OGE Energy (OGE)

A change in the jurisdictional characterization of some of Enogex’s assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of its assets, which may cause its revenues to decline and operating expenses to increase.

Enogex’s natural gas gathering and intrastate transportation operations are generally exempt from the jurisdiction of the FERC under the Natural Gas Act of 1938, but FERC regulation may indirectly impact these businesses and the markets for products derived from these businesses. The FERC’s policies and practices across the range of its oil and natural gas regulatory activities, including, for example, its policies on interstate open access transportation, ratemaking and capacity release and its promotion of market centers, may indirectly affect intrastate markets. In recent years, the FERC has aggressively pursued pro-competitive policies in its regulation of interstate oil and natural gas pipelines. However, we cannot assure you that the FERC will continue to pursue these same objectives as it considers matters such as pipeline rates and rules and policies that may indirectly affect intrastate natural gas transportation business.

Enogex’s natural gas transportation and storage operations are subject to regulation by the FERC pursuant to Section 311 of the NGPA, which could have an adverse impact on its ability to establish transportation and storage rates that would allow it to recover the full cost of operating its transportation and storage facilities, including a reasonable return, and an adverse impact on its consolidated financial position, results of operations or cash flows.

The FERC has jurisdiction over transportation rates charged by Enogex for transporting natural gas in interstate commerce under Section 311 of the NGPA. Rates to provide such service must be “fair and equitable” under the NGPA and are subject to review and approval by the FERC at least once every three years. Enogex is currently charging rates for its Section 311 transportation services that were deemed fair and equitable under a rate settlement approved by the FERC for the period from January 1, 2005 until December 31, 2007. On October 1, 2007, Enogex made its required triennial filing for rates and in its filings proposed the new rates to be effective January 1, 2008. A number of interventions have been filed in response to Enogex’s triennial filings and some of the intervening parties also filed protests. Enogex has not been able to reach a resolution of the issues with the protesting parties but expects to continue to have discussions with customers and to participate in settlement discussions with the FERC Staff and other interested parties. Enogex has not yet placed the higher

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proposed rates into effect. Enogex cannot predict what the settlement terms will be or, if not settled, what determinations the FERC will make with respect to this proceeding or what impact, if any, those determinations might have on Enogex’s ability to establish transportation rates that would allow Enogex to recover the full cost, including a reasonable return, of operating its transportation facilities and that portion of its storage capacity used in support of transportation services. Accordingly, Enogex cannot predict what impact, if any, such determinations could have on its consolidated financial position, results of operations or cash flows.

Enogex’s natural gas transportation, storage and gathering operations are subject to regulation by agencies in Oklahoma and Texas, and that regulation could have an adverse impact on its ability to establish rates that would allow it to recover the full cost of operating its facilities, including a reasonable return, and its consolidated financial position, results of operations or cash flows.

State regulation of natural gas transportation, storage and gathering facilities generally focuses on various safety, environmental and, in some circumstances, nondiscriminatory access requirements and complaint-based rate regulation. Natural gas gathering may receive greater regulatory scrutiny at the state level; therefore, Enogex’s natural gas gathering operations could be adversely affected should they become subject to the application of state regulation of rates and services. Enogex’s gathering operations also may be or become subject to safety and operational regulations relating to the integrity, design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional rules and legislation pertaining to these matters are considered and, in some instances, adopted from time to time. We cannot predict what effect, if any, such changes might have on Enogex’s operations, but Enogex could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes. Other state and local regulations also may affect Enogex’s business. Any such state regulation could have an adverse impact on Enogex’s business and its consolidated financial position, results of operations or cash flows.

A change in the jurisdictional characterization of some of Enogex’s assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of its assets, which may cause its revenues to decline and operating expenses to increase.

Enogex’s natural gas gathering and intrastate transportation operations are generally exempt from the jurisdiction of the FERC under the Natural Gas Act of 1938, but FERC regulation may indirectly impact these businesses and the markets for products derived from these businesses. The FERC’s policies and practices across the range of its oil and natural gas regulatory activities, including, for example, its policies on interstate open access transportation, ratemaking and capacity release and its promotion of market centers, may indirectly affect intrastate markets. In recent years, the FERC has aggressively pursued pro-competitive policies in its regulation of interstate oil and natural gas pipelines. However, we cannot assure you that the FERC will continue to pursue these same objectives as it considers matters such as pipeline rates and rules and policies that may indirectly
affect intrastate natural gas transportation business.

Enogex’s natural gas transportation and storage operations are subject to regulation by the FERC pursuant to Section 311 of the NGPA, which could have an adverse impact on its ability to establish transportation and storage rates that would allow it to recover the full cost of operating its transportation and storage facilities, including a reasonable return, and an adverse impact on its consolidated financial position, results of operations or cash flows.

The FERC has jurisdiction over
transportation rates charged by Enogex for transporting natural gas in interstate commerce under Section 311 of the NGPA. Rates to provide
such service must be “fair and equitable” under the NGPA and are subject to review and approval by the FERC at least once every three
years. Enogex is currently charging rates for its Section 311 transportation services that were deemed fair and equitable under a rate settlement
approved by the FERC for the period from January 1, 2005 until December 31, 2007. On October 1, 2007, Enogex made its required triennial filing for
rates and in its filings proposed the new rates to be effective January 1, 2008. A number of interventions have been filed in response to Enogex’s
triennial filings and some of the intervening parties also filed protests. Enogex has not been able to reach a resolution of the issues with
the protesting parties but expects to continue to have discussions with customers and to participate in settlement discussions with the FERC Staff and other
interested parties. Enogex has not yet placed the higher

25

proposed rates into effect. Enogex cannot predict what the settlement terms will be or, if not settled,
what determinations the FERC will make with respect to this proceeding or what impact, if any, those determinations might have on Enogex’s ability to establish
transportation rates that would allow Enogex to recover the full cost, including a reasonable return, of operating its transportation facilities and that portion of
its storage capacity used in support of transportation services. Accordingly, Enogex cannot predict what impact, if any, such determinations could have on its consolidated
financial position, results of operations or cash flows.

Enogex’s natural gas transportation, storage and gathering operations are subject to regulation by agencies in Oklahoma and Texas, and that regulation could have an adverse impact on its ability to establish rates that would allow it to recover the full cost of operating its facilities, including a reasonable return, and its consolidated financial position, results of operations or cash flows.

State regulation of natural gas transportation, storage and gathering facilities generally focuses on various safety, environmental and, in some circumstances, nondiscriminatory access requirements and complaint-based rate regulation. Natural gas gathering may receive greater regulatory scrutiny at the state level; therefore, Enogex’s natural gas gathering operations could be adversely affected should they become subject to the application of state regulation of rates and services. Enogex’s gathering operations also may be or become subject to safety and operational regulations relating to the integrity, design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional rules and legislation pertaining to these matters are considered and, in some instances, adopted from time to time. We cannot predict what effect, if any, such
changes might have on Enogex’s operations, but Enogex could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory changes. Other state and local regulations also may affect Enogex’s business. Any such state regulation could have an adverse impact on Enogex’s business and its consolidated financial position, results of operations or cash flows.