Enterprise ServicesCost Allocation Manual

2013

Table of Contents

Allocation Overview 3Allocation Objectives 5Allocation Categories 6Driver Based Settlements 9Distrigas Allocations 10Total Allocations for 2013 12Overheads Applied 13Direct Support 14Indirect Support 15

Allocation Overview

The purpose of the Enterprise Services allocation process is to distribute corporate costs to the various business units in a transparent and equitable manner.

During 2013, to the extent possible, corporate costs are assigned directly to the business unit for whom the work is being performed. For those costs not directly assignable, we will begin defining the cost drivers where feasible. If no specific cost driver can be assigned, we will utilize the commonly accepted Distrigas (Three factor method) for allocations.

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Allocation Overview

There are three basic methods of allocating our corporate support costs:

Overheads - Certain defined costs, allowable for capitalization and incurred by the business as a whole, that are not directly attributable to a specific project or process, but are shared by all projects and processes. These costs are applied to

all work based on certain cost elements as defined by the overhead.Direct Support - Costs expended by Corporate functions in support of a specific business unit. These costs are charged and settled directly to the business unit.

Indirect Support - Costs expended by Corporate functions in support of the business as a whole. These costs are applied based on the settlement basis (driver) of the work. If no defined driver, these costs are settled based on the three factor method (Distrigas).

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Allocation Objectives

• Direct assignment of costs to the correct business unit or business activity where possible.

• Assign drivers to costs that are not directly assigned for equitable spread across business units.

• Establish responsibility and accountability for support provided.

• Make costs visible.

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Allocation Categories - Overhead

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Purchasing – Costs related to the procurement of goods and services.

Warehousing – Costs related to the storage and movement of goods.

Facilities - Costs related to the upkeep of physical locations.

Computing Equipment - Cost of acquisition, operation, and maintenance of computing equipment, software, and data network. Includes acquisition and annual maintenance of each PC or server, other associated equipment and the operation and maintenance of the local and wide area networks, intra/inter net.

Information Systems - Costs related to general operation and maintenance of the Corporate Enterprise Solution including SAP/R3 (financial and work management systems), SAP/CCS (customer billing system), and CADS/OMS (outage management system).

Telephone- Costs related to the acquisition, operation, and maintenance of the telephone systems.

Radio - Costs related to the acquisition, operation, and maintenance of radio communication system.

Allocation Categories - Overheads Applied Detail

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All costs categorized as overheads are first assigned to either a specific business unit, or a non-specific cost collector. Those costs are then allocated across all projects and processes within that group.

Purchasing Overhead Applied to all work projects and process, based on the dollars recorded against certain cost elements. The cost element Group PURCH-ALOC includes Non-Stock materials, Outside Services, Professional Services, Rentals, Communications, Fleet, etc. This group includes all cost elements for which Purchase Orders are created.

Warehousing Overhead Applied based on the dollars recorded as stock materials, materials issued from the warehouse

Facilities, Computing Equipment, Information Systems, Telephone, and Radio OverheadsApplied based on the dollars recorded as internal labor. These items are all used in the day to day work of each employee, and therefore follow employee labor activity.

Allocation CategoriesDirect and Indirect Support

The following functions charge costs both directly to a business unit, and have costs that are for the benefit of all business units. Each area has cost collectors that designate either direct or indirect cost charging and identify the driver and recipient of the charge.

Executive Audit

Corporate Secretary, Compliance, Security Legal

Public Affairs Human Resources

Accounting, Finance, Treasury Regulatory

Strategy, Marketing Corporate Risk

Information Technology Supply Chain

Business Process Improvements

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Driver Based Settlements

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The table below shows the indicator used to move Enterprise Services’ costs, how often the rule is updated and who has responsibility for updating. Each Cost Collector will have one rule assigned.

NAME Description Frequency Responsibility Used when0001BASIS 0001 RCC for all CE Perpetual Accounting Holding Company costs that do not get allocated. These costs remain in Co 0001.

0400BASIS 0400 RCC for all CE Perpetual Cost Accounting Utility Costs that are corporate in nature and remain in Co 0400.

APINVOICES AP Invoices by Comp Quarterly Cost Accounting Corporate Accounts Payable costs allocated to all Business Units.

DIRECT Non0001 Direct to CC Perpetual Cost Accounting Cost that is incurred for a specific Business Unit or Area.

DIRECTENOG Direct to Enogex CC Perpetual Cost Accounting Corporate Cost incurred specifically on behalf of Enogex.

DIRECTUTIL Direct to Utility CC Perpetual Cost Accounting Corporate Cost incurred specifically on behalf of the Utility.

DISTRIGAS Distrigas to multiple CC's Annual Finance 3 Factor Method of allocation for shared corporate costs with no defined driver.

GIS Software Licenses Annual IT GIS Software related costs shared by Enogex and the Utility.

GPTS Gather/Process/Transport/Storage Annual Enogex Finance Corporate Costs in support of all Enogex Business Units.

HEADCOUNT By Headcount % Quarterly Cost Accounting Corporate Costs that fluctuate or are driven by the number of employees.

LGLGENCSL Leg Gen Counsel Fees Annual Legal Cost allocation determined by the Legal Department based on current caseload.

OGEEGXHOLD OGE Enog Hold LLC Annual Finance Holding Company Costs in Support of Enogex Holding Company.

OPNJOBREQ Open Job Reqs Quarterly Cost Accounting Corporate Recruitment costs incurred for the benefit of all Business Units.

UTIL DSGAS Utility Distrigas Annual Finance Corporate Costs in support of all Utility Business Units

UTIL SALRY Utility Payroll and Benefit Annual Accounting Corporate costs incurred for Utility specific Benefits - Regulatory Pension accruals

Three Factor (Distrigas) Allocations

Distrigas method is used to calculate the split between the Utility and Enogex. The percentages calculated are based on three factors: Net Operating Revenue Gross Plant Payroll

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Three Factor (Distrigas) Allocations

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For the Year 2013 Distrigas

Based on 12 Months Ended August 2012

OG&E Enogex Total

     

Net Operating Revenue $1,231,568 $470,105 $1,701,673

72.37% 27.63% 100.00%

Gross Plant 8,335,575 2,812,744 11,148,319

74.77% 25.23% 100.00%

Payroll 186,233 71,894 258,127

72.15% 27.85% 100.00%

     

Total $9,753,377 $3,354,744 $13,108,121

     

% Allocation 73.10% 26.90% 100.00%

Total Allocations for 2013Based on 2013 Budget $ in 000’s

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Power Supply

Power Delivery

Retail Energy

OG&E Utility Corporate Services Enogex

Utility Capital

Enogex Capital

Other Capital  

Total Allocations

Overheads $ 7,114 $ 4,429 $ 2,083 $ 2,270 $ 6,401 $ 13,752 $ 1,954 $ 101 $ 38,104

Direct Support 20,359 30,980 10,877 (10,567) 8,699 60,348

Indirect Support 10,492 18,850 4,123 972 12,856 47,293

Total Allocations from Enterprise Services $ 37,965 $ 54,259 $ 17,083 $ (7,325) $ 27,956 $ 13,752

$ 1,954 $ 101

  $ 145,745

Overheads Applied to WorkBased on 2013 Budget $ in 000’s

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Power Supply

Power Delivery

Retail Energy

OG&E Utility

Corporate Services Enogex

Utility Capital

Enogex Capital

Other Capital

Total Overheads

Applied

Purchasing $ 203 $ 177 $ 14 $ 68 $ 112 $ 3,222 $ 958 $ 14 $ 4,768

Warehousing 1,065 231 - 1 1 4,445 224 - 5,967

Facilities 550 436 146 211 728 500 73 11 2,655

Computing Equipment 760 603 201 291 1,001 692 100 15 3,663

Information Systems 2,993 2,349 1,313 1,106 2,780 2,673 278 42 13,534

Telephone 1,356 1,076 359 521 1,689 1,236 169 18 6,424

Radio 187 257 50 72 220 284 22 1 1,093

Planning Adjustments - (700) - - (130) 700 130 - -

Total Overheads Applied $ 7,114 $ 4,429 $ 2,083 $ 2,270 $ 6,401 $ 13,752 $ 1,954 $ 101 $ 38,104

Direct SupportBased on 2013 Budget ($ in 000’s)

.

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Power Supply

Power Delivery

Retail Energy

OG&E Utility

Corporate Services Enogex

Total Allocations

Executive $ 1,402 $ 2,540 $ 394 $ (1,442) $ 297 $ 3,191

Corporate Secretary and Compliance 3,143 2,250 470 - 250 6,113

Audit 124 161 126 - 354 765

Public Affairs 3 6 1 545 - 555

Accounting, Finance & Treasury 2,555 4,031 749 632 2,246 10,213

Human Resources 1,776 3,111 626 - - 5,513

Legal 1,782 2,553 464 - 10 4,809

Strategy and Marketing 1,189 2,237 4,965 (7,234) 1 1,158

Corporate Risk 1,674 3,146 677 - 4,541 10,038

Regulatory Affairs - - - 5 - 5

Information Technology 854 3,314 871 - 790 5,829

Supply Chain 3,074 4,164 817 - 210 8,265

Business Process Improvements 1,204 2,015 675 - - 3,894

Utility Technical Training 1,579 1,452 42 (3,073) -

Total Indirect Support $ 20,359 $ 30,980 $ 10,877

$ (10,567) $ 8,699 $ 60,348

Indirect SupportBased on 2013 Budget ($ in 000’s)

.

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Power Supply

Power Delivery

Retail Energy

OG&E Utility

Corporate Services Enogex

Total Allocations

Executive $ 945 $ 1,776 $ 382 $ (8) $ 1,142 $ 4,237

Corporate Secretary and Compliance 970 1,818 390 2 1,167 4,347

Audit 307 578 124 - 371 1,380

Public Affairs 864 1,520 343 145 1,053 3,925

Accounting, Finance & Treasury 1,119 1,796 373 199 1,487 4,974

Human Resources 1,352 2,081 512 634 1,669 6,248

Legal 408 767 166 - 493 1,834

Strategy and Marketing 324 610 131 - 392 1,457

Corporate Risk 233 439 95 - 282 1,049

Information Technology 2,712 5,099 1,098 - 3,279 12,188

Supply Chain 1,255 2,360 508 - 1,517 5,640

Business Process Improvements 3 6 1 - 4 14

Total Indirect Support $ 10,492 $ 18,850 $ 4,123 $ 972 $ 12,856 $ 47,293