BEFORE THE CORPORATION COMMISSION OF OKLAHOMA

6 IN THE MATTER OF THE APPLICATION OF OKLAHOMA GAS AND ELECTRIC COMPANY FOR COMMISSION APPROVAL OF THE COMPANY'S PLAN TO INSTALL DRY SCRUBBERS AT THE SOONER GENERATING FACILITY

)

)

)

)

)

)

CAUSE NO. PUD 201600059

ORDER NO. 65220S

HEARING: April 4-6, 2015, in Courtroom 301 2101 North Lincoln Boulevard, Oklahoma City, Oklahoma 73105 Before the Oklahoma Corporation Commission En Banc with Judge Ben Jackson, as Referee

APPEARANCES: Kimber L. Shoop, William Bullard, Patrick Shore, and William L. Humes, Attorneys representing Oklahoma Gas and Electric Company

Natasha M. Scott, Senior Attorney representing Public Utility Division, Oklahoma Corporation Commission

Dara Derryberry, and Kimberly Carnley, Assistant Attorneys General, representing Office of the Oklahoma Attorney General

Cheryl Vaught, Scot A. Conner and Jon W. Laasch, Attorneys representing Oklahoma Energy Results, LLC

Thomas P. Schroedter and Jennifer H. Castillo, Attorneys representing Oklahoma Industrial Energy Consumers

Ronald E. Stakem and Jack G. Clark, Jr., Attorneys representing OG&E Shareholders Association

Jacquelyn Dill, S. Laurie Williams and Kristin A. Henry, Attorneys representing Sierra Club

Marc Edwards, Dominic Williams and James A. Roth, Attorneys representing Oklahoma Cogeneration L.L.0

Deborah R. Thompson, Attorney representing AARP Charles Helm, Attorney representing Continental Resources and JMA

Energy A.J. Ferate, Attorney representing Oklahoma Independent Petroleum

Association Russell Walker, Attorney representing PaZone Energy, LLC

FINAL ORDER

This Cause comes on before the Oklahoma Corporation Commission (Commission) on the Application of Oklahoma Gas and Electric (OG&E. Company or Applicant) for pre-approval of the Company's plan to install scrubbers at its Sooner coal-fired generating facility. The Commission heard the matter en banc with the assistance of Referee Ben Jackson.

The EPA promulgated two sets of regulations under the federal Clean Air Act (i.e., the Regional Haze (RH) rule and the Mercury and Air Toxics Standards (MATS) rule) that

Final Order Cause PUD 201600059 Page 2 of 12

directly affect certain OG&E coal and natural gas-fired generating facilities. These rules require OG&E to take steps to meet new emission limits for nitrogen oxide (NOx), sulfur dioxide (SO2), and mercury. The deadline for meeting these SO 2 emission requirements is January 4, 2019.

In Cause No. PUD 201400229 (Cause 229), the Commission declined OG&E's request for pre-approval of cost recovery for a broad Environmental Compliance Plan and Mustang Modernization Plan. However, the Commission remains well aware of the benefit to customers of preserving fuel diversity and, in Cause 229, the Commission did not specifically address the merits of installing scrubbers at Sooner. Instead, the Company's previous request addressed equipment and facilities at several of the Company's generating units and involved several ratemaking issues. In the present Cause, the Commission is asked for the first time to consider only the pre-approval of the Sooner scrubbers. Also, OG&E is not requesting such pre-approval under 17 O.S. §286(B), but under the Commission's general authority under Oklahoma Constitution Article IX, §18 and 17 O.S. §151, et seq. While pre-approval under §286(B) raised issues about cost recovery riders, pre-approval under Oklahoma Constitution Article IX, § 18 and 17 O.S. §151 does not implicate any cost recovery riders and OG&E has stated that any cost recovery will be addressed in subsequent proceedings.

Procedural History

On February 6, 2016, OG&E filed its application to seek Commission approval of its plan to install two dry scrubbers at the Sooner Plant to comply with the RH rule under the Federal Clean Air Act (Application). The Company also filed the Direct Testimony of Donald R. Rowlett to support the Application. OG&E also filed a Motion to Determine Notice Requirements, a Motion for Protective Order and a Motion to Establish Procedural Schedule. These Motions were set for hearing beginning February 23, 2016.

On February 16, 2016, a Notice of Initial Screening Conference was filed. The Oklahoma Attorney General (AG) also filed Entry of Appearance for Dara Derryberry and Eric Davis.

On February 17, 2016, the Commission Public Utility Division (PUD) filed an Affidavit of Electronic Mailing to show notice given for the Initial Screening Conference to be held February 23, 2016.

On February 19, 2016, Oklahoma Industrial Energy Consumers (OIEC) and Oklahoma Energy Results (OER) filed Entries of Appearance.

On February 22, 2016, OG&E Shareholder's Association (Shareholders) filed an Entry of Appearance. On that date, OER also filed a Response in Opposition to OG&E's Motion to Establish Procedural Schedule and OER filed a Motion to Dismiss and Brief in Support.

On February 23, 2016 the Sierra Club filed an Entry of Appearance and Sierra Club filed a Motion to Associate Counsel for attorney Kristin A. Henry.

Final Order Cause PUD 201600059 Page 3 of 12

On February 23, 2016, the Sierra Club filed a Motion to Dismiss OG&E's Application.

On February 23, 2016, the Commissioners held the Initial Screening Conference and assigned Judge Jackson as Referee. On that date arguments on the Proposed Procedural Schedule were held before the Commissioners.

On February 24, 2016, Oklahoma Cogeneration LLC (OK Cogen) filed an Entry of Appearance with Jim Roth, Marc Edwards, and Dominic Williams. AARP also filed Entry of Appearance for Deborah Thompson.

On February 24, 2016, OG&E filed a Response to Sierra Club's Motion to Dismiss. Also on February 24, 2016 the Commissioners heard arguments on Sierra Club's Motion to Dismiss. On that date, Referee Jackson continued the hearing on Motion to Establish Procedural Schedule.

On February 24, 2016, the Commissioner's issued Order No. 650192 approving Form of Notice and issued Order No. 650191 Granting Motion for Protective Order.

On February 25, 2016, the Commissioners and Referee Jackson heard arguments on OER's Motion to Dismiss. On that date, the Commissioners denied Sierra Club's and OER's Motion to Dismiss.

On February 25, 2016, Referee Jackson continued the hearing on OG&E's Motion to Establish Procedural Schedule until February 29, 2016.

On February 26, 2016, OG&E filed Entry of Appearance for William J. Bullard.

On February 29, 2016, OG&E filed the Affidavit of James Allen and Sierra Club filed a Supplement to Motion to Associate Counsel.

On February 29, 2016, the Commission issued Order No. 650330 approving OG&E's Motion to Establish Procedural Schedule and set the hearing on the merits to begin April 4, 2016.

On March 1, 2016, Oklahoma Independent Petroleum Association (OIPA) filed Entry of Appearance and OIEC filed a List of Authorities in Opposition to Request to Certify Order Denying Motion to Dismiss. Additionally, the Commissioners announced that an En Banc Hearing on Motion to Associate Counsel for Sierra Club was continued until March 3, 2016.

On March 2, 2016, OG&E filed a List of Authorities in Opposition to Request to Certify Order Denying Motion to Dismiss and Sierra Club filed List of Authorities in Support of Sierra Club and OER's Request to Certify Order Denying Motion to Dismiss. Additionally, on March 2, 2016, OER filed a List of Authorities in Support of Request for Certification.

On March 3, 2016, the Commission issued Order No. 650442 approving Sierra Club's Motion to Associate Counsel Kristin A. Henry.

Final Order Cause PUD 201600059 Page 4 of 12

On March 8, 2016, Sierra Club filed an Unopposed Motion for Clarification.

On March 10, 2016, the AG filed Entry of Appearance for Kimberly Carnley.

On March 10, 2016, the Commission issued Order No. 650637 and Order No. 650638 denying OER's and Sierra Club's Motions to Dismiss and Order No. 650639 approving Sierra Club's Unopposed Motion for Clarification.

On March 14, 2016, OK Cogen filed Responsive Testimony Statement of Incorporation and PUD filed the Responsive Testimony of Jason C. Chaplin. On March 14, 2016, the Sierra Club filed the Responsive Testimony of Tyler Comings.

On March 18, 2016, Statements of Position were filed by OIPA. OG&E Shareholders, OER, AARP, OIEC and the AG.

On March 21, 2016, OG&E filed an Affidavit of Publication.

On March 23, 2016, Sierra Club filed the Rebuttal Testimony of Tyler Comings.

On March 28, 2016, OER filed a Motion for Summary Judgment and Brief in Support.

On March 29, 2016, OIPA filed a Statement of Position.

On March 30, 2016, the Pre-Conference Hearing was held and OER's Motion for Summary Judgment was continued until April 4, 2016.

On March 30, 2016. OG&E filed an Objection to Sierra Club's Fourth Set of Data Requests. The Hearing on this Objection was set for April 4, 2016. OG&E also filed the Testimony Summary of Donald R. Rowlett and PUD filed the Testimony Summary of Jason Chaplin.

On March 31, 2016, the Sierra Club filed an Errata to Rebuttal Testimony of Tyler Comings.

On April 1, 2016, OG&E, AG, Sierra Club, Attorney General, PUD, OG&E Shareholder's, OIEC, OER, OK Cogeneration, and AARP filed Exhibit Lists.

On April 1, 2016, the AG filed Notice of Withdrawal as Counsel for Assistant Attorney General, Eric Davis.

On April 4, 2016, PaZone Energy, LLC (PaZone) filed an Entry of Appearance for Russell Walker and OG&E filed a Response to OER's Motion for Summary Judgment.

Final Order Cause PUD 201600059 Page 5 of 12

On April 4, 2016, the hearing on the merits commenced in this cause with Public Comments and arguments on OG&E's Objection to Sierra Club's Fourth Set of Data Requests, and OER's Motion for Summary Judgment. Referee Jackson took the matters under advisement. The hearing on the merits continued each business day through April 6, 2016, with public comments received each business day. On April 6, 2016 Referee Jackson sustained OG&E's objection to Sierra Club's Fourth Set of Data Requests.

On April 15, 2016, Proposed Orders were filed by PaZone, OER, OG&E, PUD, AARP and the AG. Also on this date, Post-Hearing Briefs were filed by OER and Sierra Club.'

Summary of the Evidence and Statements of Position

On February 12, 2016, OG&E filed written Direct Testimony of Donald R. Rowlett.

On March 10, 2016, the Commission entered Order No. 650639 in this Cause wherein the Commission ordered that it was "incorporating the entire record from Cause No. PUD 201400229 into the present cause, including all testimony and testimony exhibits, hearing transcripts, trial exhibits, filings, briefs, and Commission deliberation transcripts."

On March 14, 2016, Oklahoma Cogeneration filed its Responsive Testimony Statement of Incorporation.

On March 14, 2016, Staff filed written Responsive Testimony of Jason C. Chaplin.

On March 17, 2016, Sierra Club filed written Responsive Testimony of Tyler Comings.

On March 24, 2016, Sierra Club filed written Rebuttal Testimony of Tyler Comings.

On March 30, 2016, Staff filed written Summary Testimony of Jason C. Chaplin.

On March 30, 2016, OG&E filed written Testimony Summary of Donald R. Rowlett.

On March 31, 2016, Sierra Club filed written Errata to Rebuttal Testimony of Tyler Comings.

On March 31, 2016, Sierra Club filed written Summary of Responsive and Rebuttal Testimony of Tyler Comings.

On March 18, 2016, Statements of Position were filed by OIPA, OG&E Shareholders Association, OER, AARP, OIEC and AG.

OIPA filed a second Statement of Position on March 29, 2016.

Sierra Club's Post-Hearing Brief included a Proposed Order.

Final Order Cause PUD 201600059 Page 6 of 12

Continental Resources, Inc. filed a Statement on April 6, 2016.

In addition, all witnesses filing written testimony appeared and testified at the hearing on the merits where a full transcript of the proceedings was made, and each witness filing written testimony read a summary of his/her testimony into the record and were subject to direct examination, cross examination and re-direct examination. Surrebuttal witnesses were also presented by OG&E. and oral surrebuttal testimony was given.

The Commission takes notice of the testimonies filed herein and incorporates the testimony summaries as if reflected fully herein.

Motions

Early in the course of the proceedings, the Commission heard and denied two Motions to Dismiss filed separately by OER and the Sierra Club (see Order Nos. 650637 and 650638). Prior to the beginning of the hearing on the merits, the Commission heard and took under advisement OER's Motion for Summary Judgment (filed March 28, 2016) (Motion) and OG&E's Objection to Sierra Club's Fourth Set of Data Requests (filed March 30, 2016) (Objection). On April 6, 2016, Referee Jackson sustained OG&E's Objection.

With respect to the Motion for Summary Judgment, OER argued that this proceeding is barred as a matter of law under the doctrine of res judicata and that this case is a judicial proceeding. OER also argued that it is entitled to summary judgment as matter of law, stating that "there is no substantial controversy as to any material fact." (Motion at 7.)

On the matter of law issue, OER contends that issue and claim preclusion bar the instant Application. OER asserts that it has vested rights under Final Order No. 647346 (December 2, 2015) (Final Order or Cause 229 Final Order), which denied pre-approval of OG&E's broad Environmental Compliance Plan (ECP) presented in Cause 229.

By way of background, Cause 229 involved an OG&E rate base proposal to add 1.1 billion dollars for construction projects at several facilities over an extended period of time. The list of construction projects included the installation of the Sooner scrubbers, which are the subject of this Cause. In its application in Cause 229, OG&E sought pre-approval of the projects and a rider to recoup expenditures through periodic adjustments through rates. Five months after closing the evidentiary record in Cause 229, the Commission issued the Final Order denying OG&E's application. Subsequently, the Commission heard a Motion to Reconsider filed by OG&E. The Final Order became final and unappealable by operation of law. Approximately two months later, OG&E filed its Application in this Cause. The new Application represents a scaled down version of the application in Cause 229: total costs drop from 1.1 billion to roughly 490 million dollars; the new proposal involves only installation of dry scrubbers for the two coal-fired units at the Sooner generating facility; and the new proposal does not include a rider for interim recovery of costs. The Application asks the Commission to approve its decision to install scrubbers and does not seek determination on the reasonableness or recovery of costs.

Final Order Cause PUD 201600059 Page 7 of 12

Additionally, the Application does not propose or otherwise address a methodology for future recovery of related costs.

In its Motion, OER contends the Final Order precludes OG&E from ever recovering costs for installation of dry scrubbers at the Sooner generating facility. 2 OER argues that OG&E is seeking a different post-order decision based upon the same issues and evidence, and, therefore, this Cause is barred by issue and claim preclusion.

The Commission finds that Cause 229 and this current proceeding are legislative in nature and that the Oklahoma courts have concluded on several occasions that the res judicata doctrine is inapplicable to a legislative action by this Commission. See e.g., Chicago, Rock Island & Pacific R.R. Co. i'. State et al., 225 P.2d 363, 368 (Okla. 1950) (the doctrine of res judicata is not recognized in legislative proceedings before the Corporation Commission); Phillips v. Snug Harbor Water and Gas Co., 596 P. 2d 1273, 1275 (Okla. Ct. App. 1979) (questioning applicability of doctrine of res judicata in legislative action of Corporation Commission and citing United States i Utah Constr. & Mining Co., 384 U.S. 4 (1966) for proposition that Corporation Commission rate order was legislative in nature and therefore not res judicata); Community Natural Gas Co. v. Corporation Commission et al., Lone Star Gas Co. v. Same, 76 P. 2d 393, 398 (Okla. 1938) ("Ordinarily, the rule of res judicata applies only to judicial proceedings. As we pointed out in the Prentis Case ... the findings of fact and rules of law announced in a legislative proceeding cannot be res judicata upon the issue subject to the scrutiny of a court in judicial review.") See also Cox Oklahoma Telecom, LLC v. State ex rel. Oklahoma Corporation Commission, 164 P.3d 150 (Okla. 2007) (addressing legislative action by this Commission.)

OER also claims that the relief sought in this cause may only be obtained under 17 O.S. §286(B), not under Oklahoma Constitution Article IX, §18 and 17 O.S. §151 et seq. It claims 17 O.S. §286(B) applies and controls because it is recently enacted and conflicts with Oklahoma Constitution Article IX, §18 and 17 O.S. §151 et seq. The Commission disagrees. There is no conflict. Moreover, 17 O.S. §286(B) did not amend Article IX, §18 and must be interpreted as consistent with that provision of the Constitution. The power to pre-approve exists in both Article IX, §18 and 17 O.S. §151 et seq., generally, and in 17 O.S. §286(B) in the instances to which it applies. The Commission rejects the contention that the relief sought in this cause can only be obtained in an action under 17 O.S. §286(B).

Finally, the Commission finds there is a substantial controversy as to material facts. OER is not entitled to judgment as a matter of law and there are disputed questions of fact or inferences to be drawn from those facts. All inferences and conclusions drawn from the evidence must be viewed in a light most favorable to the party opposing the motion for summary judgment. Davis v. Leitner, 782 P.2d 924, 926 (Okla. 1989); Flanders v. Crane, 693 P.2d 602, 605 (Okla. 1984).

2 Such assertion was also argued in OER's and Sierra Club's Motions to Dismiss.

Final Order Cause PUD 201600059 Page 8 of 12

With respect to OG&E's Objection 3 , at the conclusion of the evidentiary hearing the Referee sustained OG&E's Objection and determined that OG&E was not required to provide a response. The Referee found that the topic of the data requests is not unusual although the data requests were broadly worded. For the Referee, the main problem with the data requests was timing. OAC 165:5-11-1(e) generally requires ten-to-twenty days for data production. However, the procedural schedule, Order No. 550330, requires five business days for data production, which would put the deadline at the end of the evidentiary hearing or after its conclusion.

Based upon the filings and arguments of counsel, and the reasons set forth above, the Commission denies OER's Motion. Further, the Commission sustains OG&E's Objection.

Findings of Fact and Conclusions of Law

A. Notice and Jurisdiction

Notice in this Cause was published in compliance with Commission Order No. 650192 and Proof of Publication was filed on March 21, 2016.

Applicant is a public utility with plant, property, and other assets dedicated to the generation, transmission, distribution and sale of electricity within the State of Oklahoma.

The Commission has jurisdiction over this Cause as set forth in the provisions of Article IX, § 18 of the Constitution of the State of Oklahoma and 17 0. S. § 151, et seq., as well as the Commission's Rules.

B. Incorporation of the Full Record from Cause 229

OG&E's Application in this matter relies entirely upon and requests the Commission rely entirely on the record from Cause 229. The Application itself states that OG&E requests that for consideration of the merits, "the Commission incorporate by reference the entire record from Cause No. PUD 201400229 into this present cause." (Application, ¶ II.H) Subsequently, in Order No. 650639, the Commission incorporated the full record from Cause 229 for the purpose of evaluating the merits of the Application.

C. Burden of Proof

Related to this matter, the Commission addressed the issue of burden of proof when a utility is seeking a discretionary request for relief. (See Final Order No. 647346, p. 15 .) As the Final Order has been incorporated into this record (along with the entire record in Cause 229), the Commission incorporates by reference "Section (D) Burden of Proof' from the Final Order as if fully set forth herein. In general, OG&E as the Applicant has the burden of proof in this matter.

Sierra Club's data requests sought OG&E to disclose any out-of-court meeting(s) between any OG&E personnel and the Commissioners or any Commission staff member.

Final Order Cause PUD 201600059 Page 9 of 12

D. Cause 229 and OG&E's Request for Pre-Approval for Scrubber Installation at the Sooner Generating Facility

EPA's RI-I rules require stricter emission requirements of SO 2 , which affects certain coal-fired and gas-fired generating facilities. In order to accomplish lower SO 2 emissions, OG&E plans to implement what it calls its "Scrub/Convert Plan" as the Company's preferred compliance strategy. The Scrub/Convert Plan entails the installation of dry scrubbers at the two coal-fired units at the Sooner generating facility and converting two of the three coal units to burn natural gas at the Company's Muskogee coal-fired generating facility.

OG&E previously sought pre-approval of its ECP in Cause 229 pursuant to 17 O.S. § 286(B), which, inter alia, included its Scrub/Convert Plan. 4 The Cause 229 Final Order was issued on December 2, 2016. The Final Order was not appealed and became final and unappealable on January 2, 2016. The Cause 229 Final Order denied OG&E's request for pre-approval of its ECP.

On February 12, 2016, OG&E filed the instant Cause seeking pre-approval of "OG&E's plan to install two dry scrubbers at the Sooner Plant to comply with the Regional Haze rule under the federal Clean Air Act." (Application, IV.) OG&E stated in its Application that "it is not requesting approval of its entire ECP, but only approval of OG&E's decision to install scrubbers at the Sooner Plant. (Id. at II.G.) The Application further stated it "is not seeking any determination on the reasonableness or recovery of the costs of the scrubbers at this time and will request cost recovery of the scrubbers in a subsequent case and only after they are placed in service." (Id. See also Rowlett Direct Test., p.3.)

Based upon the denial of OG&E's plan in the Final Order, OG&E specifically stated in this Cause it was relying on the Commission's general authority under 17 O.S. § 151, et seq. and not under 17 O.S. §286(B)—the pre-approval statute for capital investment related to environmental law compliance. (Application, II.0 and II.G; Rowlett Direct Test., p.3; Rowlett Cross, 4/5/16 Tr., pp. 56, 74.)

OG&E relied extensively on the Cause 229 record to support its requested relief in this case for the limited approval of its decision to install scrubbers at the Sooner Plant under 17 O.S. §15 1, et seq. (Rowlett Cross, 4/5/16 Tr., pp. 56, 74.) It is noteworthy that OG&E's Application and direct testimony reference and generally describe its September 2014 Scrubber Supplier Contract and its February 2015 Engineering, Procurement and Construction Contract (Contracts) to illustrate that OG&E utilized an internal competitive procurement process for the scrubber equipment and installation contracts and to demonstrate the contracting process resulted in a reduction in the costs of the scrubbers. (See Application, II.D; Rowlett Direct Test., pp.6-7). However, the Contracts were not submitted into the record in either this Cause or Cause 229 and,

Other aspects of the ECP included low NOx burners on seven generating units to comply with the NOx emission requirements of RI-I, Activated Carbon Injection on five coal-fired generating units to comply with MATS, and the conversion of Muskogee Units 4 and 5 to natural gas to comply with the SO 2 emission requirements of RH.

Final Order Cause PIJD 201600059 Page 10 of 12

accordingly, are not part of the Commission's determination concerning OG&E's decision to scrub the Sooner Plants.

E. Pre-Approval Pursuant to the Commission's Authority under 17 O.S. U51 in this Cause versus 17 O.S. 286(B) Relied upon by OG&E in Cause 229

OG&E relied upon 17 O.S. §286(B) in Cause 229 as the basis for the Commission's authority to pre-approve its proposed plan to comply with RH and MATS regulations. Pursuant to Section 286(B), a utility "may file an application seeking Commission authorization of a plan by the utility to make capital expenditures" required to comply with certain environmental laws. According to Section 286(B), "if approved by the Commission, after notice and hearing, the equipment or facilities specified in the approved utility plan are conclusively presumed used and useful

The Commission finds that pursuant to 17 O.S. §286(B), if capital expenditures are approved then they are 'conclusively presumed used and useful" as set forth specifically in the statute, while no such presumption automatically flows with investment approval pursuant to 17 O.S. §151.

The Commission recognizes that OG&E is relying on the record from Cause 229; however, notes this Cause is a separate and distinct case. Accordingly, a proper review of the requested relief sought in this Cause must occur.

The Company is seeking a decision be determined reasonable. Specifically, OG&E seeks a determination from the Commission that its decision to scrub the Sooner Plant is reasonable. The Commission finds that granting this requested relief does not, as was the case in Cause 229, immediately result in a determination that the decision to scrub is deemed "used and useful" and entitled to immediate cost recovery. Granting such request is simply a determination that the decision to scrub the Sooner Plant is—no more or no less—reasonable. As a result, the Commission finds the recovery of related costs in a future proceeding will allow the Commission to examine the prudency of the Company's decision to scrub the Sooner Plant, in the context of determining the appropriate level of cost recovery. Accordingly, the Commission can take necessary action to disallow any unreasonable and/or imprudent costs associated with scrubbing.

Because finding OG&E's decision to scrub the Sooner Plant to be reasonable will not result in an automatic right to recover costs or a determination of used and useful, the Commission finds there is substantial evidence to support approving the decision of OG&E to scrub the Sooner Plant. Specifically:

The Scrub/Convert plan which includes scrubbing Sooner provides for continued fuel diversity. It addresses the risks attributable to fuel prices, emissions prices and the potential for future carbon regulation, striking an appropriate balance between exposure to natural gas prices and exposure to coal and carbon prices. (Howell Direct in PUD 2014-229, p. 21, in. 23 - p. 22, in. 20.)

Final Order Cause PUD 201600059 Page 11 of 12

2. Converting four coal units to natural gas generation exposes the Company and its customers to high and volatile natural gas prices, which is moderated by scrubbing the Sooner units. Finally, the plans that include replacement of coal with new gas-fired combined cycle plants are consistently the highest cost cases and also expose the Company to high and volatile natural gas prices. (Howell Direct in Cause 229, p. 19, In. 22-28.)

3. By maintaining a diverse generation resource portfolio where coal provides in the range of 20-35% of the Company's total installed generating capacity, the scrub and scrub Sooner only compliance plans will produce additional fuel diversity that should allow OG&E to better respond to future market changes (Norwood Responsive Test. in Cause 229, p. 30, lines 7-11.)

4. With the scrub Sooner only plan, OG&E's portfolio will be diversified with coal, natural gas, and wind. (Roach Surrebuttal in Cause 229, 4/7/15 Tr., pp. 11-12). That diversity of resource will help moderate the cost and risk to ratepayers, given the uncertainty about future natural gas prices and environmental regulations. Id. As Dr. Roach noted, 'Faced with that uncertainty [regarding natural gas prices, environmental regulations and other factors], the best response is to assure a diversified portfolio of resources." jr. 4-7-2015 in Cause 229, p. 11.)

5. In contrast, if additional OG&E coal units were to be retired or converted to natural gas, cost to customers would be higher and OG&E would no longer have sufficient coal-fired generating capability to protect customers from future natural gas and market price spikes and price volatility. (Norwood Responsive Test., p. 30, lines 11-14.)

6. Not only does scrubbing Sooner attain compliance with the Regional Haze FTP, but it has the benefit of significantly reducing the emissions of key pollutants from the OG&E units. Scrubbers at Sooner will reduce SO 2 emission rates by about 90%. (Turner Direct in Cause 229, p. 5 in. 12.)

7. OG&E Witness Howell testified that even if he had included OG&E's or Sierra Club's carbon tax in the IRP base case, the Scrubbing Sooner would still have been the second lowest cost option. He testified that OG&E would still have selected the Scrub/Convert Plan because of the risk of natural gas prices and the desire for fuel diversity. jr. 3-11 - 2015 in Cause 229, pp. 95-96.)

8. In this Cause, OG&E Witness Rowlett testified he has not seen natural gas prices any lower than they are today, but has seen them extremely high. Witness Rowlett referenced natural prices as high as $1 2/mmBTU in 2001 and remarked that another OG&E employee has seen gas costs as high as $35/mmBTU. Witness Rowlett stated that he has no idea where natural gas prices are going over the next 30 years. jr. 4-5-2016 (Morning Session), p. 14-15, 19.) He also testified that as recently as 2014, the price for natural gas was volatile and ranged widely including $5.1 8/mmBTU to $8.91 /mmBTU to $22.68/mmBTU. jr. 4-5-2016 (Morning Session), p. 26, In. 25 and p. 28, in. 3-6.)

Final Order Cause PUD 201600059 Page 12 of 12

Meanwhile, Witness Rowlett testified that the delivered price for coal has remained at approximately $2.00/mmBTU over the years. Jr. 4-5-2016 (Morning Session), p. 28, In. 10-22.)

ORDER

Consistent with the findings and conclusions above, the Commission orders as follows:

THE COMMISSION ORDERS that OG&E's decision to install scrubbers at the Sooner Plant is reasonable;

THE COMMISSION FURTHER ORDERS that cost recovery of the scrubbers, including but not limited to, the mitigation of cost, the appropriate level of funding, and the appropriate funding mechanism shall be ultimately determined in a subsequent proceeding;

THE COMMISSION FURTHER ORDERS that OER's Motion for Summary Judgment is denied; and

THE COMMISSION FURTHER ORDERS that OG&E's Objection to Sierra Club's Fourth Set of Data Requests is sustained.

C ORATION MMISSION OF OKLAHOMA

IO ó1#t' CONCURRING OPINION ATTACHED

BOB ANTHONY, Chairm

CONCURRING IN RESULT

DANA L. MURPHY, Vice Chairman

JODD HIETT, Commissioner

DONE AND PERFORMED this day of , 2016

BY ORDER OF THE COMMISSION:

PEGGY Nlf tommission Secretary

BEFORE THE CORPORATION COMMISSION OF OKLAHOMA

IN THE MATTER OF THE APPLICATION OF OKLAHOMA GAS AND ELECTRIC COMPANY FOR COMMISSION APPROVAL OF THE COMPANY'S PLAN TO INSTALL DRY SCRUBBERS AT THE SOONER GENERATING FACILITY

)

)

)

)

)

)

CAUSE NO. PUD 201600059

FILED APR 282016

COURT CLERKS OFFICE - OKC CORPORATION COMMISSION

OF OKLAHOMA

Concurring Opinion of Corporation Commissioner Bob Anthony

In my opinion, today's April 28, 2016 Commission Order will result in OG&E going forward with scrubbers at the Sooner Plant. Furthermore, the Order promotes fuel diversity and power reliability while giving assurance to investors.

The words "legislative" or "judicial" appear more than one hundred times in the record of this case. Today's Order correctly states, "The Commission finds that Cause 229 and this current proceeding [Cause 59] are legislative in nature and that the Oklahoma courts have concluded on several occasions that the res judicata doctrine is inapplicable to a legislative action by this Commission." (p. 7)

The Oklahoma Supreme Court in Cox Oklahoma Telecom, LLC v. State ex rel. Oklahoma Corporation Commission, 164 P. 3d 150 (Okla. 200 7) states, "This court has adopted Prentis 's classic definition of legislative and judicial proceedings and has held that the kind of process that is a litigant's due flows from the label attached by law to a proceeding." The Court goes on to say, "Ratemaking has been definitely labeled and treated as legislative."

As quoted on the Agenda for today's Commission meeting, Prentis v. Atlantic Coast Line Co., 211 U.S. 210 (1908) states, "Proceedings legislative in nature are not proceedings in a court,

no matter what may be the general or dominant character of the body in which they may take place. ... That question depends not upon the character of the body, but upon the character of the proceedings. ... The decision upon them cannot be res judicata when a suit is brought. ... The nature of the final act determines the nature of the previous inquiry. ... So, when the final act is legislative, the decision which induces it cannot be judicial in the practical sense, although the questions considered might be the same that would arise in the trial of a case."

As indicated by the transcript of the February 24, 2016 afternoon hearing of Cause No. PUD 20 1600059, counsel for OG&E characterized the Prentis decision as saying, "It is not the nature of the body considering the issue, not the nature of the process used to reach the conclusion, it's the nature of the final act that defines whether or not an action is legislative." (lw-46) "So the fact that we convene in a courtroom and we take evidence and we have someone that presides in a judicial-type setting and we cross examine the witnesses, that doesn't make something judicial. It's the end result is what determines whether it's legislative or judicial. What is the act that is done? What does it propose to do?" (lw-47)