The following combined discussion is separately filed by OGE Energy and OG&E. However, OG&E does not make any representations as to information related solely to OGE Energy or the subsidiaries of OGE Energy other than itself.
Introduction and Overview
OGE Energy is a holding company whose primary investment provides electricity in Oklahoma and western Arkansas. OGE Energy's electric company operations are conducted through its wholly-owned subsidiary, OG&E, which generates, transmits, distributes and sells electric energy in Oklahoma and western Arkansas and are reported through OGE Energy's electric company business segment. OG&E's rates are subject to regulation by the OCC, the APSC and the FERC. OG&E was incorporated in 1902 under the laws of the Oklahoma Territory and is the largest electric company in Oklahoma, with a franchised service territory that includes Fort Smith, Arkansas and the surrounding communities. OG&E sold its retail natural gas business in 1928 and is no longer engaged in the natural gas distribution business.
The accounts of OGE Energy and its wholly-owned subsidiaries, including OG&E, are included in OGE Energy's condensed consolidated financial statements. All intercompany transactions and balances are eliminated in such consolidation.
OGE Energy's purpose is to energize life, providing life-sustaining and life-enhancing products and services that enrich its communities, encouraging growth and a higher quality of life. OGE Energy's purpose comes with a balanced approach to multifaceted stewardship: keeping its employees (internally referred to as "members") safe, reducing its environmental impact, strengthening its diverse communities and ensuring its effective corporate governance. OGE Energy's business model is centered around growth and sustainability for members, communities and customers and the owners of OGE Energy, its shareholders. OGE Energy is focused on creating long-term shareholder value by targeting the consistent growth of consolidated earnings per share of five to seven percent through 2030, and consolidated earnings per share in the top half of the range in 2027 and 2028, supported by expected strong load growth enabled by low customer rates and a strategy of investing in lower risk infrastructure projects that improve the economic vitality of the communities it serves in Oklahoma and Arkansas. OGE Energy's long-term sustainability is predicated on providing exceptional customer engagement, strengthening the energy grid, investing in proven technologies to meet generation capacity needs, environmental stewardship, strong governance practices and caring for and supporting its members and communities. Further discussion of OGE Energy's strategy can be found in its 2025 Form 10-K.
Recent Developments
OG&E's Regulatory Matters
Current activity related to OG&E's regulatory matters is discussed in Note 13 within "Item 1. Financial Statements."
Summary of OGE Energy Operating Results
Three Months Ended June 30, 2026 as compared to the Three Months Ended June 30, 2025
OGE Energy's net income was $116.3 million, or $0.56 per diluted share, during the three months ended June 30, 2026 as compared to $107.5 million, or $0.53 per diluted share, during the same period in 2025. The increase in net income of $8.8 million, or $0.03 per diluted share, is further discussed below.
•An increase in net income at OG&E of $12.4 million, or $0.05 per diluted share of OGE Energy's common stock, was primarily due to higher operating revenues (excluding the impact of recoverable fuel, purchased power and direct transmission expense not impacting earnings) driven by the recovery of capital investments, the deferral of certain interest expense to a regulatory asset in accordance with Oklahoma PISA, and higher other income, partially offset by increased other operation and maintenance expense.
•An increase in net loss of other operations of $3.6 million, or $0.02 per diluted share of OGE Energy's common stock, was primarily due to higher interest expense and lower net other income driven by a one-time benefit related to activity at OGE Energy's legacy midstream operations recognized in 2025, which was partially offset by increased other income from OGE Energy’s other energy-related investments.
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Six Months Ended June 30, 2026 as compared to the Six Months Ended June 30, 2025
OGE Energy's net income was $166.5 million, or $0.80 per diluted share, during the six months ended June 30, 2026 as compared to $170.2 million, or $0.84 per diluted share, during the same period in 2025. The decrease in net income of $3.7 million, or $0.04 per diluted share, is further discussed below.
•A decrease in net income at OG&E of $0.7 million, or $0.02 per diluted share of OGE Energy's common stock, was primarily due to an increase in other operation and maintenance expense, partially offset by the deferral of certain interest expense to a regulatory asset in accordance with Oklahoma PISA and higher operating revenues (excluding the impact of recoverable fuel, purchased power and direct transmission expense not impacting earnings) driven by the recovery of capital investments which offset the impact of milder first quarter weather.
•An increase in net loss of other operations of $3.0 million, or $0.02 per diluted share of OGE Energy's common stock, was primarily due to lower net other income driven by a one-time benefit related to activity at OGE Energy's legacy midstream operations recognized in 2025, which was partially offset by increased other income from OGE Energy’s other energy-related investments.
2026 Outlook
OGE Energy’s consolidated earnings guidance remains unchanged from OGE Energy's original 2026 earnings guidance range of $494 million to $514 million, or $2.38 to $2.48 per average diluted share. This guidance assumes, among other things, approximately 207.3 million average diluted shares outstanding and normal weather for the remainder of the year. OG&E has significant seasonality in its earnings due to weather on a year-over-year basis. See OGE Energy's 2025 Form 10-K for other key factors and assumptions underlying its 2026 guidance.
Results of Operations
The following discussion and analysis presents factors that affected the Registrants' results of operations for the three and six months ended June 30, 2026 as compared to the same periods in 2025 and the Registrants' financial position at June 30, 2026. Due to seasonal fluctuations and other factors, the Registrants' operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 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 Six Months Ended
OGE Energy June 30, June 30,
(In millions, except per share data) 2026 2025 2026 2025
Net income $ 116.3 $ 107.5 $ 166.5 $ 170.2
Basic average common shares outstanding 206.5 201.3 206.4 201.3
Diluted average common shares outstanding 207.8 202.1 207.5 202.0
Basic earnings per average common share $ 0.56 $ 0.53 $ 0.81 $ 0.85
Diluted earnings per average common share $ 0.56 $ 0.53 $ 0.80 $ 0.84
Dividends declared per common share $ 0.42500 $ 0.42125 $ 0.85000 $ 0.84250
Results by Business Segment
Three Months Ended Six Months Ended
June 30, June 30,
(In millions) 2026 2025 2026 2025
Net income (loss):
OG&E (Electric Company) $ 120.1 $ 107.7 $ 178.0 $ 178.7
Other operations (3.8 ) (0.2 ) (11.5 ) (8.5 )
OGE Energy net income $ 116.3 $ 107.5 $ 166.5 $ 170.2
The following discussion of results of operations for OG&E includes intercompany transactions that are eliminated in OGE Energy's condensed consolidated financial statements.
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OG&E (Electric Company)
Three Months Ended Six Months Ended
June 30, June 30,
(Dollars in millions) 2026 2025 2026 2025
Operating revenues $ 711.9 $ 741.6 $ 1,464.5 $ 1,489.3
Fuel, purchased power and direct transmission expense 217.7 261.1 554.4 585.1
Other operation and maintenance 138.6 126.3 275.4 248.1
Depreciation and amortization 138.1 140.6 274.5 278.0
Taxes other than income 25.8 26.2 55.7 57.4
Operating income 191.7 187.4 304.5 320.7
Allowance for equity funds used during construction 7.3 6.0 14.8 13.0
Other net periodic benefit expense (2.5 ) (2.6 ) (5.0 ) (5.1 )
Other income 6.4 4.1 9.1 9.4
Other expense 0.6 0.5 1.4 1.4
Interest expense 58.4 63.4 108.4 120.2
Income tax expense 23.8 23.3 35.6 37.7
Net income $ 120.1 $ 107.7 $ 178.0 $ 178.7
Operating revenues by classification:
Residential $ 261.1 $ 261.0 $ 521.5 $ 548.3
Commercial 215.6 225.9 427.6 434.7
Industrial 56.5 60.2 117.2 122.4
Oilfield 49.3 53.2 107.7 112.4
Public authorities and street light 62.3 64.5 124.2 125.3
System sales revenues 644.8 664.8 1,298.2 1,343.1
Provision for rate refund — — — 3.0
Integrated market 27.4 26.3 74.7 47.6
Transmission 30.5 42.1 71.2 81.9
Other 9.2 8.4 20.4 13.7
Total operating revenues $ 711.9 $ 741.6 $ 1,464.5 $ 1,489.3
MWh sales by classification (In millions)
Residential 2.3 2.1 4.4 4.6
Commercial 3.3 3.1 6.1 5.8
Industrial 1.0 1.0 2.0 2.0
Oilfield 1.1 1.0 2.2 2.1
Public authorities and street light 0.7 0.7 1.4 1.4
System sales 8.4 7.9 16.1 15.9
Integrated market 0.4 0.2 0.7 0.4
Total sales 8.8 8.1 16.8 16.3
Number of customers 917,157 909,131 917,157 909,131
Weighted-average cost of energy per kilowatt-hour (In cents)
Natural gas 3.438 3.498 5.173 4.265
Coal 2.662 2.761 2.620 2.751
Total fuel 3.086 3.120 4.208 3.508
Total fuel and purchased power 2.406 3.076 3.179 3.437
Degree days (A)
Heating - Actual 127 156 1,510 2,056
Heating - Normal 250 250 2,139 2,139
Cooling - Actual 772 579 864 598
Cooling - Normal 553 553 563 563
(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, then the difference between the calculated average and 65 is expressed as heating degree days, with each degree of difference equaling one heating degree
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day. The daily calculations are then totaled for the particular reporting period. The calculation of heating and cooling degree normal days is based on a 30-year average and weighted on a jurisdictional split.
OG&E's net income increased $12.4 million, or 11.5 percent, and decreased $0.7 million, or 0.4 percent, during the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. The following section discusses the primary drivers for the changes in net income during the three and six months ended June 30, 2026 as compared to the same periods in 2025.
Operating revenues decreased $29.7 million, or 4.0 percent, and $24.8 million, or 1.7 percent, during the three and six months ended June 30, 2026, respectively, primarily driven by the below factors.
(In millions) Three Months Ended Six Months Ended
Fuel, purchased power and direct transmission expense (A) $ (43.4 ) $ (30.7 )
Wholesale transmission revenue (B) (12.5 ) (12.8 )
Guaranteed Flat Bill program (C) 0.4 6.3
Other 0.6 0.6
Industrial and oilfield sales 1.1 0.4
New customer growth 2.3 5.9
Non-residential demand and related revenues 3.7 7.8
Price variance (D) 7.1 13.4
Quantity impacts (primarily weather) (E) 11.0 (15.7 )
Change in operating revenues $ (29.7 ) $ (24.8 )
(A)These expenses are generally recoverable from customers through regulatory mechanisms and are offset in Fuel, Purchased Power and Direct Transmission Expense in the statements of income. The primary drivers of the changes in fuel, purchased power and direct transmission expense during the periods are further detailed in the table below.
(B)Decreased during the three and six months ended June 30, 2026 primarily due to a SPP formula rate true-up for transmission revenues.
(C)The Guaranteed Flat Bill program allows qualifying customers the opportunity to purchase their electricity needs at a set monthly price for an entire year, which can result in variances when actual fuel and purchased power prices differ from what is included in Guaranteed Flat Bill program rates.
(D)Increased during the three months ended June 30, 2026 primarily due to price variance related to weather and increased during the six months ended June 30, 2026 primarily due to increased recovery through rider mechanisms.
(E)Increased during the three months ended June 30, 2026 primarily due to a 33 percent increase in cooling degree days and decreased during the six months ended June 30, 2026 primarily due to a 27 percent decrease in heating degree days.
Fuel, purchased power and direct transmission expense for OG&E consists of fuel used in electric generation, purchased power and transmission related charges. As described above, the actual cost of fuel used in electric generation and certain purchased power costs are generally recoverable from OG&E's customers through fuel adjustment clauses. The fuel adjustment clauses are subject to periodic review by the OCC and the APSC. OG&E's fuel, purchased power and direct transmission expense decreased $43.4 million, or 16.6 percent, and $30.7 million, or 5.2 percent, during the three and six months ended June 30, 2026, respectively, primarily driven by the below factors.
(In millions) Three Months Ended Six Months Ended
Fuel expense (A) $ 2.2 $ 28.6
Purchased power costs:
Purchases from SPP (B) (45.6 ) (68.1 )
Wind (1.4 ) 1.0
Other 0.8 1.6
Capacity 2.6 2.6
Transmission expense (2.0 ) 3.6
Change in fuel, purchased power and direct transmission expense $ (43.4 ) $ (30.7 )
(A)Increased during the six months ended June 30, 2026 primarily due to higher fuel costs related to the generating assets utilized.
(B)Decreased during the three and six months ended June 30, 2026 primarily due to lower market prices.
Other operation and maintenance expense increased $12.3 million, or 9.7 percent, and $27.3 million, or 11.0 percent, during the three and six months ended June 30, 2026, respectively, primarily due to an increase in contract technical and construction services, driven by the timing of certain projects, vegetation management activities and payroll and benefits, net of capitalized labor, and with
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respect to the six months ended June 30, 2026, other operation and maintenance expense also increased due to energy efficiency program activities and services, which are recoverable through riders.
Depreciation and amortization expense decreased $2.5 million, or 1.8 percent, and $3.5 million, or 1.3 percent, during the three and six months ended June 30, 2026, respectively, primarily due to deferrals of allowable depreciation and amortization expense of $12.0 million and $23.3 million, respectively, to a regulatory asset in accordance with Oklahoma PISA, partially offset by additional assets being placed into service.
Net other income increased $3.6 million, or 51.4 percent, and $1.6 million, or 10.1 percent, during the three and six months ended June 30, 2026, respectively, due to increased allowance for equity funds used during construction driven by higher construction work in progress balances resulting from increased spending for generation projects, partially offset by lower interest income related to the carrying charge for the higher fuel under recovery balance in 2025.
Interest expense decreased $5.0 million, or 7.9 percent, and $11.8 million, or 9.8 percent, during the three and six months ended June 30, 2026, respectively, primarily due to the deferral of certain interest expense to a regulatory asset in accordance with Oklahoma PISA, partially offset by interest expense related to the $350.0 million senior notes issuance in April 2026 and, with respect to the six months ended June 30, 2026, also partially offset by interest expense related to the $350.0 million senior notes issuance in April 2025.
Income tax expense increased $0.5 million, or 2.1 percent, during the three months ended June 30, 2026, primarily due to higher pretax income, partially offset by additional state tax credits generated and decreased $2.1 million, or 5.6 percent, during the six months ended June 30, 2026, primarily due to additional state tax credits generated and lower pretax income.
Liquidity and Capital Resources
Cash Flows
OGE Energy
Six Months Ended
June 30, 2026 vs. 2025
(Dollars in millions) 2026 2025 $ Change % Change
Net cash provided from operating activities (A) $ 511.4 $ 354.5 $ 156.9 44.3 %
Net cash used in investing activities (B) $ (518.8 ) $ (559.0 ) $ 40.2 (7.2 )%
Net cash provided from financing activities (C) $ 8.1 $ 204.4 $ (196.3 ) (96.0 )%
(A)Changed primarily due to increased cash received from customers, including cash related to fuel recoveries and customer connections, and lower purchased power payments, partially offset by higher payments for fuel.
(B)Changed primarily due to timing of power delivery and power generation projects.
(C)Changed primarily due to a decrease in short-term debt, partially offset by the repayment of the Muskogee industrial authority bonds that matured in January 2025.
Working Capital
Working capital is defined as the difference in current assets and current liabilities. OGE Energy's working capital requirements are driven generally by changes in accounts receivable, accounts payable, commodity prices, credit extended to and the timing of collections from OG&E's customers, the level and timing of spending for maintenance and expansion activity, inventory levels and fuel recoveries. The following discussion addresses changes in OGE Energy's working capital balances at June 30, 2026 compared to December 31, 2025.
Income Taxes Receivable decreased $11.8 million, or 31.6 percent, primarily due to an increase in federal taxes owed.
Short-term Debt decreased $162.9 million, or 55.8 percent, primarily due to OG&E's $350.0 million senior notes issuance in April 2026, which was used to pay down short-term debt along with general operating needs. The Registrants borrow on a short-term basis, as necessary, through the issuance of commercial paper under their revolving credit agreements.
Accounts Payable decreased $68.4 million, or 19.5 percent, primarily due to the timing of vendor payments.
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Accrued Compensation decreased $15.8 million, or 29.1 percent, primarily due to 2025 incentive compensation payouts that occurred during the first quarter of 2026.
Long-Term Debt due within One Year increased $115.9 million, due to the reclassification of OGE Energy's term loan scheduled to mature in May 2027 and OG&E's industrial authority bonds scheduled to mature in June 2027.
Fuel Clause Over Recoveries increased $124.9 million, primarily due to higher recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power.
Other Current Liabilities increased $15.1 million, or 45.1 percent, primarily due to increases in SPP projected payables and under recovered riders.
Future Material Cash Requirements
OGE Energy's primary, material cash requirements are related to acquiring or constructing new facilities and replacing or expanding existing facilities at OG&E. Other working capital requirements include items such as maturing debt, operating lease obligations, fuel clause under recoveries and other general corporate purposes. Further, working capital requirements can be seasonal. OGE Energy generally meets its cash needs through a combination of cash generated from operations, short-term borrowings (through a combination of bank borrowings and commercial paper) and permanent financings. OGE Energy believes its cash flows from operations, existing borrowing capacity, and access to debt and equity capital markets, as needed, should be sufficient to satisfy material cash requirements over the short-term and long-term.
Capital Expenditures
OGE Energy's estimates of capital expenditures for the years 2026 through 2030 are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 2025 Form 10-K, and OGE Energy's estimates have not changed significantly at this time. The capital investments are customer-focused and targeted to maintain and improve the safety, resiliency and reliability of OG&E's distribution and transmission grid and generation fleet, enhance the ability of OG&E's system to perform during extreme weather events and to serve OG&E's growing customer base. Additional capital expenditures beyond those identified in the Registrants' 2025 Form 10-K, including additional incremental growth opportunities, will be evaluated based upon the requirements of OG&E's power supply, transmission and distribution operational teams and the expected resultant customer benefits.
Financing Activities and Future Sources of Financing
Management expects that cash generated from operations, proceeds from the issuance of long- and short-term debt, proceeds from the settlement of the FSAs, sales of common stock to the public, including through OGE Energy's Automatic Dividend Reinvestment and Stock Purchase Plan, or other offerings will be adequate over the short-term and the long-term to meet anticipated cash needs and to fund future growth opportunities. OGE Energy utilizes short-term borrowings (through a combination of bank borrowings and commercial paper) to satisfy temporary working capital needs and as an interim source of financing capital expenditures until permanent financing is arranged.
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Short-Term Debt and Credit Facilities
OGE Energy borrows on a short-term basis, as necessary, by issuance of commercial paper and borrowings under its revolving credit agreements.
On June 12, 2026, OGE Energy and OG&E entered into new, unsecured five-year revolving credit facilities totaling $1.3 billion ($650.0 million for OGE Energy and $650.0 million for OG&E), which can also be used as letter of credit facilities. OGE Energy also has a $120.0 million floating rate unsecured three-year credit agreement, of which $60.0 million is considered a revolving loan. The following table presents information about OGE Energy's revolving credit agreements at June 30, 2026.
(Dollars in millions) June 30, 2026
Balance of outstanding supporting letters of credit $ 0.4
Weighted-average interest rate of outstanding supporting letters of credit 1.20 %
Net available liquidity under revolving credit agreements, commercial paper borrowings and letters of credit $ 1,230.5
Balance of cash and cash equivalents $ 0.9
The following table presents information about OGE Energy's total short-term debt activity for the three and six months ended June 30, 2026.
(Dollars in millions) Three Months Ended June 30, 2026 Six Months Ended June 30, 2026
Average balance of short-term debt $ 218.8 $ 323.6
Weighted-average interest rate of average balance of short-term debt 4.11 % 4.01 %
Maximum month-end balance of short-term debt $ 247.5 $ 516.5
OG&E must obtain regulatory approval from the FERC in order to borrow on a short-term basis. OG&E has the necessary regulatory approvals to incur up to $1.0 billion in short-term borrowings at any one time for a two-year period beginning January 1, 2025 and ending December 31, 2026.
Issuance of Long-Term Debt
On April 1, 2026, OG&E issued $350.0 million of 5.90 percent senior notes due April 1, 2056. The proceeds from this issuance were added to OG&E's general funds and used for general corporate purposes, including repayment of short-term debt, repayment of borrowings under OG&E's revolving credit facility, and funding of OG&E's capital investment program and working capital needs.
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 credit facilities could cause annual fees and borrowing rates to increase if an adverse rating impact occurs. The impact of any future downgrade could include an increase in the costs of OGE Energy's short-term borrowings, but a reduction in OGE Energy's credit ratings would not result in any defaults or accelerations. Any future downgrade could also lead to higher long-term borrowing costs and, if below investment grade, would require OGE Energy to post collateral or letters of credit.
A security rating is not a recommendation to buy, sell or hold securities. Such rating may be subject to revision or withdrawal at any time by the credit rating agency, and each rating should be evaluated independently of any other rating.
On April 20, 2026, Moody's Investors Service revised their ratings outlook on both OGE Energy and OG&E to stable from negative. Moody's Investors Service indicated the stabilization of outlooks reflects an expectation that OGE Energy and OG&E will maintain adequate financial metrics over the next few years that are consistent with current rating levels.
Common Stock
In November 2025, OGE Energy entered into FSAs in connection with a completed public offering of 9,226,744 shares of its common stock. The 4,613,372 shares that are subject to the FSAs provide for settlement on a settlement date or dates to be specified at OGE Energy’s discretion on or prior to May 27, 2027. The forward sale price was initially $41.71 per share and is subject to
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adjustment based on a floating interest rate factor equal to the overnight bank funding rate less a spread and less expected dividends on OGE Energy's common stock during the period the instruments are outstanding. See Note 7 within "Item 1. Financial Statements" for further discussion.
Critical Accounting Policies and Estimates
The condensed financial statements and notes thereto contain information that is pertinent to Management's Discussion and Analysis of Financial Condition and Results of Operations. 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. Actual results could differ from those estimates. Changes to these assumptions and estimates could have a material effect on the condensed financial statements. The Registrants believe they have taken reasonable positions where assumptions and estimates are used in order to minimize the negative financial impact to the Registrants that could result if actual results vary from the assumptions and estimates.
In management's opinion, the areas where the most significant judgment is exercised include the determination of pension and postretirement plan assumptions, income taxes, contingency reserves, and regulatory assets and liabilities. The selection, application and disclosure of the critical accounting estimates have been discussed with the Audit Committee of OGE Energy's Board of Directors and are discussed in detail within "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Registrants' 2025 Form 10-K.
Commitments and Contingencies
In the normal course of business, the Registrants are confronted with issues or events that may result in a contingent liability. These generally relate to lawsuits or claims made by third parties, including governmental agencies. When appropriate, management consults with legal counsel and other experts to assess the claim. If, in management's opinion, the Registrants have incurred a probable loss as set forth by GAAP, an estimate is made of the loss, and the appropriate accounting entries are reflected in the condensed financial statements. If the assessment indicates that a potential loss is not probable but reasonably possible, the nature of the contingent matter, together with an estimate of the range of possible loss if determinable and material, would be disclosed. At the present time, based on currently available information, except as disclosed in Note 12 within "Item 1. Financial Statements," the Registrants believe that any reasonably possible losses in excess of accrued amounts arising out of pending or threatened lawsuits or claims would not be quantitatively material to their condensed financial statements and would not have a material adverse effect on their financial position, results of operations or cash flows. See Notes 12 and 13 within "Item 1. Financial Statements" for further discussion of the Registrants' commitments and contingencies.
Environmental Laws and Regulations
The activities of OG&E are subject to numerous stringent and complex federal, state and local laws and regulations governing environmental protection. These laws and regulations can change, restrict or otherwise impact the Registrants' business activities in many ways, including the handling or disposal of waste material, planning for future construction activities to avoid or mitigate harm to threatened or endangered species and requiring the installation and operation of emissions or pollution control equipment. Failure to comply with these laws and regulations could result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements and the issuance of orders enjoining future operations. Management believes that OG&E's operations are in substantial compliance with current federal, state and local environmental standards.
Changes in presidential administrations can result in uncertainty regarding policy or initiatives relating to activities that may affect the environment. In March 2025, the EPA announced that it would begin reconsideration of numerous regulations, including several that apply to OG&E. The EPA has begun this process for certain regulations as described below and must adhere to the legal requirements for enacting, revising, repealing, or replacing agency regulations. Future developments, such as changes in existing laws, introduction of new laws or regulations, or the emergence of new facts or conditions, may result in significant changes to anticipated costs for the Registrants.
Environmental regulation can increase the cost of planning, design, initial installation and operation of OG&E's facilities. Management continues to evaluate its compliance with existing and proposed environmental legislation and regulations and implement appropriate environmental programs in a competitive market.
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Air
OG&E's operations are subject to the Federal Clean Air Act of 1970, as amended, and comparable state laws and regulations. These laws regulate air pollutant emissions from industrial sources, including electric generating units, and require monitoring and reporting. These laws and regulations may require OG&E to secure pre-approval for constructing or modifying projects or facilities that are anticipated to generate air emissions or increase current emission levels. Additionally, OG&E may need to obtain and comply with air permits outlining specific emission and operational requirements or implement emission control equipment. OG&E likely will be required to incur certain capital expenditures in the future for air pollution control equipment and technology in connection with obtaining and maintaining operating permits and approvals for air emissions.
Cross State Air Pollution Rule
In 2015, the EPA updated the ambient air standards for ozone. Although Oklahoma meets these standards, the Clean Air Act requires states to submit implementation plans to the EPA to ensure their emissions do not affect other states. Oklahoma submitted its SIP in 2018. However, in January 2023, the EPA disapproved the SIPs of 19 states, including Oklahoma. In response, the Oklahoma Attorney General, the ODEQ and OG&E filed petitions for review in March 2023. A stay on the EPA's disapproval was granted in July 2023. The timing of further action is currently unknown.
In a related matter, in April 2022, the EPA published a proposed FIP related to the "Good Neighbor" requirements intended to reduce interstate NOx emissions. OG&E commented on this proposed FIP in June 2022. By June 2023, the EPA finalized this plan for 23 states, including Oklahoma. This final Good Neighbor FIP would revise Oklahoma's NOx emissions budget for electric generating units, including OG&E's, starting in 2023. The emissions budget would decrease over time based on achievable reductions. OG&E estimated a 34.5 percent reduction by 2026 from 2023 levels and a 50 percent reduction by 2027 from 2021 levels. Following the FIP issuance, OG&E has been considering options to cut emissions at its generating units, including buying emission allowances, installing selective catalytic reduction systems, switching coal units to gas, or retiring and replacing capacity. OG&E submitted its final 2024 IRP to the OCC and APSC in March 2024, which evaluates various compliance options related to the EPA's Good Neighbor FIP. Due to the uncertainty surrounding the SIP disapproval and FIP implementation, OG&E cannot determine the exact cost of compliance. The costs depend on the litigation outcome, chosen control strategies, regulatory approvals, and project timelines. However, OG&E estimated in mid-2023 that compliance costs could range from $2.4 billion to $2.8 billion, including $100 million to $300 million over the first 12 to 18 months following the FIP's effectiveness. OG&E plans to seek recovery of necessary environmental expenditures but cannot guarantee approval or timely recovery of all such expenditures. In October 2023, several petitioners sought a stay of the final FIP from the U.S. Supreme Court, pending review of the challenges in the U.S. Court of Appeals for the District of Columbia. The U.S. Supreme Court granted the stay in June 2024. The EPA requested a delay in the case in February 2025, which was denied. In March 2025, the EPA sought to reconsider the rule without vacating it. The D.C. Circuit Court agreed to hold the case in abeyance in April 2025, requiring status reports every 90 days. The timing of further action is unknown.
The EPA has indicated that it intends to reconsider both the SIP disapprovals and the final FIP in a two-phase reconsideration rulemaking. In January 2026, the EPA proposed its "Phase 1" reconsideration of SIP disapprovals for several states. The EPA did not include the disapproved Oklahoma SIP in "Phase 1" but indicated that it intends to address the remaining states, including Oklahoma, in a separate action. The timing of further action is unknown.
Particulate Matter NAAQS
In February 2024, the EPA issued a final rule resulting from its reconsideration of the primary (health-based) and secondary (welfare-based) NAAQS for PM, which were set in 2013 and which the EPA declined to revise in 2020. The final rule lowers the primary annual PM2.5 NAAQS from 12.0 µg/m3 to 9.0 µg/m3 and retains the other PM standards at their current levels, including the 24-hour PM2.5 NAAQS. The Clean Air Act requires the EPA to determine which areas of the country meet the standards, such as making initial attainment and nonattainment designations, no later than two years after new standards are issued. States must develop and submit attainment plans no later than 18 months after the EPA finalizes nonattainment designations.
In June 2024, a coalition of 24 states, including Oklahoma, filed challenges to the final rule in the D.C. Circuit, and a separate coalition of states and other stakeholders filed to intervene in these challenges on behalf of the EPA. A coalition of 22 state governors separately requested the EPA to pause implementation of the final rule. In June 2026, the D.C. Circuit issued an opinion denying the challenges and upholding the primary annual PM2.5 NAAQS of 9.0 µg/m3 as revised in 2024.
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The revised NAAQS could impact regional air quality goals and emission limits for emission sources, and it could affect pre-construction permitting for the siting of new emission sources; however, it is unknown at this time what, if any, potential material impacts to OG&E individual operating permit emission limits or the siting of new sources will result from the EPA actions.
Regional Haze
In July 2020, the ODEQ notified OG&E that the Horseshoe Lake generating units that were in-service at the time would be included in Oklahoma's second Regional Haze implementation period evaluation of visibility impairment impacts to the Wichita Mountains. OG&E submitted an analysis of all potential control measures for NOx on these units to the ODEQ. The ODEQ submitted a revised SIP to the EPA in August 2022. In February 2026, the EPA proposed to approve the Oklahoma SIP revision, and a 2024 consent decree requires the EPA to take final action no later than December 31, 2026. It is unknown at this time what the outcome, or any potential material impacts, if any, will be from the evaluations by OG&E, the ODEQ and the EPA.
Mercury and Air Toxics Standards
In April 2024, the EPA released the final revised Mercury and Air Toxics Standards regulation with a compliance date in July 2027. A coalition of states, including Oklahoma, challenged this rule in the D.C. Circuit Court and sought a stay, which was denied. This coalition of states then filed an emergency stay application with the U.S. Supreme Court, which was also denied. In April 2025, the EPA extended the compliance deadline to July 8, 2029. In June 2025, the EPA proposed to repeal the revised Mercury and Air Toxics Standards; the repeal was finalized in February 2026, removing the emission limit and monitoring requirements revised in 2024. In March 2026, the repeal was challenged in the D.C. Circuit Court. The potential material impacts, if any, of further actions by the EPA or final action by the D.C. Circuit Court are currently unknown.
Greenhouse Gas
OG&E monitors developments in federal greenhouse gas (“GHG”) emissions regulations applicable to fossil fuel-fired electric generating units. Changes in legal standards, including the implementation of rules for the power sector finalized by the EPA in 2024 or the adoption of new regulations, could require significant capital investment and compliance expenditures. If such costs are not recoverable through regulated rates, OG&E’s financial position, results of operations, and cash flows could be materially affected.
In May 2024, the EPA issued final rules establishing (i) emission guidelines under Section 111(d) of the Clean Air Act for existing fossil fuel-fired steam generating units and (ii) revised standards of performance under Section 111(b) for new natural gas-fired combustion turbines. Under these rules, existing coal-fired units that intend to operate beyond 2039 must achieve 90 percent carbon capture by 2032. Units that plan to operate until 2039 must co-fire with natural gas at 40 percent by 2030. Units that retire by 2032 are exempt from these requirements.
OG&E’s existing natural gas-fired boilers satisfy the new standards and therefore require no additional compliance measures other than reporting. For new natural gas-fired combustion turbines commencing construction after May 23, 2023, the 2024 GHG rules establish three subcategories—baseload, intermediate-load, and low-load—based on capacity factor thresholds, all of which are subject to efficiency requirements. Baseload units, defined as units with capacity factors greater than 40 percent, are also required to achieve 90 percent CO₂ capture by January 1, 2032.
Significant litigation related to these 2024 GHG rules is ongoing. In February 2025, the D.C. Circuit placed the litigation in abeyance at the EPA’s request while the agency reconsiders the 2024 GHG rules.
In June 2025, the EPA proposed to repeal the 2024 GHG rules for both existing and new units or, alternatively, to repeal the 2024 GHG rules for existing units and rescind the carbon capture requirements applicable to new combustion turbines. OG&E submitted comments on the 2025 proposed rules individually and through trade associations. The repeal rulemaking is in process, and the EPA's proposed final rule is undergoing review at the Office of Management and Budget after which the EPA will finalize and publish the rule in the Federal Register. Although the EPA has initiated reconsideration and proposed repeal, the 2024 power sector GHG rules have not been stayed, and future compliance timelines remain in effect. If the new emission standards and guidelines are implemented, compliance costs could be significant. OG&E continues to monitor these developments and plan for compliance with 2024 GHG rules standards currently in effect.
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Separately, in February 2026, the EPA released a final rule that rescinds the agency’s 2009 Endangerment Finding, which determined that GHG emissions endanger public health and welfare. While rescinding the Endangerment Finding would not directly alter the 2024 GHG rules, it may result in increased regulatory uncertainty for the power sector as future generation needs are considered.
OG&E cannot predict the outcome of the EPA’s reconsideration process, the proposed repeal, or the pending litigation. However, the 2024 GHG rules remain in effect and could result in material compliance obligations and associated costs. OG&E continues to monitor these regulatory developments and evaluate potential impacts on its operations.
Endangered Species
Certain federal laws, including the Bald and Golden Eagle Protection Act, the Migratory Bird Treaty Act and the Endangered Species Act, provide special protection to certain designated species. These laws and any state equivalents provide for significant civil and criminal penalties for unpermitted activities that result in harm to or harassment of certain protected animals and plants, including damage to their habitats. If such species are in an area in which OG&E conducts operations, or if additional species in those areas become subject to protection, OG&E's operations and development projects, particularly transmission, wind or solar projects, could be restricted or delayed, or OG&E could be required to implement expensive mitigation measures.
Waste
OG&E's operations generate wastes that are subject to the Federal Resource Conservation and Recovery Act of 1976 as well as comparable state laws which impose detailed requirements for the handling, storage, treatment and disposal of waste.
Ash from OG&E's River Valley, Muskogee and Sooner facilities is recovered and reused off-site in various ways, including soil stabilization, landfill cover, road base construction and cement and concrete production. Reusing fly ash reduces the need to manufacture cement resulting in reductions in greenhouse gas emissions from cement and concrete production.
OG&E has sought and will continue to seek pollution prevention opportunities and to evaluate the effectiveness of its waste reduction, reuse and recycling efforts. OG&E obtains refunds from the recycling of scrap metal, salvaged transformers and used transformer oil. Additional savings are expected to be gained through the reduction and/or avoidance of disposal costs and the reduction in material purchases due to the reuse of existing materials.
Water
OG&E's operations are subject to the Federal Clean Water Act and comparable state laws and regulations. These laws and regulations impose detailed requirements and strict controls regarding the discharge of pollutants into state and federal waters.
In 2015, the EPA issued a final rule addressing the effluent limitation guidelines for power plants under the Federal Clean Water Act. The final rule establishes technology- and performance-based standards that may apply to discharges of six waste streams including bottom ash transport water. In April 2024, the EPA released a supplemental effluent limitations guidelines rule. OG&E's installation of dry bottom ash handling technology at an affected facility complies with the 2024 rule requiring facilities to cease discharging bottom ash transport water. OG&E is evaluating compliance options at another affected facility, and in December 2025, the EPA published a final rule revising the deadline to cease bottom ash transport water discharge to December 31, 2034.
OG&E has made investments in its infrastructure at Redbud and McClain that have led to OG&E's use of treated municipal effluent for cooling water at each plant, which offsets the need for fresh water as cooling water, making fresh water available for other beneficial uses like drinking water, irrigation and recreation.
Site Remediation
The Comprehensive Environmental Response, Compensation and Liability Act of 1980 and comparable state laws impose liability, without regard to the legality of the original conduct, on certain classes of persons responsible for the release of hazardous substances into the environment. Because OG&E utilizes various products and generates wastes that are considered hazardous substances for
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purposes of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, OG&E could be subject to liability for the costs of cleaning up and restoring sites where those substances have been released to the environment. No associated liability is expected to significantly impact OG&E at this time.