OGE Energy Corp.: Form 10-Q for the period ended Mar 31, 2026

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 March 31, 2026 as compared to the Three Months Ended March 31, 2025

OGE Energy's net income was $50.2 million, or $0.24 per diluted share, during the three months ended March 31, 2026 as compared to $62.7 million, or $0.31 per diluted share, during the same period in 2025. The decrease in net income of $12.5 million, or $0.07 per diluted share, is further discussed below.

• A decrease in net income at OG&E of $13.1 million, or $0.07 per diluted share of OGE Energy's common stock, was primarily due to lower operating revenues (excluding the impact of recoverable fuel, purchased power and direct transmission expense not impacting earnings) driven by milder weather and higher other operation and maintenance expense, partially offset by the deferral of certain interest expense to a regulatory asset in accordance with Oklahoma PISA.
• A decrease in net loss of other operations of $0.6 million was primarily due to lower interest expense, driven by a lower average short-term debt balance during the first quarter of 2026 compared to the first quarter of 2025.

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. OG&E is projected to earn approximately $533 million, or $2.57 per average diluted share. A loss of $30 million, or $0.14 per average diluted share is projected for other operations (primarily the holding company). 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 months ended March 31, 2026 as compared to the same period in 2025 and the Registrants' financial position at March 31, 2026. Due to seasonal fluctuations and other factors, the Registrants' operating results for the three months ended March 31, 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.

(In millions, except per share data)

Results by Business Segment

(In millions)

The following discussion of results of operations for OG&E includes intercompany transactions that are eliminated in OGE Energy's condensed consolidated financial statements.

OG&E (Electric Company)

(Dollars in millions)

(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 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 decreased $13.1 million, or 18.5 percent, during the three months ended March 31, 2026, as compared to the same period in 2025. The following section discusses the primary drivers for the decrease in net income during the three months ended March 31, 2026 as compared to the same period in 2025.

Operating revenues increased $4.9 million, or 0.7 percent, during the three months ended March 31, 2026, primarily driven by the below factors.

(In millions)

(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 period are further detailed in the table below.

(B) 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.

(C) Decreased 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 increased $12.7 million, or 3.9 percent, during the three months ended March 31, 2026, primarily driven by the below factors.

(In millions)

(A) Increased primarily due to higher fuel costs related to the generating assets utilized during the period.

(B) Decreased primarily due to lower market prices during the period.

Other operation and maintenance expense increased $15.0 million, or 12.3 percent, during the three months ended March 31, 2026, primarily due to an increase in energy efficiency program activities and services, which are recoverable through riders, contract professional services, and uncollectible accounts, partially offset by lower contract technical and construction services driven by the timing of certain projects.

Depreciation and amortization expense decreased $1.0 million, or 0.7 percent, during the three months ended March 31, 2026, primarily due to deferrals of allowable depreciation and amortization expense of $11.2 million to a regulatory asset in accordance with Oklahoma PISA, partially offset by additional assets being placed into service.

Net other income decreased $2.0 million, or 22.5 percent, during the three months ended March 31, 2026, primarily due to decreased interest income related to the carrying charge for the higher fuel under recovery balance in early 2025.

Interest expense decreased $6.8 million, or 12.0 percent, during the three months ended March 31, 2026, primarily due to the deferral of certain interest expense to a regulatory asset in accordance with Oklahoma PISA, partially offset by the $350.0 million in senior notes issuance in April 2025.

Income tax expense decreased $2.6 million, or 18.1 percent, during the three months ended March 31, 2026, primarily due to lower pretax income.

Liquidity and Capital Resources

Cash Flows

OGE Energy

(Dollars in millions)

* Change is greater than 100 percent.

(A) Changed primarily due to increases in cash received from customers, including cash related to fuel recoveries and customer connections.

(B) Changed primarily due to timing of power delivery projects and an increase in the cost of removals.

(C) Changed primarily due to decreases in long-term revolver borrowings and 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 March 31, 2026 compared to December 31, 2025.

Accounts Receivable and Accrued Unbilled Revenues decreased $51.3 million, or 12.1 percent, primarily due to a decrease in billings to OG&E's retail customers reflecting lower usage in early 2026 compared to late 2025.

Short-term Debt increased $200.4 million, or 68.6 percent, primarily due to increased borrowings for 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 $67.7 million, or 19.3 percent, primarily due to the timing of vendor payments and a decrease in fuel and integrated market payables.

Accrued Taxes decreased $20.2 million, or 38.1 percent, primarily resulting from the timing of payments for ad valorem taxes.

Accrued Interest increased $13.8 million, or 20.1 percent, primarily resulting from the timing of interest payments and accruals.

Accrued Compensation decreased $20.9 million, or 38.5 percent, primarily due to 2025 incentive compensation payouts that occurred during the first quarter of 2026.

Fuel Clause Over Recoveries increased $28.2 million, primarily due to higher recoveries from OG&E retail customers as compared to the actual cost of fuel and purchased power.

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.

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.

OGE Energy has unsecured five-year revolving credit facilities totaling $1.1 billion ($550.0 million for OGE Energy and $550.0 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 March 31, 2026.

(Dollars in millions)

The following table presents information about OGE Energy's total short-term debt activity for the three months ended March 31, 2026.

(Dollars in millions)

34

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 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.

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.

New Source Performance Standards

In December 2024, the EPA published in the Federal Register a proposed rule that would revise the new source performance standards regulating NOx and SO2 emissions from new, modified, and reconstructed stationary combustion turbines. OG&E participated with trade associations to submit comments on the proposed rule in April 2025. In January 2026, the EPA published in the Federal Register its final rule establishing NOx emissions standards for several subcategories of stationary combustion turbines based on the size, rates of utilization, design efficiency, and fuel type of these turbines. The rule applies to affected sources constructed, modified, or reconstructed after the December 2024 publication date. As only future, currently unknown activities are affected by this regulation, it is unknown what potential material impacts, if any, there will be from this final action by EPA.

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 EPA will 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.

Litigation on the final rule is proceeding in the D.C. Circuit. A coalition of 24 states, including Oklahoma, filed challenges to the final rule, 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.

The revised NAAQS could impact regional air quality goals and emission limits for emission sources; however, it is unknown at this time what, if any, potential material impacts to OG&E individual operating permit emission limits 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. 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.

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 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.

There have been no significant changes in the market risks affecting the Registrants from those discussed in the Registrants' 2025 Form 10-K.

The Registrants maintain a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the Registrants in reports that they file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the chief executive officer and chief financial officer, allowing timely decisions regarding required disclosure. As of the end of the period covered by this report, based on an evaluation carried out under the supervision and with the participation of the Registrants' management, including the chief executive officer and chief financial officer, of the effectiveness of the Registrants' disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934), the chief executive officer and chief financial officer have concluded that the Registrants' disclosure controls and procedures are effective.

No change in the Registrants' internal control over financial reporting has occurred during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrants' internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).

There have been no significant changes in the Registrants' risk factors from those discussed in the Registrants' 2025 Form 10-K, which are incorporated herein by reference.