0.6	$	0.3	$	2.7		$	1.7		$	4.9		$	4.3		$	0.2	$	0.4		$	0.3	$	0.5

In addition to the $2.9 million and $2.1 million of net periodic benefit cost recognizedduring the three months ended June 30, 2017and2016, respectively, OG&E recognized the following:



	Postretirement Benefit Plans
	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In millions)	2017 (B)			2016 (B)			2017 (C)			2016 (C)
Service cost	$	0.1		$	0.2		$	0.2		$	0.3
Interest cost	1.6			1.9			3.3			3.7
Expected return on plan assets	(0.5		)	(0.5		)	(1.0		)	(1.0		)
Amortization of net loss	0.2			0.8			0.8			1.3
Amortization of unrecognized prior service cost (A)	—			(1.6		)	—			(3.1		)
Net periodic benefit cost	$	1.4		$	0.8		$	3.3		$	1.2

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$2.4 millionand$12.1 millionof net periodic benefit cost recognizedduring the~~ ~~three months ended~~ ~~September 30, 2016and2015~~, ~~respectively~~, ~~OG&E recognized the following:~~

~~an increase in pension expense during the three months ended~~ ~~September 30, 2016~~of~~$2.4 millionand~~ ~~a deferral of~~ ~~$4.7 million~~ ~~for the three months ended September 30, 2015,~~ ~~to maintain the allowable amount to be recovered for pension expense in the Oklahoma jurisdiction which are included in the Pension tracker regulatory liability (see Note 1);~~ ~~and~~

In addition to the ~~$7.2~~$1.4 million and ~~$16.2~~$0.8 million of net periodic benefit cost recognized during the ~~nine months ended September 30, 2016 and 2015, respectively, OG&E recognized the following:~~

Postretirement Benefit Plans
Three Months Ended Nine Months Ended
September 30, September 30,
(In millions) 2016 (B) 2015 (B) 2016 (C) 2015 (C)
Service cost $ 0.1
$ 0.3
$ 0.4
$ 0.8
Interest cost 1.8
1.9
5.5
5.9
Expected return on plan assets (0.6 ) (0.5 ) (1.6 ) (1.6 )
Amortization of net loss 0.6
3.0
1.9
8.9
Amortization of unrecognized prior service cost (A) (1.5 ) (3.4 ) (4.6 ) (10.2 )
Net periodic benefit cost $ 0.4
$ 1.3
$ 1.6
$ 3.8

~~In addition to the$0.4 millionand$1.3 millionof net periodic benefit cost recognizedduring the~~three months ended ~~September~~June 30, 2017 and 2016,~~and2015~~, respectively, OG&E recognized an increase in postretirement medical expense ~~during~~in the three months ended ~~September~~June 30, 2017 and 2016~~and2015~~of~~$1.9 millionand$1.4 million~~, ~~respectively~~, ~~to maintain the allowable amount to be recovered for postretirement medical expense in the Oklahoma jurisdiction which are included in the Pension tracker regulatory liability (see Note 1).~~

~~In addition to the $1.6~~ $1.0 million and $3.8 million of net periodic benefit cost recognized during the nine months ended September 30, 2016 and 2015, respectively, OG&E recognized an increase in postretirement medical expense during the nine months ended September 30, 2016 and 2015 of $5.9 million and $4.3$2.0 million, respectively, to maintain the allowable amount to be recovered for postretirement medical expense in the Oklahoma jurisdiction which are included in the ~~Pension~~pension tracker regulatory liability ~~(see~~(See Note 1)1.).

In addition to the $3.3 million and $1.2 million of net periodic benefit cost recognized during the six months ended June 30, 2017 and 2016, respectively, OG&E recognized an increase in postretirement medical expense in the six months ended June 30, 2017 and 2016 of $2.1 million and $4.0 million, respectively, to maintain the allowable amount to be recovered for postretirement medical expense in the Oklahoma jurisdiction which are included in the pension tracker regulatory liability (See Note 1.).

~~Pension Plan Funding~~Postretirement Benefit Plans

OGE Energy provides certain medical and life insurance benefits for eligible retired members. Regular, full-time, active employees hired prior to February 1, 2000 whose age and years of credited service total or exceed 80 or have attained at least age 55 with 10 or more years of service at the time of retirement are entitled to postretirement medical benefits while employees hired on or after February 1, 2000 are not entitled to postretirement medical benefits. Eligible retirees must contribute such amount as OGE Energy specifies from time to time toward the cost of coverage for postretirement benefits. The benefits are subject to deductibles, co-payment provisions and other limitations. OG&E charges postretirement benefit costs to expense and includes an annual amount as a component of the cost-of-service in future ratemaking proceedings.

In ~~July 2016,~~August 2017, OGE Energy ~~contributed $20.0 million~~adopted an amendment to ~~its Pension Plan, none~~the retiree medical plan. Effective January 1, 2018, OGE Energy will reduce the amount of ~~which was attributed~~supplemental Medicare coverage for Medicare-eligible retirees, providing a fixed stipend based on current market analysis. OGE Energy will continue to ~~OG&E. No additional contributions are expected~~allow those Medicare-eligible retirees to acquire coverage from a company-provided third-party administrator. The effect of these plan amendments will be reflected in ~~2016.~~OGE Energy’s September 30, 2017 Condensed Consolidated Balance Sheet as a reduction to the postretirement benefit obligation of $45.0 million.

In August 2017, OGE Energy settled the retiree life plan in its entirety and will pay 27.9 million to participants in August 2017. No gain or loss will be recognized upon settlement, and the effect of the settlement will be reflected in OGE Energy’s September 30, 2017 Condensed Consolidated Balance Sheet as a reduction in plan assets of 27.9 million with a corresponding reduction in the benefit obligation.

Except as set forth below, in Note 11 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 12 and 13 to OG&E's Financial Statements included in OG&E's ~~2015~~2016 Form 10-K appropriately represent, in all material respects, the current status of OG&E's material commitments and contingent liabilities.

As previously disclosed in OG&E’s 2016 Form 10-K, OG&E has a QF contract with AES-Shady Point, Inc. ("AES") whereby OG&E purchases 100 percent of the electricity generated from AES’s 320 MW facility. The QF contract expires on January 15, 2023; however, OG&E had the option beginning in July 2017 to provide notice to AES to terminate the contract in January 2018.

On July 17, 2017, OG&E and AES amended the agreement to allow OG&E the ability, through July 17, 2018, to provide AES a termination notice that would terminate the agreement on January 15, 2019.

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, future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions 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. ~~OG&E~~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. Historically, OG&E's total expenditures for environmental control facilities and for remediation have not been significant in relation to its financial position or results of operations. OG&E believes, however, that it is likely that the trend in environmental legislation and regulations will continue towards more restrictive standards. Compliance with these environmental standards is expected to increase the cost of conducting business. ~~Management continues to evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a competitive market.~~

OG&E is managing several ~~significant~~potentially material uncertainties about the scope and timing for the acquisition, installation and operation of additional pollution control equipment and compliance costs for a variety of the EPA rules that are being challenged in court. OG&E is unable to predict the financial impact of these matters with certainty at this time.

~~Federal Clean Air Act New Source Review Litigation~~

~~In July 2008, OG&E received a request for information from the EPA regarding Federal Clean Air Act~~ Management continues to evaluate its compliance ~~at OG&E's Muskogee~~with existing and ~~Sooner generating plants.~~

On July 8, 2013, the U.S. Department of Justice, on behalf of the EPA, filed a complaint against OG&E in United States District Court for the Western District of Oklahoma alleging that OG&E did not follow the Federal Clean Air Act procedures for projecting emission increases attributable to eight projects that occurred between 2003proposed environmental legislation and ~~2006. This complaint sought to have OG&E submit a new assessment of whether the projects were likely to result~~regulations and implement appropriate environmental programs in a significant emissions increase. The Sierra Club intervened in this proceeding. On August 30, 2013, the government filed a Motion for Summary Judgment and on September 6, 2013, OG&E filed a Motion to Dismiss the case. On January 15, 2015, the Court dismissed the complaints filed by the EPA and the Sierra Club. The Court held that it lacked subject matter jurisdiction over plaintiffs’ claims because plaintiffs failed to present an actual “case or controversy” as required by Article III of the Constitution. The court also ruled in the alternative that, even if plaintiffs had presented a case or controversy, it would have nonetheless “decline[d] to exercise jurisdiction.” The EPA and the Sierra Club did not file an appeal of the Court's ruling.

On August 12, 2013, the Sierra Club filed a separate complaint against OG&E in the United States District Court for the Eastern District of Oklahoma alleging that OG&E projects at Muskogee Unit 6 in 2008 were made without obtaining a prevention of significant deterioration permit and that the plant had exceeded emissions limits for opacity and particulate matter. The Sierra Club sought a permanent injunction preventing OG&E from operating the Muskogee generating plant. On March 4, 2014, the District Court dismissed the prevention of significant deterioration permit claim based on the statute of limitations, but allowed the opacity and particulate matter claims to proceed. To obtain the right to appeal this decision, the Sierra Club subsequently withdrew a Notice of Intent to Sue for additional Clean Air Act violations and asked the District Court to dismiss its remaining claims with prejudice. On August 27, 2014, the District Court granted the Sierra Club's request. The Sierra Club appealed the District Court's dismissal of its prevention of significant deterioration claim to the United States Court of Appeals for the Tenth Circuit. On March 8, 2016, the Tenth Circuit affirmed the trial court's decision dismissing the Sierra Club's case. On March 21, 2016, the Sierra Club filed a request for rehearing ~~en banc~~ with the Tenth Circuit. On April 13, 2016, the Tenth Circuit denied the request for rehearing. The Sierra Club did not seek review of the case by the United States Supreme Court. OG&E considers this case now closed.competitive market.

On September 10, 2014, OG&E executed a contract for the design, engineering and fabrication of two circulating ~~dry scrubber~~Dry Scrubber systems to be installed at Sooner Units 1 and 2. OG&E entered into an agreement on February 9, 2015 to install the ~~dry scrubber~~Dry Scrubber systems. The ~~dry scrubbers~~Dry Scrubbers are scheduled to be completed by 2019. More detail regarding the ~~dry scrubber project~~ECP can be found under ~~“Pending~~"Pending Regulatory ~~Matters”~~Matters" in Note 11.

In the normal course of business, OG&E 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, OG&E 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 OG&E's Condensed Financial Statements. At the present time, based on currently available information, OG&E 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 OG&E's financial position, results of operations or cash flows.


11.	Rate Matters and Regulation

Except as set forth below, the circumstances set forth in Note 13 to OG&E's Financial Statements included in OG&E's ~~2015~~2016 Form 10-K appropriately represent, in all material respects, the current status of OG&E's regulatory matters.

Completed Regulatory Matters

~~FERC Order No. 1000, Final Rule on Transmission Planning and Cost Allocation~~

On July 21, 2011, the FERC issued Order No. 1000, which revised the FERC's existing regulations governing the process for planning enhancements and expansions of the electric transmission grid along with the corresponding process for allocating the costs of such expansions. Order No. 1000 requires individual regions to determine whether a previously-approved project is subject to reevaluation and is therefore governed by the new rule.

Order No. 1000 directs public utility transmission providers to remove from the FERC-jurisdictional tariff and agreement provisions that establish any Federal "right of first refusal" for the incumbent transmission owner (such as OG&E) regarding transmission facilities selected in a regional transmission planning process, subject to certain limitations. However, Order No. 1000 is not intended to affect the right of an incumbent transmission owner (such as OG&E) to build, own and recover costs for upgrades to its own transmission facilities or to alter an incumbent transmission owner's use and control of existing rights of way. Order No. 1000 also clarifies that incumbent transmission owners may rely on regional transmission facilities to meet their reliability needs or service obligations. The SPP's pre-Order No. 1000 tariff included a "right of first refusal" for incumbent transmission owners and this provision has played a role in OG&E being selected by the SPP to build previous transmission projects in Oklahoma. On May 29, 2013, the Governor of Oklahoma signed House Bill 1932 into law which establishes a "right of first refusal" for Oklahoma incumbent transmission owners, including OG&E, to build new transmission projects with voltages under 300kV that interconnect to those incumbent owners' existing facilities.

The SPP has submitted compliance filings implementing Order No. 1000's requirements. In response, the FERC issued an order on the SPP filings that required the SPP to remove certain "right of first refusal" language from the SPP Tariff and the SPP Membership Agreement. On December 15, 2014, OG&E filed an appeal in the Court challenging the FERC's order requiring the removal of the "right of first refusal" language from the SPP Membership Agreement.

On July 1, 2016, the Court upheld the FERC's decision requiring removal of the rights of first refusal for incumbent transmission providers from the SPP Membership Agreement. The Court determined that the FERC had reasonably found the rights of first refusal in the SPP Membership Agreement to be anticompetitive.

OG&E does not believe the Court’s ruling will have any impact on existing transmission projects for which OG&E has already received a notice to construct from the SPP. OG&E intends to actively participate in the SPP planning process for competitive transmission projects that we believe apply to transmission voltage levels projects greater than 300kV.

~~Fuel Adjustment Clause Review for Calendar Year 2014~~

On July 28, 2015, the OCC staff filed an application to review OG&E's fuel adjustment clause for calendar year 2014, including the prudence of OG&E's electric generation, purchased power and fuel procurement costs. On May 26, 2016, the OCC issued a final order, finding that for the calendar year 2014 OG&E's electric generation, purchased power and fuel procurement processes and costs were prudent.

~~Oklahoma Demand Program Rider Review - SmartHours Program~~

In July 2012, OG&E filed an application with the OCC to recover certain costs associated with Demand Programs through the Demand Program Rider, including the lost revenues associated with the SmartHours program. The SmartHours program is designed to incentivize participating customers to reduce on-peak usage or shift usage to off-peak hours during the months of May through October, by offering lower rates to those customers in the off-peak hours of those months. Lost revenues are created by the difference in the standard rates and the lower incentivized rates. Non-SmartHours program customers benefit from the reduction of on-peak usage by SmartHours customers by the reduction of more costly on-peak generation and the delay in adding new on-peak generation.

In December 2012, the OCC issued an order approving the recovery of costs associated with the Demand Programs, including the lost revenues associated with the SmartHours program, subject to the PUD Staff's review.

In March 2014, the PUD Staff began their review of the Demand Program costs, including the lost revenues associated with the SmartHours program. In November 2014, OG&E believed that it had reached an agreement with the PUD Staff on the methodology to be used to calculate lost revenues associated with the SmartHours program and the amount of lost revenue for 2013, which totaled $10.1 million. The agreement also included utilizing the same methodology for calculating lost revenues for 2014 and beyond. In January 2015, OG&E implemented rates that began recovering the 2013 lost revenues (approximately $10.0 million annually).

In April 2015, the PUD Staff filed an application, seeking an order from the OCC, for determining the proper methodology for calculating lost revenues pursuant to OG&E’s Demand Program Rider, primarily affecting the SmartHours program lost revenues. In the application, the PUD Staff recommended the OCC approve the PUD Staff's methodology for calculating lost revenues associated with the SmartHours program, which differed from the methodology that OG&E believes it agreed upon and which would result in recovery of significantly less lost revenue for 2013, 2014 and 2015 than OG&E had recorded.

On March 28, 2016, the ALJ issued her recommendation on the PUD Staff's application. She found, among other things, that OG&E and the PUD Staff had not reached an agreement on all aspects of the calculation of lost revenues, that OG&E’s methodology for calculating lost revenues was not consistent with the provisions of OG&E’s tariff, and that the PUD Staff’s methodology for calculating lost revenues was proper. The ALJ recommended that the OCC order OG&E to adjust its calculation of SmartHours lost revenue for 2013 through 2015 consistent with the PUD Staff’s methodology, but that such adjustment should only be applied on a prospective basis following the issuance of an order by the OCC.

On August 9, 2016, OG&E entered into a settlement agreement with the PUD Staff to resolve the recoverable amount of lost revenues associated with the SmartHours program. The settlement provides for recovery of $10.1 million per year for 2013, 2014 and 2015, for a total of $30.3 million. OG&E had recorded $36.6 million of lost revenues for 2013, 2014 and 2015. On August 16, 2016, the OCC issued an order adopting the settlement agreement. Accordingly, OG&E reduced lost revenues and the Oklahoma Demand Program Rider regulatory asset by $6.3 million.

~~Mustang Modernization Plan-Arkansas~~

On April 13, 2016, OG&E filed an application at the APSC seeking authority to construct combustion turbines at its existing Mustang generating facility. Arkansas law requires a public utility to seek approval from the APSC to construct a power-generating facility located outside the boundaries of the state of Arkansas. The application did not seek any cost recovery for the capital expenditures in the application, as cost recovery will be determined in future proceedings. In July 2016, OG&E filed a motion to dismiss the APSC Mustang proceeding and in August, the APSC approved the dismissal. OG&E intends to seek cost recovery of the Mustang combustion turbines at a later date after the Mustang facility is placed in service.

~~Pending Regulatory Matters~~

Set forth below is a list of various proceedings pending before state or federal regulatory agencies. 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.

~~Environmental Compliance Plan~~

On August 6, 2014, OG&E filed an application with the OCC for approval of its plan to comply with the EPA’s MATS and Regional Haze Rule FIP while serving the best long-term interests of customers in light of future environmental uncertainties. The application sought approval of the ECP and for a recovery mechanism for the associated costs. The ECP includes installing dry scrubbers at Sooner Units 1 and 2 and the conversion of Muskogee Units 4 and 5 to natural gas. The application also asked the OCC to predetermine the prudence of its Mustang Modernization Plan, which calls for replacing OG&E's soon-to-be retired Mustang steam turbines in late 2017 with 400 MWs of new, efficient combustion turbines at the Mustang site in 2018 and 2019 and approval for a recovery mechanism for the associated costs. The OCC hearing on OG&E's application before an ALJ began on March 3, 2015, approximately seven months after OG&E filed its application, and concluded on April 8, 2015. Multiple parties advocating a variety of positions intervened in the proceeding.

On June 8, 2015, the ALJ issued his report on OG&E's application. While the ALJ in his report agreed that the installation of dry scrubbers at Sooner Units 1 and 2 and the conversion of Muskogee Units 4 and 5 to natural gas pursuant to OG&E’s ECP is the best approach, the ALJ's report included several recommendations. OG&E filed exceptions to the ALJ's report and on July 21, 2015, Commissioner Bob Anthony issued his deliberation statement that was consistent with many parts of the ALJ's report, including the ALJ’s support of OG&E’s ECP, the ALJ’s recommendation to pre-approve certain estimated costs of the environmental recovery plan, and the ALJ’s recommendation to defer all other cost recovery issues until the next general rate case.

On December 2, 2015, OG&E received an order from the OCC denying its plan to comply with the environmental mandates of the Federal Clean Air Act, Regional Haze Rule and MATS. The OCC also denied OG&E's request for pre-approval of its Mustang Modernization Plan, revised depreciation rates for both the retirement of the Mustang units and the replacement combustion turbines and pre-approval of early retirement and replacement of generating units at its Mustang site, including cost recovery through a rider.

On December 11, 2015, OG&E filed a motion requesting modification of the OCC order for the purposes of approving only the ECP. OG&E did not seek modification to any other provisions of the OCC order, including cost recovery. OG&E also agreed that it would not implement a rider for recovery of the costs of the ECP until and unless authorized by the OCC in a subsequent proceeding. On December 23, 2015, the OCC rejected, by a two to one vote, a proposal by Commissioner Dana Murphy to grant OG&E's December 11, 2015 motion.

On February 12, 2016, OG&E filed an application requesting the OCC to issue an order approving its decision to install dry scrubbers at the Sooner facility on or before May 2, 2016. OG&E's application did not seek approval of the costs of the dry scrubber project. Instead, the reasonableness of the costs would be considered after the project is completed and OG&E seeks recovery in its rates. On April 28, 2016, the OCC approved the dry scrubber project and OG&E is proceeding with the project. Two parties to the proceeding have appealed the OCC's decision to the Oklahoma Supreme Court. After the OCC provides a certified record to the Oklahoma Supreme Court, the parties will file briefs by the end of 2016 or the first quarter of 2017.

OG&E anticipates the total cost of dry scrubbers will be $547.5 million. As of September 30, 2016, OG&E had invested $138.6 million of construction work in progress on the dry scrubbers. OG&E anticipates the combustion turbines for the Mustang Modernization Plan will be $424.9 million. As of September 30, 2016, OG&E has invested $133.6 million on the Mustang Modernization Plan.

~~Integrated Resource Plans~~

In August 2015, OG&E initiated the process to update its IRP pursuant to the OCC rules. After engaging interested stakeholders in August and September, OG&E finalized the 2015 IRP and submitted it to the OCC on October 1, 2015. The 2015 IRP updated certain assumptions contained in the IRP submitted in 2014, but did not make any material changes to the ECP and other parts of the action plan contained in the IRP submitted in 2014.

~~Oklahoma Rate Case Filing~~

As previously reported in OG&E's 2015 Form 10-K, on December 18, 2015, OG&E filed a general rate case with the OCC requesting a rate increase of $92.5 million and a 10.25 percent return on equity based on a common equity percentage of 53 percent. The rate case was based on a June 30, 2015 test year and included recovery of $1.6 billion of electric infrastructure additions since its last general rate case in Oklahoma, the impact of the expiration of OG&E's wholesale contracts, increased operating costs such as vegetation management and increased recovery of depreciation and plant dismantlement of approximately $8.0 million. Each 0.25 percent change in the requested return on equity affects the requested rate increase by approximately $9.0 million.

In late March 2016, the PUD Staff and other intervenors filed testimony in the case. The PUD Staff recommended a $6.1 million annual rate increase based on a return on equity of 9.25 percent and a common equity percentage of 53 percent. Included in the PUD Staff's recommendation is a reduction of $33.0 million to OG&E’s requested increase for depreciation and plant dismantlement.

The staff of the Oklahoma Attorney General made a recommendation to reduce rates $10.8 million based on a return on equity of 9.25 percent and a common equity percentage of 50 percent, as well as a recommendation to reduce rates $13.7 million based on a return on equity of 8.90 percent and a common equity percentage of 53 percent. Included in the Attorney General's recommendation is a reduction of $20.9 million to OG&E’s requested increase for depreciation and plant dismantlement.

The Oklahoma Industrial Electric Consumers recommended a $47.9 million annual rate decrease based on a return on equity of 9.00 percent and a common equity percentage of 53 percent. Included in the Oklahoma Industrial Electric Consumers' recommendation is a reduction of $52.5 million to OG&E’s requested increase for depreciation and plant dismantlement.

The hearings in this matter began on May 3, 2016. While there is no statutory deadline for the ALJ to make a recommendation or for the commission to issue a final order, OG&E is allowed to implement increased rates subject to refund 180 days after the filing of its application on December 18, 2015. On July 1, 2016, OG&E implemented an annual interim rate

increase of $69.5 million while simultaneously reducing fuel costs billed to customers. The interim rates are subject to refund of any amount recovered in excess of the rates ultimately approved by the OCC in the rate case.

~~As of September 30, 2016, OG&E has recorded $23.6 million of revenues from the interim rate increase and has reserved $21.0 million of that revenue.~~

Arkansas Rate Case Filing

On August 25, 2016, OG&E filed a general rate case with the APSC. The rate filing requested a $16.5 million rate increase based on a 10.25 percent return on equity. The rate increase was based on a June 30, 2016 test year and included a recovery of over $3.0 billion of electric infrastructure additions since the last Arkansas general rate case in 2011. The increase also reflects increases in operation and maintenance expenses, including vegetation management and increased recovery of depreciation and dismantlement costs.

In May 2017, the APSC approved a settlement between OG&E and the staff of the APSC and other intervenors. The settlement provides for a $7.1 million annual rate increase and a 9.5 percent return on equity on a 50.0 percent equity capital structure.

The settlement also provides that OG&E will be regulated under a formula rate rider, which should result in a more efficient process as the return on equity, depreciation rates and capital structure should not change from what is approved by the APSC in the current rate case proceeding. The formula rate rider provides for an adjustment to rates if the earned rate of return falls outside of a plus or minus 50 basis point dead-band around the allowed return on equity. Adjustments are limited to plus or minus four percent of revenue for each rate class for the 12 months preceding the projected year. The initial term for the formula rate rider is not to exceed five years, unless additional approval is obtained from the APSC. OG&E expects to make its first filing under the Arkansas Formula Rate Rider in October 2018.

Pending Regulatory Matters

Environmental Compliance Plan

On February 12, 2016, OG&E filed an application requesting the OCC to issue an order approving its decision to install Dry Scrubbers at the Sooner facility. OG&E's application did not seek approval of the costs of the Dry Scrubber project. Instead, the reasonableness of the costs would be considered after the project is completed, and OG&E seeks recovery in its rates. On April 28, 2016, the OCC approved the Dry Scrubber project.

Two parties appealed the OCC's decision to the Oklahoma Supreme Court. OG&E is unable to predict what action the Oklahoma Supreme Court may take or the timing of any such action.

OG&E anticipates the total cost of Dry Scrubbers will be $542.4 million, including allowance for funds used during construction and capitalized ad valorem taxes. As of June 30, 2017, OG&E had invested $323.4 million of construction work in progress on the Dry Scrubbers. OG&E anticipates the total cost for the Mustang Modernization Plan will be $390.0 million, including allowance for funds used during construction and capitalized ad valorem taxes and expects the project to be completed in late 2017. As of June 30, 2017, OG&E had invested $276.3 million on the Mustang Modernization Plan.

Integrated Resource Plans

In October 2015, OG&E finalized the 2015 IRP and submitted it to the OCC. The 2015 IRP updated certain assumptions contained in the IRP submitted in 2014 but did not make any material changes to the ECP and other parts of the plan. Currently, OG&E is scheduled to update its IRP in Arkansas by October 1, 2017 and in Oklahoma by October 1, 2018. In July 2017, OG&E requested the APSC to consider an extension of time to file the IRP in Arkansas to no later than October 31, 2018.

Oklahoma Rate Case Filing

On December 18, 2015, OG&E filed a general rate case with the OCC requesting a rate increase of $92.5 million and a 10.25 percent return on equity based on a common equity percentage of 53 percent. The rate case was based on a June 30, 2015 test year and included recovery of $1.6 billion of electric infrastructure additions since its last general rate case in Oklahoma.

On July 1, 2016, OG&E implemented an annual interim rate increase of $69.5 million, subject to refund for amounts in excess of the rates approved by the OCC.

In December 2016, the ALJ issued a report and recommendations in the case. The ALJ's recommendations included, among other things, the use of OG&E's actual capital structure of 53.0 percent equity and 47.0 percent long-term debt and a return on equity of 9.87 percent resulting in an annual increase in OG&E's revenues of $40.7 million.

On March 20, 2017, the OCC held hearings and issued a final order. The final order results in an annual net increase of approximately $8.8 million in OG&E's rates to its Oklahoma retail customers. Although the final order adopted certain recommendations set forth in the ALJ report, it differs in certain key respects.

The primary adjustments to the ALJ report consist of: (i) Oklahoma retail authorized rate of return on equity of 9.50 percent, (ii) depreciation expense is reduced by approximately $28.6 million from the ALJ report or $36.4 million from current rates on an annual basis, (iii) recovery of 50.0 percent of short-term incentive compensation and no recovery of long-term incentive compensation, (iv) recovery of OG&E's requested vegetation management expenses and (v) recovery of production tax credits expiring in 2017 and air quality control systems consumable costs through the fuel adjustment clause. The order maintained OG&E's existing capital structure of 53.0 percent equity and 47.0 percent long-term debt.

As a result of the final order, OG&E recorded, in the first quarter of 2017, adjustments to depreciation expense, amortization of regulatory assets and liabilities and impacts to the fuel adjustment clause effective July 1, 2016. On May 1, 2017, OG&E implemented new rates and began refunding excess amounts that it had collected in interim rates.

As of June 30, 2017, OG&E had refunded $15.3 million of the $47.5 million expected refund from the interim rate increase. Additionally, OG&E has reserved $5.6 million, pending resolution of a ~~hearing scheduled~~dispute with PUD staff, regarding recovery of certain lost revenues associated with energy efficiency incurred prior to the March 20, 2017 rate order. These lost revenues are included within the total Demand Program Rider regulatory asset balance of $45.1 million as disclosed in Note 1. OG&E is unable to predict what actions the OCC may take regarding the unrecovered lost revenue or the timing of any actions. The remaining reserve for the interim rate ~~case~~refund and the lost revenues reserve are included in ~~the second quarter of 2017.~~Other Current Liabilities on OG&E's Condensed Balance Sheets.

Fuel Adjustment Clause Review for Calendar Year 2015

On September 8, 2016, the OCC staff filed an application to review OG&E’s fuel adjustment clause for calendar year 2015, including the prudence of OG&E’s electric generation, purchased power and fuel procurement costs. At a hearing on March 30, 2017, the PUD staff recommended to the OCC that the 2015 fuel costs be found prudent. In the second quarter of 2017, the ALJ report was issued, and in exceptions subsequently filed by an intervenor, recommendations were made to address concerns regarding future cases. These recommendations were requested to be included in the order; however, there were no proposed changes to the amounts of recoverable fuel costs. OG&E ~~has verbally agreed~~expects a final order to ~~a March 9, 2017 hearing date.~~be issued by year-end.

Oklahoma Rate Case Filing - 2017

OG&E intends to file a general rate case in Oklahoma with the OCC during the fourth quarter of 2017. The rate case will be based on a June 30, 2017 test year.

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

Introduction

Overview

OG&E Mission and Focus

OGE Energy's mission, through OG&E and its 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.

Summary of Operating Results

Three Months Ended ~~September~~June 30, ~~2016~~2017 as ~~Compared~~compared to Three Months Ended ~~September~~June 30, ~~2015~~2016

OG&E reported net income of $~~159.9~~86.2 million and $~~162.9~~72.3 million during the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016, respectively, ~~a decrease~~an increase of $~~3.0~~13.9 million, or ~~1.8~~19.2 percent,, primarily due to ~~an increase in~~lower other operation and maintenance expense, ~~higher income tax~~lower depreciation expense ~~additional~~related to the reduction in depreciation rates approved in the OCC's final order as discussed in Note 11, and ~~amortization expense due to~~ higher ~~storm amortization and additional assets placed into service, and lower~~ other income ~~partially offset by an increase in gross margin and an increase in~~related to increased allowance for equity funds used during ~~construction.~~construction, partially offset by higher income tax expense.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2016~~2017 as ~~Compared~~compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2015~~2016

OG&E reported net income of ~~$238.3~~$102.4 million and ~~$249.0~~$78.4 million during the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, ~~and 2015,~~ respectively, ~~a decrease~~an increase of ~~$10.7~~$24.0 million, or ~~4.3~~30.6 percent, primarily due to ~~an increase~~lower depreciation expense related to the reduction in depreciation rates approved in the OCC's final order as discussed in Note 11, and higher other ~~operation and maintenance expense, higher depreciation and amortization expense due~~income related to ~~additional assets being placed into service and an increase in income tax expense. These decreases were~~increased allowance for equity funds used during construction, partially offset by ~~an increase~~higher income tax expense and a decrease in gross ~~margin, lower interest expense, higher other income and lower taxes other than income.~~margin.

Recent Developments and Regulatory Matters

As discussed in Note 11, on March 20, 2017, the OCC issued a final order in OG&E's general rate case. The final order results in an annual net increase of approximately $8.8 million in OG&E's rates to its Oklahoma retail customers. Although the final order adopted certain of the recommendations set forth in the ALJ report, it differs in certain key respects.

The primary adjustments to the ALJ report consist of: (i) Oklahoma retail authorized rate of return on equity of 9.50 percent, (ii) depreciation expense is reduced by approximately $28.6 million from the ALJ report or $36.4 million from current rates on an annual basis, (iii) recovery of only 50.0 percent of short-term incentive compensation and no recovery of long-term incentive compensation, (iv) recovery of OG&E's requested vegetation management expenses and (v) recovery of production tax credits expiring in 2017 and air quality control systems consumable costs through the fuel adjustment clause.

As a result of the final order, OG&E recorded in the first quarter of 2017 adjustments to depreciation expense, amortization of regulatory assets and liabilities and impacts to the fuel adjustment clause effective July 1, 2016. On May 1, 2017, OG&E implemented new rates and began refunding excess amounts that it had collected in interim rates.

As of June 30, 2017, OG&E had refunded $15.3 million of the $47.5 million expected refund from the interim rate increase. Additionally, OG&E has reserved $5.6 million, pending resolution of a dispute with PUD staff, regarding recovery of certain lost revenues associated with energy efficiency incurred prior to the March 20, 2017 rate order. These lost revenues are included within the total Demand Program Rider regulatory asset balance of $45.1 million as disclosed in Note 1. OG&E is unable to predict what actions the OCC may take regarding the unrecovered lost revenue or the timing of any actions. The remaining reserve for the interim rate refund and the lost revenues reserve are included in Other Current Liabilities on OG&E's Condensed Balance Sheets.

Also as discussed in Note 11, in May 2017, the APSC approved a settlement between OG&E and the staff of the APSC and other intervenors. The settlement provides for a $7.1 million annual rate increase and a 9.5 percent return on equity on a 50.0 percent equity capital structure. The settlement also provides that OG&E will be regulated under a formula rate rider, which should result in a more efficient process as the return on equity, depreciation rates and capital structure should not change from what is approved by the APSC in the current rate case proceeding. The formula rate rider provides for an adjustment to rates if the earned rate of return falls outside of a plus or minus 50 basis point dead-band around the allowed return on equity. Adjustments are limited to plus or minus four percent of revenue for each rate class for the 12 months preceding the projected year. The initial term for the formula rate rider is not to exceed five years, unless additional approval is obtained from the APSC. OG&E expects to make its first filing under the Arkansas Formula Rate Rider in October 2018.

~~2016~~2017 Outlook

OG~~&E projects~~&E's 2017 earnings guidance remains unchanged and is projected to ~~earn approximately $288.0~~be at the lower end of the earnings range of $316.0 million to ~~$300.0~~$340.0 million ~~in 2016. The guidance assumes, among other things, normal weather for remainder~~ of ~~the year and a final order before the end of 2016 from the OCC in OG&E's general rate case granting OG&E adequate rate relief.~~net income. See OG&E's ~~2015~~2016 Form 10-K and Form 10-Q for ~~other~~the period ending March 31, 2017 for key factors and assumptions underlying its ~~2016~~2017 earnings guidance.

Non-GAAP Financial Measures

Gross margin is defined by OG&E as operating revenues less 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.

Results of Operations

The following discussion and analysis presents factors that affected OG&E's results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same ~~period~~periods in ~~2015~~2016 and OG&E's financial position at ~~September~~June 30, ~~2016~~2017. Due to seasonal fluctuations and other factors, OG&E's operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016~~2017 or for any future period. The following information should be read in conjunction with the Condensed 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					Three Months Ended				Six Months Ended
	September 30,										June 30,
(Dollars in millions)	2016			2015		2016			2015		2017		2016		2017			2016
Operating revenues	$	743.9		$	719.8	$	1,728.4		$	1,749.8	$	586.4	$	551.4	$	1,042.4		$	984.5
Cost of sales	269.8			259.8		645.4			682.3		232.1		197.7		440.8			375.6
Other operation and maintenance	115.2			107.4		356.3			337.3		116.5		124.8		242.6			241.1
Depreciation and amortization	80.8			75.9		235.9			224.0		73.7		78.4		128.4			155.1
Taxes other than income	20.9			21.0		63.6			65.7		20.2		19.1		42.5			42.7
Operating income	257.2			255.7		427.2			440.5		143.9		131.4		188.1			170.0
Allowance for equity funds used during construction	3.9			2.2		9.2			5.4		8.5		3.7		15.4			5.3
Other income	2.9			4.8		11.3			9.8		7.7		4.4		14.1			8.4
Other expense	0.8			0.4		2.2			1.3		0.6		1.1		1.0			1.4
Interest expense	34.3			36.4		104.8			110.5		35.6		35.0		69.2			70.5
Income tax expense	69.0			63.0		102.4			94.9		37.7		31.1		45.0			33.4
Net income	$	159.9		$	162.9	$	238.3		$	249.0	$	86.2	$	72.3	$	102.4		$	78.4
Operating revenues by classification
Residential	$	351.9		$	318.1	$	750.0		$	726.7	$	212.6	$	219.6	$	404.9		$	398.1
Commercial	188.4			176.5		434.2			423.0		152.1		143.1		276.4			245.8
Industrial	60.4			59.2		147.4			150.2		54.0		48.8		98.3			87.0
Oilfield	47.3			49.1		118.4			128.2		43.1		38.8		81.2			71.1
Public authorities and street light	66.8			63.4		154.4			154.1		54.3		51.5		98.8			87.6
Sales for resale	—			0.9		0.2			21.7		0.1		0.1		0.1			0.2
System sales revenues	714.8			667.2		1,604.6			1,603.9		516.2		501.9		959.7			889.8
Provision for rate refund	(21.0		)	—		(21.0		)	—		16.6		—		(4.2		)	—
Integrated market	13.2			13.5		33.0			34.8		6.3		10.7		2.8			19.8
Other	36.9			39.1		111.8			111.1		47.3		38.8		84.1			74.9
Total operating revenues	$	743.9		$	719.8	$	1,728.4		$	1,749.8	$	586.4	$	551.4	$	1,042.4		$	984.5
Reconciliation of gross margin to revenue:
Reconciliation of gross margin to revenue
Operating revenues	$	743.9		$	719.8	$	1,728.4		$	1,749.8	$	586.4	$	551.4	$	1,042.4		$	984.5
Cost of sales	269.8			259.8		645.4			682.3		232.1		197.7		440.8			375.6
Gross margin	$	474.1		$	460.0	$	1,083.0		$	1,067.5	$	354.3	$	353.7	$	601.6		$	608.9
MWH sales by classification (In millions)
MWh sales by classification (In millions)
Residential	3.2			3.1		7.3			7.4		2.0		2.0		4.0			4.1
Commercial	2.1			2.1		5.7			5.7		2.0		2.0		3.6			3.6
Industrial	1.0			1.0		2.8			2.8		1.0		0.9		1.8			1.8
Oilfield	0.8			0.8		2.4			2.5		0.8		0.8		1.6			1.6
Public authorities and street light	0.9			0.9		2.4			2.4		0.8		0.8		1.5			1.5
Sales for resale	—			—		—			0.5
System sales	8.0			7.9		20.6			21.3		6.6		6.5		12.5			12.6
Integrated market	0.7			0.4		1.5			1.1		0.5		0.4		0.8			0.8
Total sales	8.7			8.3		22.1			22.4		7.1		6.9		13.3			13.4
Number of customers	832,234			821,596		832,234			821,596		838,163		829,779		838,163			829,779
Weighted-average cost of energy per kilowatt-hour - cents
Natural gas	2.688			2.668		2.366			2.666		2.842		2.262		2.831			2.157
Coal	2.222			2.209		2.251			2.170		2.188		2.293		2.142			2.290
Total fuel	2.337			2.300		2.175			2.245		2.302		2.122		2.215			2.034
Total fuel and purchased power	2.984			2.973		2.796			2.925		3.209		2.735		3.172			2.675
Degree days (A)
Heating - Actual	3			—		1,714			1,984		189		159		1,570			1,711
Heating - Normal	19			19		2,020			2,020		203		203		2,002			2,001
Cooling - Actual	1,450			1,372		2,082			1,993		567		620		624			632
Cooling - Normal	1,380			1,380		2,018			2,018		625		625		638			638

~~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.

~~Three Months Ended September 30, 2016~~ ~~as Compared toThree Months Ended September 30, 2015~~

OG&E's net income ~~decreased $3.0~~increased $13.9 million ~~or 1.8 percent,~~and $24.0 million during the three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, as compared to the same ~~period~~periods in ~~2015~~2016. The three month increase of $13.9 million, or 19.2 percent, was primarily due to ~~higher other~~lower operation and maintenance expense, ~~higher income tax expense, higher~~lower depreciation and amortization expense as a result of the OCC's final order mandating a reduction in depreciation rates, and ~~lower~~higher other income, partially offset by higher ~~gross margin,~~income tax expense. The six month increase of $24.0 million, or 30.6 percent, was primarily due to lower ~~interest~~depreciation and amortization expense as a result of the OCC's final order mandating a reduction in depreciation rates as discussed in Note 11, and higher other income, partially offset by higher income tax expense and lower ~~taxes other than income.~~gross margin.

~~Operating revenues were$743.9~~Gross margin was $354.3 million and $601.6 million during the three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, as compared to~~$719.8~~ $353.7 million and $608.9 million during the same ~~period~~periods in~~2015~~, ~~an increase~~of~~$24.1~~ 2016, respectively. Gross margin increased $0.6 million,, or~~3.3~~ 0.2 percent,. ~~Cost of sales were$269.8~~ and decreased $7.3 million, or 1.2 percent, during the three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, as compared to~~$259.8 millionduring~~ the same ~~period~~periods in~~2015~~, ~~an increase~~of~~$10.0 million~~, or~~3.8 percent~~. ~~Gross margin was~~ ~~$474.1 million~~ ~~during the~~ ~~three months ended~~ ~~September 30, 2016as compared to~~ ~~$460.0 million~~ ~~during the same period in2015, an increase~~ of ~~$14.1 million,~~ or ~~3.1 percent.~~ 2016. The below factors contributed to the change in gross margin:

Onthree months ended June 30, ~~2015,~~2017. Cooling degree days decreased approximately 11 percent, and heating degree days decreased approximately eight percent during the ~~wholesale power contract with AVEC expired.~~

Cost of sales for OG&E consists of fuel used in electric generation, purchased power and transmission related charges.~~Fuel expense was$164.5 millionduring the~~ ~~three months ended~~ ~~September 30, 2016as compared to$148.7 millionduring the same period in2015~~, ~~an increase~~of~~$15.8 million~~, or~~10.6 percent~~, ~~primarily due to an increase in generation. Purchased power costs were$92.7 millionduring the~~ ~~three months ended~~ ~~September 30, 2016as compared to$100.3 millionduring the same period in2015~~, ~~a decrease~~of~~$7.6 million~~, or~~7.6 percent~~, primarily due to a decrease of $5.7 million in purchases from the SPP and a decrease of $1.6 million in cogeneration purchases. Transmission expense is charged to OG&E by the SPP for the utilization of transmission systems owned by other SPP members and is recovered from retail customers through the SPP Cost Tracker in Oklahoma and through the Transmission Cost Recovery Rider in Arkansas. Transmission related charges were ~~$12.6 millionduring the~~ ~~three months ended~~ ~~September 30, 2016as compared to$10.8 millionduring the same period in2015~~, ~~an increase~~of~~$1.8 million~~, or~~16.7 percent~~, ~~primarily due to higher SPP charges for the base plan projects of other utilities.~~

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 ~~the APSC~~ and the ~~FERC.~~APSC. OG&E's cost of sales increased $34.4 million, or 17.4 percent, and $65.2 million, or 17.4 percent, during the three and six months ended June 30, 2017, respectively, as compared to the same periods in 2016. The ~~OCC,~~changes are detailed in the ~~APSC and the FERC have authority to review the appropriateness of gas transportation charges or other fees OG&E pays to its affiliate,~~ ~~Enable.~~table below.



	Change for
	June 30, 2017
(In millions)	Three Months Ended		Six Months Ended
Fuel expense (A)	$	2.8	$	16.1
Purchased power costs
Purchases from SPP (B)	23.3		40.6
Wind	2.1		2.8
Cogeneration	1.7		(3.9		)
Transmission expense (C)	4.5		9.6
Change in cost of sales	$	34.4	$	65.2

~~Operating Expenses~~


(A)	Increase in fuel expense was primarily due to increased utilization of company-owned generation.

(B)

Increase of $23.3 million in the cost of purchases from the SPP for the three months ended June 30, 2017 was due to a 2.1 percent increase in MWhs purchased and an increase of 39.2 percent in cost per MWh purchased. Increase of $40.6 million in the cost of purchases from the SPP for the six months ended June 30, 2017 was due to an increase of 49.4 percent in cost per MWh purchased which was offset by a 4.5 percent decrease in MWhs purchased. The increase in cost per MWh purchased during both periods was due to an increase in fuel prices and higher grid congestion costs during 2017.


(C)	Increase in transmission-related charges was primarily due to higher SPP charges for the base plan projects of other utilities.

Other operation and maintenance expense ~~was$115.2~~decreased $8.3 million, or 6.7 percent, and increased $1.5 million, or 0.6 percent, during the three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, as compared to~~$107.4 millionduring~~ the same ~~period~~periods in~~2015~~, ~~an increase~~of~~$7.8 million~~, or~~7.3 percent~~. 2016. The below factors contributed to the ~~change~~changes in other operation and maintenance expense:


				Change for
				June 30, 2017
(In millions)	Change			Three Months Ended			Six Months Ended
Salaries and wages (A)	$	3.5
Contract professional services (B)	3.4
Marketing (related to demand side management)	2.2
Additional capitalized labor (A)				$	(3.9	)	$	(4.5	)
Maintenance at power plants ~~(C)~~	1.7			(3.5		)	(2.5		)
Corporate allocations and overheads	0.4			(2.5		)	(0.5		)
Injuries and damages	(1.1		)
Capitalized labor (D)	(2.3		)
Payroll and benefits (B)				(1.5		)	1.1
Marketing (related to demand side management)				(0.2		)	2.7
Contract professional services (C)				2.1			3.7
Other				0.7			0.5
Fees and permits				0.5			1.0
Change in other operation and maintenance expense	$	7.8		$	(8.3	)	$	1.5

~~Increased~~Decreased primarily due to ~~increased overtime and an increase in incentive compensation.~~

Increased primarily due to increased ~~work performed at the power plants.~~consulting costs associated with demand side management programs.

~~Decreased primarily due to capitalized labor related to storms.~~

Depreciation and amortization expense ~~was$80.8~~decreased $4.7 million,~~during~~ or 6.0 percent, and $26.7 million, or 17.2 percent, for the three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, as compared to~~$75.9 millionduring~~ the same ~~period~~periods in~~2015~~, ~~an increase~~of~~$4.9 million~~, or~~6.5 percent~~, 2016, primarily due to ~~higher storm amortization and~~lower depreciation expense related to the reduction in depreciation rates approved in the OCC's final order as discussed in Note 11, partially offset by additional assets being placed ininto service.

~~Additional Information~~

Allowance for ~~Equity Funds Used During Construction.~~ ~~Allowance for Equity Funds Used During Construction was $3.9~~equity funds used during construction increased $4.8 million and $10.1 million during the three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, as compared to ~~$2.2 million during~~ the same ~~period~~periods in ~~2015, an increase of $1.7 million or 77.3 percent,~~2016, primarily due to higher construction work in progress balances resulting from increased spending for environmental projects.

Other ~~Income.~~ ~~Other~~ income ~~was $2.9~~increased $3.3 million, or 75.0 percent, and $5.7 million, or 67.9 percent, during the three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, as compared to ~~$4.8 million during~~ the same ~~period~~periods in ~~2015, a decrease of $1.9 million, or 39.6 percent,~~2016, primarily due to ~~lower guaranteed flat bill margins and lower non-utility income from contract work partially offset by~~ an increase in the tax ~~gross up~~gross-up related to higher allowance for funds used during construction.

~~Income Tax Expense.Income tax expense was$69.0~~Allowance for borrowed funds used during construction increased $2.3 million and $4.7 million during the three and six months ended ~~September~~June 30, ~~2016as compared to$63.0 millionduring the same period in2015~~, ~~an increase~~of~~$6.0 million~~, or~~9.5 percent~~, ~~primarily due to higher pre-tax income and a reduction in wind related tax credits generated.~~

~~Nine Months Ended September 30, 2016 as Compared to Nine Months Ended September 30, 2015~~

~~OG&E's net income decreased $10.7 million, or 4.3 percent, during the nine months ended September 30, 2016~~2017, respectively, as compared to the same ~~period~~periods in 2015 primarily due to higher other operation and maintenance expense, higher depreciation and amortization expense and higher income tax expense partially offset by higher gross margin, lower interest expense, higher other income and lower taxes other than income.

~~Operating revenues were $1,728.4 million during the nine months ended September 30,~~ 2016, as compared to $1,749.8 million during the same period in 2015, a decrease of $21.4 million, or 1.2 percent. Cost of sales were $645.4 million during the nine months ended September 30, 2016 as compared to $682.3 million during the same period in 2015, a decrease of $36.9 million, or 5.4 percent. Gross margin was $1,083.0 million during the nine months ended September 30, 2016 as compared to $1,067.5 million during the same period in 2015, an increase of $15.5 million, or 1.5 percent. The below factors contributed to the change in gross margin:

~~Increased primarily due to the reversal of a reserve for gas transportation charges in addition to the pricing impact of weather related sales.~~

~~On June 30, 2015, the wholesale power contract with AVEC expired.~~

Cost of sales for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. Fuel expense was $330.1 million during the nine months ended September 30, 2016 as compared to $368.4 million during the same period in 2015, a decrease of $38.3 million, or 10.4 percent, primarily due to a decrease in generation due to lower sales. Purchased power costs were $276.8 million during the nine months ended September 30, 2016 as compared to $280.9 million during the same period in 2015, a decrease of $4.1 million, or 1.5 percent, primarily due to a decrease of $8.5 million in purchases from the SPP partially offset by an increase of $2.4 million in wind purchases, an increase of $1.4 million in cogeneration purchases and an increase of $0.5 million from transmission and curtailment expenses. Transmission expense is charged to OG&E by the SPP for the utilization of transmission systems owned by other SPP members and is recovered from retail customers through the SPP Cost Tracker in Oklahoma and through the Transmission Cost Recovery Rider in Arkansas. Transmission related charges were $38.5 million during the nine months ended September 30, 2016 as compared to $33.0 million during the same period in 2015, an increase of $5.5 million, or 16.7 percent, primarily due to higher SPP charges for the base plan projects of other utilities.

~~Operating Expenses~~

Other operation and maintenance expense was $356.3 million during the nine months ended September 30, 2016 as compared to $337.3 million during the same period in 2015, an increase of $19.0 million, or 5.6 percent. The below factors contributed to the change in other operation and maintenance expense:

~~Increased primarily due to annual salary increases and an increase in incentive compensation.~~

~~Increased primarily due to increased engineering services.~~

~~Increased primarily due to increased work performed at the power plants.~~

~~Increased primarily due to additional information technology and facility direct support.~~

~~Increased primarily due to timing of vegetation management.~~

Depreciation and amortization expense was $235.9 million during the nine months ended September 30, 2016 as compared to $224.0 million during the same period in 2015, an increase of $11.9 million, or 5.3 percent, primarily due to additional assets being placed in service.

~~Additional Information~~

~~Allowance for Equity Funds Used During Construction.~~ Allowance for Equity Funds Used During Construction was $9.2 million during the nine months ended September 30, 2016 as compared to $5.4 million during the same period in 2015, an increase of $3.8 million, or 70.4 percent, primarily due to higher construction work in progress balances resulting from increased spending for environmental projects.

~~Other Income.~~ ~~Other income was $11.3~~Income tax expense increased $6.6 million, or 21.2 percent, and $11.6 million, or 34.7 percent, during the ~~nine~~three and six months ended ~~September~~June 30, ~~2016~~2017, respectively, as compared to ~~$9.8 million during~~ the same ~~period~~periods in 2015, an increase of $1.5 million, or 15.3 percent, primarily due to an increase in the tax gross up related to higher allowance for funds used during construction partially offset by lower non-utility income from contract work.

~~Allowance for Borrowed Funds Used During Construction.~~ ~~Allowance for Borrowed Funds Used During Construction was $4.7 million during the nine months ended September 30,~~ 2016, ~~as compared to $2.7 million during the same period in 2015, an increase of $2.0 million, or 74.1 percent,~~ primarily due to higher ~~construction work in progress balances resulting from increased spending for environmental projects.~~

~~Income Tax Expense.~~ Income tax expense was $102.4 million during the nine months ended September 30, 2016 as compared to $94.9 million during the same period in 2015, an increase of $7.5 million, or 7.9 percent, primarily due to a reduction in wind related tax credits generated partially offset by lower pretaxpre-tax income.

Off-Balance Sheet ~~Arrangement~~Arrangements

There have been no significant changes in OG&E's off-balance sheet ~~arrangement~~arrangements from ~~that~~those discussed in OG&E's ~~2015~~2016 Form 10-K.

Liquidity and Capital Resources

Working Capital

Working capital is defined as the difference in current assets and current liabilities. OG&E'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.

Accounts Receivable and Accrued Unbilled Revenues. The balance of Accounts Receivable and Accrued Unbilled Revenues was $~~293.2~~271.7 million and $~~226.6~~232.7 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016, respectively, an increase of $~~66.6~~39.0 million, or ~~29.4~~16.8 percent, primarily due to an increase in billings to OG&E's retail customers reflecting higher usage due to warmer weather in ~~September 2016~~June 2017 as compared to December ~~2015~~2016.

Advances to Parent/Advances from Parent. The balance in Advances to Parent was ~~$8.6 million and $333.6~~$46.0 million at ~~September~~June 30, ~~2016 and~~2017 compared to an Advances from Parent balance of $49.9 million at December 31, ~~2015, respectively, a decrease of $325.0 million, or 97.4 percent.~~2016. The change in Advances towith Parent is primarily due to ~~additional~~an increase of cash from customers due to increased rates, partially offset by capital ~~expenditures during the nine months ended September 30, 2016, payment of long-term debt in January 2016 and customer refunds of over-recovered fuel.~~expenditures.

Fuel ~~Inventories.~~Clause Under Recoveries. The balance of Fuel ~~Inventories~~Clause Under Recoveries was ~~$87.6~~$107.4 million and ~~$113.8~~$51.3 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, ~~a decrease~~an increase of ~~$26.2~~$56.1 million, ~~or 23.0 percent,~~ primarily due to lower ~~coal inventory balances~~recoveries from ~~higher coal generation.~~

~~Other Current Assets.~~ The balance of Other Current Assets was $63.9 million and $51.6 million at September 30, 2016 and December 31, 2015, respectively, an increase of $12.3 million, or 23.8 percent, primarily due to reduced revenue collections from customers and increased revenue requirements that are not included in current rates.

~~Accounts Payable.~~ The balance of Accounts Payable was $122.8 million and $238.2 million at September 30, 2016 and December 31, 2015, respectively, a decrease of $115.4 million, or 48.4 percent, primarily due to the timing of vendor payments and a decrease in accruals.

~~Accrued Taxes.~~ The balance of Accrued Taxes was 58.2 million and 45.7 million at September 30, 2016 and December 31, 2015, respectively, an increase of $12.5 million, or 27.4 percent, primarily resulting from ad valorem tax accruals of approximately $57.6 million offset by payments of approximately $45.5 million.

~~Accrued Interest.~~ ~~The balance of Accrued Interest was~~ ~~$32.8 million~~ ~~and~~ ~~$42.8 million~~ ~~at September 30, 2016 andDecember 31, 2015, respectively, a decrease of~~ ~~$10.0 million, or~~ ~~23.4 percent, primarily due to long-term debt that matured in January 2016 and the timing of interest payments on long-term debt in 2016.~~

~~Long-Term Debt Due Within One Year.~~ ~~The balance in Long-term Debt Due Within One Year was $124.9 million and $110.0 million at~~ ~~September 30, 2016~~ ~~and~~ ~~December 31, 2015, respectively, an increase of $14.9 million, or 13.5 percent, primarily due to long-term debt that matured in January 2016 and the reclassification of long-term debt that will mature July 2017.~~

~~Fuel Clause Over Recoveries.~~ The balance of Fuel Clause Over Recoveries was $1.4 million and $61.3 million at September 30, 2016 and December 31, 2015, respectively, a decrease of $59.9 million, or 97.7 percent, primarily due to lower amounts billed to OG&E retail customers as compared to the actual cost of fuel and purchased power.

Other Current ~~Liabilities~~Assets. . The balance of Other Current Assets was $70.3 million and $78.3 million at June 30, 2017 and December 31, 2016, respectively, a decrease of $8.0 million, or 10.2 percent, primarily due to increased revenue collections from customers associated with various rate riders.

Accounts Payable. The balance of Accounts Payable was $181.3 million and $196.4 million at June 30, 2017 and December 31, 2016, respectively, a decrease of $15.1 million, or 7.7 percent, primarily due to the timing of vendor payments.

Accrued Compensation. The balance of Accrued Compensation was $23.3 million and $31.3 million at June 30, 2017 andDecember 31, 2016, respectively, a decrease of $8.0 million, or 25.6 percent, primarily due to the payment of 2016 incentive compensation in 2017, partially offset by 2017 accruals.

Other Current Liabilities. The balance of Other Current Liabilities was ~~$62.5~~$63.2 million and ~~$43.6~~$95.8 million at ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively, ~~an increase~~a decrease of ~~$18.9~~$32.6 million, or ~~43.3~~34.0 percent, primarily due to ~~revenue that has been collected from~~amounts refunded to customers ~~but is reserved until OG&E receives a rate case order from the OCC.~~in 2017.

Cash Flows

Nine Months Ended
September 30, 2016 vs. 2015
(In millions) 2016 2015 $ Change % Change
Net cash provided from operating activities $ 385.8
$ 551.6
$ (165.8 ) (30.1 )%
Net cash used in investing activities (466.4 ) (368.8 ) (97.6 ) 26.5 %
Net cash provided from (used in) financing activities 80.6
(182.8 ) 263.4
*

* Change is greater than 100 percent variance.



	Six Months Ended
	June 30,						2017 vs. 2016
(In millions)	2017			2016			$ Change			% Change
Net cash provided from operating activities	$	134.4		$	141.3		$	(6.9	)	(4.9	)%
Net cash used in investing activities	(490.8		)	(330.9		)	(159.9		)	48.3	%
Net cash provided from financing activities	356.4			189.6			166.8			88.0	%

Operating Activities

The decrease of $~~165.8~~6.9 million, or ~~30.1~~4.9 percent, in net cash provided from operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015~~2016 was primarily due to ~~higher~~an increase in purchased power and fuel ~~refunds during~~expenses not recovered from customers in the ~~nine months ended September 30, 2016 as compared to higher fuel recoveries~~current period, partially offset by increased amounts received from customers and a decrease in ~~2015.~~vendor payments.

Investing Activities

The increase of $~~97.6~~159.9 million, or ~~26.5~~48.3 percent, in net cash used in investing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015~~2016 was primarily due to an increase in capital expenditures related to environmental projects.

Financing Activities

The increase of $~~263.4~~166.8 million, or 88.0 percent, in net cash provided from financing activities during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 as compared to the same period in ~~2015~~2016 was primarily due to ~~changes~~the issuance of $300.0 million in ~~cash advances with parent partially offset by~~long-term debt in March 2017, an increase in long-term revolver debt and the payment of long-term debt in January ~~2016.~~2016, partially offset by changes in cash advances with parent.

Future Capital Requirements ~~and Financing Activities~~

OG&E's primary needs for capital are related to acquiring or constructing new facilities and replacing or expanding existing facilities. 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. OG&E generally meets its cash needs through a combination of cash generated from operations, short-term borrowings (through a combination of bank borrowings, commercial paper and borrowings from OGE Energy) and permanent financings.

Capital Expenditures

OG&E's estimates of capital expenditures for the years ~~2016~~2017 through ~~2020~~2021 are shown in the following table. These capital expenditures represent the base maintenance capital expenditures (i.e., capital expenditures to maintain and operate OG&E's business) plus capital expenditures for known and committed projects.


(In millions)	2016		2017		2018		2019		2020		2017		2018		2019		2020		2021
Base Transmission	$	50	$	35	$	30	$	30	$	30
Base Distribution	185		195		175		175		175
Base Generation	45		40		75		75		75
Other	40		35		25		25		25
OG&E Base Transmission											$	35	$	30	$	30	$	30	$	30
OG&E Base Distribution											200		175		175		175		175
OG&E Base Generation											35		75		75		75		75
OG&E Other											40		25		25		25		25
Total Base Transmission, Distribution, Generation and Other	320		305		305		305		305		310		305		305		305		305
Known and Committed Projects:
OG&E Known and Committed Non-Base Projects:
Transmission Projects:
Other Regionally Allocated Projects (A)	45		55		20		20		20		50		20		20		20		20
Large SPP Integrated Transmission Projects (B) (C)	20		150		20		—		—		155		20		—		—		—
Total Transmission Projects	65		205		40		20		20		205		40		20		20		20
Other Projects:
Solar											20		—		—		—		—
Environmental - low NO_X burners (D)	20		10		—		—		—		15		—		—		—		—
Environmental - dry scrubbers (D)	125		145		85		25		—
Environmental - Dry Scrubbers (D)											155		100		15		—		—
Combustion turbines - Mustang	150		160		30		—		—		145		30		—		—		—
Environmental - natural gas conversion (D)	—		20		25		25		—		15		30		15		—		—
Allowance of funds used during construction and ad valorem taxes	20		55		40		5		—		55		40		5		—		—
Total Other Projects	315		390		180		55		—		405		200		35		—		—
Total Known and Committed Projects	380		595		220		75		20
Total Known and Committed Non-Base Projects											610		240		55		20		20
Total	$	700	$	900	$	525	$	380	$	325	$	920	$	545	$	360	$	325	$	325


(A)	Typically 100kV to 299kV projects. Approximately 30 percent of revenue requirement allocated to SPP members other than OG&E.


(B)	Typically 300kV and above projects. Approximately 85 percent of revenue requirement allocated to SPP members other than OG&E.



(C)	Project Type	Project Description	Estimated Cost (In millions)	Projected In-Service Date
	Integrated Transmission Project	30 miles of transmission line from OG&E's Gracemont substation to an AEP companion transmission line to its Elk City substation. ~~Approximately~~ $5.0 million of the estimated cost has been spent prior to ~~2016.~~2017.	$45	Late 2017
	Integrated Transmission Project	126 miles of transmission line from OG&E's Woodward District Extra High Voltage substation to OG&E's Cimarron ~~substation;~~substation and construction of the Mathewson substation on this transmission line. ~~Approximately $55.0~~$50.0 million of the estimated cost associated with the Mathewson to Cimarron line and substations ~~will go~~went into service in 2016; ~~$35.0~~$55.0 million has been spent prior to ~~2016.~~2017.	$~~185~~180	Mid 2018

(D)

Represent capital costs associated with OG&E’s ECP to comply with the EPA’s MATS and Regional Haze Rule. More detailed discussion regarding the Regional Haze Rule and OG&E’s ECP can be found in Note 11 and under ~~“Environmental~~"Environmental Laws and ~~Regulations”~~Regulations" within ~~“Management's~~"Management's Discussion and Analysis of Financial Condition and Results of ~~Operations”~~Operations" under Part I, Item 2 of this Form 10-Q.

Additional capital expenditures beyond those identified in the table above, including additional incremental growth opportunities in electric transmission assets, will be evaluated based on their impact on OG&E's financial objectives.

Pension and Postretirement Benefit Plans

Postretirement Benefit Plans

In August 2017, OGE Energy adopted an amendment to the retiree medical plan. Effective January 1, 2018, OGE Energy will reduce the amount of supplemental Medicare coverage for Medicare-eligible retirees, providing a fixed stipend based on current market analysis. OGE Energy will continue to allow those Medicare-eligible retirees to acquire coverage from a company-provided third-party administrator. The effect of these plan amendments will be reflected in OGE Energy’s September 30, 2017 Condensed Consolidated Balance Sheet as a reduction to the postretirement benefit obligation of $45.0 million.

In August 2017, OGE Energy settled the retiree life plan in its entirety and will pay $27.9 million to participants in August 2017. No gain or loss will be recognized upon settlement, and the effect of the settlement will be reflected in OGE Energy’s September 30, 2017 Condensed Consolidated Balance Sheet as a reduction in plan assets of $27.9 million with a corresponding reduction in the benefit obligation.

Pension Plan Funding

~~In July 2016,~~ OGE Energy ~~contributed~~expects to contribute $20.0 million to its Pension Plan ~~none of which was attributed to OG&E. No additional contributions are expected in 2016.~~during 2017.

~~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 withOGE Energy's and OG&E'screditfacilitiescould 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 ofOGE Energy's and OG&E'sshort-term borrowings, but a reduction inOGE Energy's and OG&E'scredit ratings would not result in any defaults or accelerations.Any future downgrade~~ ~~of OGE Energy or~~ ~~OG&Ecould also lead to higher long-term borrowing costs and, if below investment grade, would requireOG&Eto 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.

Financing Activities and Future Sources of Financing

Management expects that cash generated from operations, proceeds from the issuance of long and short-term debt and funds received from OGE Energy (proceeds from OGE Energy's other offerings) will be adequate over the next three years to meet anticipated cash needs and to fund future growth opportunities. OG&E utilizes short-term borrowings (through a combination of bank borrowings, commercial paper and borrowings from OGE Energy) 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 Facility

At ~~September~~June 30, ~~2016~~2017, there was ~~$8.6~~$46.0 million in advances to OGE Energy compared to ~~$333.6~~$49.9 million in advances tofrom OGE Energy at December 31, ~~2015~~2016. OG&E has an intercompany borrowing agreement with OGE Energy whereby OG&E has access to up to $~~400.0~~350.0 million of OGE Energy's revolving credit amount. This agreement has a termination date of ~~December 13, 2018.~~March 8, 2022. At ~~September~~June 30, ~~2016~~2017, there were no$1.5 million intercompany borrowings under this agreement. On March 8, 2017, OG&E ~~has~~entered into a ~~$400.0~~new $450.0 million revolving credit facility which 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. At ~~September~~June 30, ~~2016~~2017, there were~~$1.7~~ $0.3 millionsupporting letters of credit at a weighted-average interest rate of0.95 percent. At June 30, 2017, there was $160.0 million in outstanding borrowings at a weighted-average interest rate of 1.92 percent. under the revolving credit facility, which was classified as Long-term Debt in OG&E's Condensed Balance Sheet. There were ~~no outstanding borrowings under this revolving credit agreement and~~ no outstanding commercial paper borrowings at ~~September~~June 30, ~~2016.~~2017. At ~~September~~June 30, ~~2016~~,2017, OG&E had ~~$398.3~~$289.7 millionof net available liquidity under its revolving credit ~~agreement~~. agreement. 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, ~~2015~~2017 and ending December 31, ~~2016. 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.~~ 2018. See Note 8 for a discussion of OG&E's short-term debt activity.

Issuance of New Long-Term Debt

Expected Issuance of Long-Term Debt

OG&E expects to issue up to $300.0 million of long-term debt during the third quarter of 2017, depending on market conditions, to fund capital expenditures, to repay short or long-term borrowings and for general corporate purposes.

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 OGE Energy's and OG&E'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 and OG&E's short-term borrowings, but a reduction in OGE Energy's and OG&E's credit ratings would not result in any defaults or accelerations.Any future downgrade of OGE Energy or OG&E could also lead to higher long-term borrowing costs and, if below investment grade, would require OG&E 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 June 29, 2017, Moody's Investors Service ("Moody's") revised the rating outlooks on OGE Energy and OG&E from stable to negative. Moody's indicated that the revised outlooks reflect the potential for a decline in financial metrics amidst some uncertainty over cost recovery and earned returns in Oklahoma. The revised outlooks did not trigger any collateral requirements or change fees under the revolving credit agreements.

Critical Accounting Policies and Estimates

The Condensed Financial Statements and Notes to Condensed Financial Statements contain information that is pertinent to Management's Discussion and Analysis. In preparing the Condensed 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 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 OG&E's Condensed Financial Statements. However, OG&E believes it has taken reasonable positions where assumptions and estimates are used in order to minimize the negative financial impact to OG&E that could result if actual results vary from the assumptions and estimates.

In management's opinion, the areas of OG&E where the most significant judgment is exercised ~~includes~~include the determination of Pension Plan assumptions, income taxes, contingency reserves, asset retirement obligations and depreciable lives of property, plant and equipment, the determination of regulatory assets and liabilities and unbilled revenues. The selection, application and disclosure of OG&E's critical accounting estimates have been discussed with OGE Energy's Audit Committee and are discussed in detail in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in OG&E's ~~2015~~2016 Form 10-K.

Commitments and Contingencies

In the normal course of business, OG&E 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, OG&E 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 OG&E's Condensed Financial Statements. At the present time, based on available information, OG&E 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 OG&E's financial position, results of operations or cash flows. See Notes 10 and 11 for a discussion of OG&E'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, future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions 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. OG&E believes that its operations are in substantial compliance with current Federal, state and local environmental standards. These environmental laws and regulations are discussed in detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in OG&E's ~~2015~~2016 Form 10-K. ~~Except as set forth below, there have been no material changes to such items.~~

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 will likely 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.

Regional Haze Control Measures

The EPA's 2005 Regional Haze Rule is intended to protect visibility in certain national parks and wilderness areas throughout the United States that may be impacted by air pollutant emissions.

~~On February 18, 2010, Oklahoma submitted its SIP to the EPA, which set forth the state's plan for compliance with Regional Haze Rule.~~ On December 28, 2011, the EPA issued a final Regional Haze Rule for Oklahoma in which ~~it rejected the SO~~₂ ~~portion of the previously submitted Oklahoma SIP and issued~~adopted a FIP in its place. OG&E and the State of Oklahoma's subsequent appeal of the FIP with the Tenth Circuit of Appeals and the U.S. Supreme Court ended on May 27, 2014 when the Supreme Court denied Petition for Certiorari, upholding the EPA's FIP for SO₂. emissions at Sooner Units 1 and 2 and Muskogee Units 4 and 5. The FIP compliance date is now January 4, ~~2019.~~ 2019 as a result of the appeal filed by OG&E and others.

~~On December 9, 2015, the EPA released a final rule partially disapproving the revisions to the 2010 Oklahoma SIP~~OG&E's current strategy for Regional Haze Rule and promulgated FIPs in their place for Oklahoma and Texas. The EPA disapproved portions of the Oklahoma SIP related to the establishment of reasonable progress goals for the Class I area located within the state and promulgated revised reasonable progress goals based onsatisfying the FIP ~~implementation in Texas. As a result, no further requirements are required in Oklahoma to meet the 2018 reasonable progress goals for Oklahoma.~~

On August 6, 2014, OG&E filed an application with the OCC for approval of its plan to comply with the EPA’s MATS and Regional Haze Rule FIP while serving the best long-term interests of customers in light of future environmental uncertainties. The application sought approval of the ECP and for a recovery mechanism for the associated costs. The ECP includes installing ~~dry scrubbers~~Dry Scrubbers at Sooner Units 1 and 2 and the conversion of Muskogee Units 4 and 5 to natural gas. ~~The application also asked~~As described in Note 11, the OCC ~~to predetermine the prudence of its Mustang Modernization Plan, which calls for replacing~~has approved OG&E's soon-to-be retired Mustang steam turbines in late 2017 with 400 MWs of new, efficient combustion turbines at the Mustang site in 2018 and 2019 and approval for a recovery mechanism for the associated costs. The OCC hearing on OG&E's application before an ALJ began on March 3, 2015, approximately seven months after OG&E filed its application, and concluded on April 8, 2015. Multiple parties advocating a variety of positions intervened in the proceeding.

21, 2015, Commissioner Bob Anthony issued his deliberation statement that was consistent with many parts of the ALJ's report, including the ALJ’s support of OG&E’s ECP, the ALJ’s recommendation to pre-approve certain estimated costs of the environmental recovery plan, and the ALJ’s recommendation to defer all other cost recovery issues until the next general rate case.

~~On February 12, 2016, OG&E filed an application requesting the OCC to issue an order approving its~~ decision to install ~~dry scrubbers~~Dry Scrubbers at the Sooner ~~facility on or before May 2, 2016. OG&E's application did not seek approval~~Units. As of ~~the costs of the dry scrubber project. Instead, the reasonableness of the costs would be considered after the project is completed and~~June 30, 2017, OG&E seeks recovery in its rates. On April 28, 2016, the OCC approved the dry scrubber project and OG&E is proceeding with the project. Two parties to the proceeding have appealed the OCC's decision to the Oklahoma Supreme Court. After the OCC provides a certified record to the Oklahoma Supreme Court, the parties will file briefs by the end of 2016 or the first quarter of 2017.

~~As of September 30, 2016, OG&E had~~has incurred ~~$138.6~~$323.4 million of construction work in progress on the ~~dry scrubbers.~~Dry Scrubbers.

Cross-State Air Pollution Rule

In August 2011, the EPA finalized its CSAPR that required 27 states in the eastern half of the United States to reduce power plant emissions that contribute to ozone and particulate matter pollution in other states. ~~In December 2011, the EPA published a supplemental CSAPR, which would make six additional states, including Oklahoma, subject to the CSAPR for NO~~_X ~~emissions during the ozone-season from May 1 through September 30. Under~~Litigation challenging the rule prevented it from entering into effect until 2014. Several parties to that litigation, including OG&E, ~~would~~ have ~~been required to reduce ozone-season NO~~_X ~~emissions from its electrical generating units within the state beginning in 2012. In response to legal challenges of the final rule on December 30, 2011, the U.S. Court of Appeals issued a stay of~~petitions for review that remain pending although the rule which includes the supplemental rule, pending a decision on the merits. By order dated August 21, 2012, the Court of Appeals vacated the CSAPR and ordered the EPA to promulgate a replacement rule. On April 29, 2014, the U.S. Supreme Court reversed the decision by the Court of Appeals. On October 23, 2014, the Court of Appeals for the District of Columbia Circuit granted the EPA's request that the court lift the stay of the CSAPR. The EPA subsequently clarified that complianceis now effective. Compliance with the CSAPR ~~would begin~~began in 2015 using the amount of allowances originally scheduled to be available in 2012. As of ~~December 31, 2015,~~June 30, 2017, OG&E has installed ~~five~~seven low NO_X burner systems on two Muskogee units, two Sooner units and ~~one~~three Seminole ~~unit~~units and is in compliance with the final rule. In the meantime, the petitions for review of the supplemental rule remain pending before the D.C. Circuit Court of Appeals for consideration of issues that are not addressed by the Supreme Court's decision.compliance.

On September 7, 2016, the EPA finalized an update to the 2011 ~~CSAPR which had been previously remanded back to the EPA by the D.C. Circuit Court of Appeals.~~CSAPR. The new rule ~~which was proposed on December 3, 2015,~~ applies to ~~ozone season, NOx only,~~ozone-season NO_X in 22 eastern states ~~including Oklahoma,~~(including Oklahoma), utilizes a cap and trade program for NO_{x X}emissions and ~~will take~~took effect on May 1, 2017. The ~~final~~ rule reduces the 2016 CSAPR emissions cap ~~from~~for all seven of OG~~&E’s~~&E's coal and gas facilities by 47 percent combined. On December 23, 2016, OG&E filed a petition for reconsideration of the 2016 rule with the EPA. OG&E is asking the agency to reconsider the methodology used to calculate state ozone-season emissions budgets. OG&E's petition, along with the petitions for reconsideration filed by various other parties, is currently pending. Also on December 23, 2016, OG&E filed a petition for review of the 2016 rule in the United States Court of Appeals for the District of Columbia Circuit, asking the court to set aside the rule on the grounds that it is arbitrary, capricious, an abuse of the EPA's discretion and not otherwise in accordance with the law. OG&E's case has been consolidated with several other petitions for review, all of which are currently pending.

Due to pending litigation and administrative proceedings, the ultimate timing and impact of the 2016 CSAPR update rule on our operations cannot be determined with certainty at this time. However, OG&E does not ~~anticipate additional capital expenditures beyond what has been disclosed to comply with this new rule, and does not~~ expect that the reduced emissions cap, if upheld, will have a material impact on OG&E's financial position, results of operations or cash flows.

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, which became effective April 16, 2012. The final rule uses a numerical standard to establish limits for particulate matter (as a surrogate for toxic metals), hydrogen chloride and mercury emissions from coal-fired boilers. Compliance was required within three years of the rule's effective date. Based on OG&E's request for a one-year extension, the deadline for compliance was extended to April 16, 2016. To comply with this rule, OG&E utilized activated carbon injections at each of its five coal-fired units during 2015.

The final MATS rule was appealed by several parties, but OG&E was not a party to the appeals. After withstanding judicial scrutiny at the District of Columbia Circuit Court of Appeals, the MATS rule was challenged at the U.S. Supreme Court. On June 29, 2015, the U.S. Supreme Court found that the EPA should have considered the compliance costs imposed on utilities at the first stage of the EPA’s regulatory analysis. The U.S. Supreme Court did not vacate the rule, but reversed the D.C. Circuit's decision and remanded to the D.C. Circuit for further proceedings. OG&E believes that it ~~is in compliance~~complied with the ~~existing~~MATS rule by the April 16, 2016 deadline that applied to OG&E. Nonetheless, there is continuing litigation, to which OG&E is not a party, challenging whether the EPA had statutory authority to issue the MATS rule.

~~Federal Clean Air Act New Source Review Litigation~~

~~In July 2008, OG&E received a request for information from the EPA regarding Federal Clean Air Act compliance at OG&E's Muskogee and Sooner generating plants.~~

On July 8, 2013, the U.S. Department of Justice, on behalf of the EPA, filed a complaint against OG&E in United States District Court for the Western District of Oklahoma alleging that OG&E did not follow the Federal Clean Air Act procedures for projecting emission increases attributable to eight projects that occurred between 2003 and 2006. This complaint sought to have OG&E submit a new assessment of whether the projects were likely to result in a significant emissions increase. The Sierra Club intervened in this proceeding. On August 30, 2013, the government filed a Motion for Summary Judgment and on September 6, 2013, OG&E filed a Motion to Dismiss the case. On January 15, 2015, the Court dismissed the complaints filed by the EPA and the Sierra Club. The Court held that it lacked subject matter jurisdiction over plaintiffs’ claims because plaintiffs failed to present an actual “case or controversy” as required by Article III of the Constitution. The court also ruled in the alternative that, even if plaintiffs had presented a case or controversy, it would have nonetheless “decline[d] to exercise jurisdiction.” The EPA and the Sierra Club did not file an appeal of the Court's ruling.

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, OG&E could be required to install additional emission controls on its facilities to help the state achieve attainment with the NAAQS. As of ~~September~~June 30, ~~2016,~~2017, no areas of Oklahoma had been designated as non-attainment for pollutants that are likely to affect OG&E's operations. Several processes are under way to designate areas in Oklahoma as attaining or not attaining revised NAAQS. OG&E is monitoring those 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 OG&E's financial results.

~~In August~~The EPA proposed to designate part of 2013, the Sierra Club and the Natural Resources Defense Council filed a complaint under the citizen suit provision of the Clean Air Act based on the EPA's failure to promulgate and publish designationsMuskogee County, in which OG&E's Muskogee Power Plant is located, as non -attainment for the 2010 ~~revised primary~~ SO₂ NAAQS on March 1, 2016, even though nearby monitors indicate compliance with the NAAQS. ~~On March 2, 2015,~~The proposed designation is based on modeling that does not reflect the planned conversion of two of the coal units at Muskogee to natural gas. OG&E commented that the EPA should defer a designation of the area to allow time for additional monitoring. The EPA has a deadline for making a decision on the designation pursuant to a consent decree entered by the U.S. District Court for the Northern District of California ~~issued an order granting~~to resolve a citizen suit. The deadline has been extended several times, with the EPA and the Sierra Club's joint motion to approve and enter a consent decree that set forth mandatory deadlines for the EPA to issue designations for all areas of the country that remained undesignated. On September 18, 2015 the ODEQ reported to the EPA that no areas in Oklahoma should be designated as non-attainment for the 2010 SO₂standard. In a letter dated February 11, 2016, EPA Region 6 notified Oklahoma of their intent to designate part of Muskogee County in which OG&E’s Muskogee Power Plant is located, as non-attainment for the 2010 SO₂ ~~NAAQS. This new designation was required to be finalized according to the EPA-Sierra Club consent decree by July 2, 2016. On June 17, 2016 and again on~~current deadline being August ~~30, 2016, the EPA and the Sierra Club entered into a joint agreement to extend the July 2, 2016 deadline for certain areas including the Muskogee area. The date for a final EPA~~

~~decision on the proposed designation for the Muskogee area is pending.~~26, 2017. The EPA has published final decisions on all other areas ~~not subject to the extension on July 2, 2016.~~of Oklahoma. In this decision, Noble County, in which the Sooner plant is located, was deemed to be in attainment with the 2010 standard. ~~On August 21, 2015, the EPA finalized a data requirements rule for implementing the 2010 SO~~₂ ~~standard requiring air agencies to characterize air quality around sources that emit 2,000 tons per year or more of SO~~₂ via air quality modeling or ambient air monitoring. On June 28, 2016, the ODEQ filed their emissions monitoring plan with the EPA in compliance with the rule, stating that ambient monitoring will be used as the method for characterizing air quality for sources which release 2,000 tons of SO₂ ~~per year or more.~~ At this time, OG&E cannot determine with any certainty whether ~~this determination~~any of these determinations will cause a material impact to OG&E's financial results.

On September 30, 2015, the EPA finalized a ~~new ambient standard~~NAAQS for ozone at 70 ~~Ppb~~ppb, which is more stringent than the ~~current~~previous standard of 75 ~~Ppb,~~ppb set in 2008. In September 2016, Governor Mary Fallin submitted to the EPA the recommendation of "attainment/unclassifiable" for all 77 counties in Oklahoma. This recommendation is subject to approval by the EPA.

OG&E is monitoring those 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 OG&E'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 June 1, 2017, President Trump announced that the U.S. will withdraw from the Paris Climate Accord and begin negotiations to re-enter the agreement with different terms. The new agreement may result in future additional emissions reductions in the United States; 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 ~~Power Plan~~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 OG&E's facilities, this could result in significant additional compliance costs that would affect OG&E’s future financial position, results of operations and cash flows if such costs are not recovered through regulated rates. Several states outside the area where OG&E 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.

On October 23, 2015, the EPA published the final Clean Power Plan that established standards of performance for CO₂emissions from existing fossil-fuel-fired power plants along with state-specific CO₂reduction standards expressed as both rate-based (lbs/MWh) and mass-based (tons/yr) goals. The 2030 rate-based reduction requirement for all existing generating units in Oklahoma has decreased from a proposed 43 percent reduction to 32 percent in the final rule. The mass-based approach for existing units calls for a 24 percent reduction by 2030 in Oklahoma. ~~The Clean Power Plan required that states submit to the EPA plans for achieving the state-specific CO~~₂reduction goals by September 6, 2016 or submit an extension request for up to two years. The compliance period was to begin in 2022, and emission reductions were to be phased in by 2030. The EPA also proposed a federal compliance plan to implement the Clean Power Plan in the event that an approvable state plan was not submitted to the EPA by the required deadline.

A number of states, ~~have~~including Oklahoma, filed lawsuits against the Clean Power Plan. On February 9, 2016, the U.S. Supreme Court issued orders staying implementation of the Clean Power Plan pending resolution of challenges to the rule. OG&E is unable to determine what impact the lawsuits will ultimately have on the Clean Power Plan or what impact the stay in implementation will have; however, if the Clean Power Plan survives judicial review and is implemented as written, it could result in significant additional compliance costs that would affect our future ~~consolidated~~ financial position, results of operations and cash flows if such costs are not recovered through regulated rates. Significant uncertainties would remain with regards to potential implementation in Oklahoma (and the federal plan that would be imposed by the EPA for states that do not submit approvable plans), including whether states would elect an emissions standards approach versus a state measures approach, whether and what type of emissions trading would be allowed, and available cost mitigation options. Due to ~~the~~ pending litigation and the uncertainties in the state approaches, the ultimate timing and impact of these standards on our operations cannot be determined with certainty at this time.

~~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 CO~~₂, sulfur hexafluoride and methane, and whether these emissions are contributing to the warming of the earth's atmosphere. In December 2015, as part of the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change, the United States committed to reduce economy wide emissions by 26 percent to 28 percent below 2005 emission levels. This multinational agreement became open for signing on April 22, 2016 and will require countries to review and "represent a progression" every five years beginning in 2020. The agreement could result in future additional emissions reductions in the United States, 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 commitments under the December 2015 Paris Agreement will be implemented through the Clean Air Act, other than existing statutes and new legislation.

Several states 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.

~~If legislation or regulations are passed at the Federal or state levels in the future requiring mandatory reductions of CO~~₂ and other greenhouse gases on OG&E's facilities, this could result in significant additional compliance costs that would affect OG&E’s future financial position, results of operations and cash flows if such costs are not recovered through regulated rates.

~~In 2009, the EPA adopted a comprehensive national system for reporting emissions of CO~~₂ and other greenhouse gases produced by major sources in the United States. The reporting requirements apply to large direct emitters of greenhouse gases with emissions equal to or greater than a threshold of 25,000 metric tons per year, which includes certain OG&E facilities. OG&E also reports quarterly its CO₂~~emissions from generating units subject to the Federal Acid Rain Program. OG&E has submitted the reports required by the applicable reporting rules.~~

Nonetheless, OG&E’s current business strategy will result in a reduced carbon emissions rate compared to current levels. As discussed in ~~“Pending~~"Pending Regulatory ~~Matters”,~~Matters" in Note 11, OG~~&E has filed an application with the OCC for approval of its~~&E's plan to comply with the EPA’s MATS and Regional Haze Rule FIP byincludes converting two coal-fired generating units at 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 also seeks to utilize renewable energy sources that do not emit greenhouse gases. OG&E's service territory borders one of the nation's best wind resource areas. OG&E has leveraged its geographic position to develop renewable energy resources and completed transmission investments to deliver the renewable energy. The SPP has begun to authorize the construction of transmission lines capable of bringing renewable energy out of the wind resource area 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.

EPA Startup, Shutdown and Malfunction Policy

On May 22, 2015, the EPA issued a final rule to address the outdated 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 to assure consistency with the Clean Air Act and other recent court decisions. The Oklahoma Department of Environmental Quality ~~is in~~submitted a SIP revision for the ~~process of developing a SIP~~EPA's approval on November 7, 2016 to comply with this ~~rule, which is to be submitted to the EPA before November 2016.~~rule. Although the extent of impact is not known, this rule will impact certain OG&E units.

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 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 pipeline projects, could be restricted or delayed, or OG&E could be required to implement expensive mitigation measures.

In 2014, OG&E enrolled in the Western Association of Fish and Wildlife Agencies range-wide conservation plan which consists of industry-specific conservation practices that apply to projects and activities in the impacted area. The range-wide conservation plan was approved by the U.S. Fish and Wildlife Service and incorporated as part of the agency’s final decision on March 27, 2014 to list the lesser prairie chicken as a threatened species. On September 1, 2015, the U.S. District Court Western District of Texas vacated federal protections for the lesser prairie chicken based on the U.S. Fish and Wildlife Service's failure to thoroughly consider the active conservation efforts in making the listing decision. On July 19, 2016, the U.S. Fish and Wildlife Service issued a final rule to amend its regulations to remove the lesser prairie chicken from the list of threatened species under the Endangered Species Act. On September 8, 2016, WildEarth Guardians, Defenders of Wildlife and the Center for Biological Diversity filed a petition with the U.S. Fish and Wildlife Services to list the lesser prairie chicken as "endangered" under the Endangered Species Act. On November 30, 2016, the U.S. Fish and Wildlife Services published a notice in the Federal Register announcing its finding that the September 2016 petition presents information indicating that listing of the lesser prairie chicken may be warranted. The agency has initiated a 12-month status review. OG&E will continue to monitor the progress of the petition.

Air Quality Control System

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.

On December 19, 2014, 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 final rule regulates coal ash as a solid waste rather than a hazardous waste, which would have made the management of coal ash more costly. The final rule is currently being appealed at the D.C. Circuit Court of Appeals. OG&E is in compliance with this rule at this time.

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 2015,~~ OG&E ~~obtained~~obtains refunds ~~of $2.3 million~~ from the recycling of scrap metal, salvaged transformers and used transformer oil. ~~This figure does not include the additional~~Additional savings are 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. OG&E submitted compliance plans to the state in April 2015. 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.

On September 30, 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~~technology- and ~~performance based~~performance-based standards that may apply to discharges of six waste streams including bottom ash transport water. Compliance with this rule occurs between 2018 and 2023. 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. On June 6, 2016, the EPA proposed to delay the compliance deadlines for the 2015 final rule following granting numerous petitions for reconsideration that were filed with the EPA. The proposal was open for a 30-day public comment period. It is unknown what the outcome of the rule reconsideration will be. 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.

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 generate 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 a further discussion regarding contingencies relating to environmental laws and regulations, see Note 10.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Under the reduced disclosure format permitted by General Instruction H(2)(c) of Form 10-Q, the information otherwise required by Item 3 has been omitted.

Item 4. Controls and Procedures.

OG&E maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by OG&E 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 OG&E's management, including the chief executive officer and chief financial officer, of the effectiveness of OG&E'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 OG&E's disclosure controls and procedures are effective.

No change in OG&E's internal control over financial reporting has occurred during OG&E's most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, OG&E'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).

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Reference is made to Item 3 of Part I of OG&E's ~~2015~~2016 Form 10-K for a description of certain legal proceedings presently pending. Except as described above under Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations - Environmental Laws and Regulations," there are no new significant cases to report against OG&E and there have been no material changes in the previously reported proceedings.

Item 1A. Risk Factors.

There have been no significant changes in OG&E's risk factors from those discussed in OG&E's ~~2015~~2016 Form 10-K, which are incorporated herein by reference.

Item 6. Exhibits.



Exhibit No.	Description
10.01	Form of Performance Unit Agreements under OGE Energy's 2013 Stock Incentive Plan. (Filed as Exhibit 10.01 to OGE Energy's Form 10-Q for the quarter ended June 30, 2017 (File No. 1-12579) and incorporated by reference herein).
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	XBRL Instance Document.
101.SCH	XBRL Taxonomy Schema Document.
101.PRE	XBRL Taxonomy Presentation Linkbase Document.
101.LAB	XBRL Taxonomy Label Linkbase Document.
101.CAL	XBRL Taxonomy Calculation Linkbase Document.
101.DEF	XBRL Definition Linkbase Document.

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.



	OKLAHOMA GAS AND ELECTRIC COMPANY
	(Registrant)

By:	/s/ Scott Forbes
	Scott Forbes
	Controller and Chief Accounting Officer
	(On behalf of the Registrant and in his capacity as Chief Accounting Officer)

~~November 3, 2016~~August 2, 2017

3835



Oklahoma		73-0382390
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)



	Page
GLOSSARY OF TERMS	ii
FORWARD-LOOKING STATEMENTS	1

Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Statements of Income and Comprehensive Income	2
Condensed Statements of Cash Flows	3
Condensed Balance Sheets	4
Condensed Statements of Changes in Stockholder's Equity	6
Notes to Condensed Financial Statements	7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3532

Item 4. Controls and Procedures	3532

Part II - OTHER INFORMATION
Item 1. Legal Proceedings	3734

Item 1A. Risk Factors	3734

Item 6. Exhibits	3734

Signature	3835


					June 30,		December 31,
(In millions)	September 30, 2016		December 31, 2015		2017		2016
ASSETS
CURRENT ASSETS
Accounts receivable, less reserve of $2.0 and $1.4, respectively	$	222.2	$	173.1
Accounts receivable, less reserve of $1.1 and $1.5, respectively					$	185.0	$	173.0
Accrued unbilled revenues	71.0		53.5		86.7		59.7
Advances to parent	8.6		333.6		46.0		—
Fuel inventories	87.6		113.8		77.5		79.8
Materials and supplies, at average cost	74.1		78.8		81.6		80.3
Fuel clause under recoveries	0.5		—		107.4		51.3
Other	63.9		51.6		70.3		78.3
Total current assets	527.9		804.4		654.5		522.4
OTHER PROPERTY AND INVESTMENTS	5.2		5.6		5.9		6.6
PROPERTY, PLANT AND EQUIPMENT
In service	10,482.1		10,179.3		10,727.9		10,572.3
Construction work in progress	365.8		278.5		797.9		495.1
Total property, plant and equipment	10,847.9		10,457.8		11,525.8		11,067.4
Less accumulated depreciation	3,328.9		3,161.7		3,447.7		3,385.6
Net property, plant and equipment	7,519.0		7,296.1		8,078.1		7,681.8
DEFERRED CHARGES AND OTHER ASSETS
Regulatory assets	404.8		402.2		406.8		404.8
Other	54.6		17.2		53.7		53.8
Total deferred charges and other assets	459.4		419.4		460.5		458.6
TOTAL ASSETS	$	8,511.5	$	8,525.5	$	9,199.0	$	8,669.4


					June 30,		December 31,
(In millions)	September 30, 2016		December 31, 2015		2017		2016
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable - affiliates	$	1.4	$	2.2	$	1.1	$	0.1
Accounts payable - other	121.4		236.0		180.2		196.3
Advances from parent					—		49.9
Customer deposits	77.4		77.0		79.1		77.7
Accrued taxes	58.2		45.7		39.2		40.8
Accrued interest	32.8		42.8		43.5		40.2
Accrued compensation	23.9		23.8		23.3		31.3
Long-term debt due within one year	124.9		110.0		125.0		125.0
Fuel clause over recoveries	1.4		61.3
Other	62.5		43.6		63.2		95.8
Total current liabilities	503.9		642.4		554.6		657.1
LONG-TERM DEBT	2,405.4		2,529.3		2,863.0		2,405.8
DEFERRED CREDITS AND OTHER LIABILITIES
Accrued benefit obligations	176.1		179.9		164.8		167.7
Deferred income taxes	1,728.8		1,637.8		1,797.1		1,752.3
Regulatory liabilities	292.0		273.6		321.6		299.7
Other	134.6		106.8		141.7		134.7
Total deferred credits and other liabilities	2,331.5		2,198.1		2,425.2		2,354.4
Total liabilities	5,240.8		5,369.8		5,842.8		5,417.3
COMMITMENTS AND CONTINGENCIES (NOTE 10)
STOCKHOLDER'S EQUITY
Common stockholder's equity	1,023.5		1,021.8		1,025.8		1,024.1
Retained earnings	2,247.2		2,133.9		2,330.4		2,228.0
Total stockholder's equity	3,270.7		3,155.7		3,356.2		3,252.1
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY	$	8,511.5	$	8,525.5	$	9,199.0	$	8,669.4


(In millions)	Common Stock		Premium on Common Stock		Retained Earnings			Total			Common Stock		Premium on Common Stock		Retained Earnings			Total
Balance at December 31, 2016											$	100.9	$	923.2	$	2,228.0		$	3,252.1
Net income											—		—		102.4			102.4
Stock-based compensation											—		1.7		—			1.7
Balance at June 30, 2017											$	100.9	$	924.9	$	2,330.4		$	3,356.2

Balance at December 31, 2015	$	100.9	$	920.9	$	2,133.9		$	3,155.7		$	100.9	$	920.9	$	2,133.9		$	3,155.7
Net income	—		—		238.3			238.3			—		—		78.4			78.4
Dividends declared on common stock	—		—		(125.0		)	(125.0		)	—		—		(60.0		)	(60.0		)
Stock-based compensation	—		1.7		—			1.7			—		1.5		—			1.5
Balance at September 30, 2016	$	100.9	$	922.6	$	2,247.2		$	3,270.7

Balance at December 31, 2014	$	100.9	$	918.3	$	1,985.0		$	3,004.2
Net income	—		—		249.0			249.0
Dividends declared on common stock	—		—		(90.0		)	(90.0		)
Stock-based compensation	—		1.9		—			1.9
Balance at September 30, 2015	$	100.9	$	920.2	$	2,144.0		$	3,165.1
Balance at June 30, 2016											$	100.9	$	922.4	$	2,152.3		$	3,175.6



Large accelerated filer o	Accelerated filer o
Non-accelerated filer þ (Do not check if a smaller reporting company)	Smaller reporting company o
	Emerging growth company o


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30,
(In millions)	2016			2015			2016			2015			2017			2016			2017			2016
OPERATING REVENUES	$	743.9		$	719.8		$	1,728.4		$	1,749.8		$	586.4		$	551.4		$	1,042.4		$	984.5
COST OF SALES	269.8			259.8			645.4			682.3			232.1			197.7			440.8			375.6
OPERATING EXPENSES
Other operation and maintenance	115.2			107.4			356.3			337.3			116.5			124.8			242.6			241.1
Depreciation and amortization	80.8			75.9			235.9			224.0			73.7			78.4			128.4			155.1
Taxes other than income	20.9			21.0			63.6			65.7			20.2			19.1			42.5			42.7
Total operating expenses	216.9			204.3			655.8			627.0			210.4			222.3			413.5			438.9
OPERATING INCOME	257.2			255.7			427.2			440.5			143.9			131.4			188.1			170.0
OTHER INCOME (EXPENSE)
Allowance for equity funds used during construction	3.9			2.2			9.2			5.4			8.5			3.7			15.4			5.3
Other income	2.9			4.8			11.3			9.8			7.7			4.4			14.1			8.4
Other expense	(0.8		)	(0.4		)	(2.2		)	(1.3		)	(0.6		)	(1.1		)	(1.0		)	(1.4		)
Net other income	6.0			6.6			18.3			13.9			15.6			7.0			28.5			12.3
INTEREST EXPENSE
Interest on long-term debt	35.4			36.7			106.3			110.1			38.6			35.4			74.1			70.9
Allowance for borrowed funds used during construction	(2.0		)	(1.1		)	(4.7		)	(2.7		)	(4.1		)	(1.8		)	(7.4		)	(2.7		)
Interest on short-term debt and other interest charges	0.9			0.8			3.2			3.1			1.1			1.4			2.5			2.3
Interest expense	34.3			36.4			104.8			110.5			35.6			35.0			69.2			70.5
INCOME BEFORE TAXES	228.9			225.9			340.7			343.9			123.9			103.4			147.4			111.8
INCOME TAX EXPENSE	69.0			63.0			102.4			94.9			37.7			31.1			45.0			33.4
NET INCOME	159.9			162.9			238.3			249.0			86.2			72.3			102.4			78.4
Other comprehensive income (loss), net of tax	—			—			—			—			—			—			—			—
COMPREHENSIVE INCOME	$	159.9		$	162.9		$	238.3		$	249.0		$	86.2		$	72.3		$	102.4		$	78.4


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


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


~~(C)~~	~~Prior year amount of $1.0 million reclassified from Deferred Other Liabilities to Non-Current Regulatory Liabilities.~~


(B)	In addition to the $5.2 million and $4.8 million of net periodic benefit cost recognized during the six months ended June 30, 2017 and 2016, respectively, OG&E recognized the following:


~~(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.


(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,


(A)	~~As discussed in Note 13, on~~On July 1, 2016, OG&E implemented an annual interim rate increase of $69.5 million. ~~Interim rates are subject to refund of any amount recovered in excess of the rates ultimately approved by~~On March 20, 2017, the OCC issued a final order resulting in ~~the general rate case.~~an annual increase of $8.8 million, as discussed in Note 11.


(B)	~~Increased primarily due to~~Cooling degree days decreased approximately nine percent during the ~~pricing impact of weather related sales.~~


2.	Accounting Pronouncements


3.	Related Party Transactions


5.	Stock-Based Compensation


~~(D)~~	~~Decreased primarily due to capitalized labor related to storms.~~



(In millions)	Change
Interim rate increase - Oklahoma (A)	$	23.6
Reserve rate for refund (A)	(21.0		)
Price variance (B)	21.2
Wholesale transmission revenue (C)	4.7
New customer growth	1.9
Non-residential demand and related revenues	(0.6		)
Quantity variance (primarily weather)	(1.5		)
Other	(3.1		)
Expiration of AVEC contract (D)	(9.7		)
Change in gross margin	$	15.5


~~(A)~~	As discussed in Note 13, on July 1, 2016, OG&E implemented an annual interim rate increase of $69.5 million. Interim rates are subject to refund of any amount recovered in excess of the rates ultimately approved by the OCC in the general rate case.


~~(B)~~	~~Increased primarily due to the reversal of a reserve for gas transportation charges in addition to the pricing impact of weather related sales.~~


~~(C)~~	Increased primarily due to a true up for the base plan projects in the SPP formula rate for 2014 and 2015 as well as a true up for Network Integration Transmission Services in the SPP formula rate for 2015.


~~(E)~~	~~Increased primarily due to timing of vegetation management.~~


~~(F)~~	~~Decreased primarily due to capitalized labor related to storms.~~



	Nine Months Ended
	September 30,						2016 vs. 2015
(In millions)	2016			2015			$ Change			% Change
Net cash provided from operating activities	$	385.8		$	551.6		$	(165.8	)	(30.1	)%
Net cash used in investing activities	(466.4		)	(368.8		)	(97.6		)	26.5	%
Net cash provided from (used in) financing activities	80.6			(182.8		)	263.4			*