Table of Contents Allocation Overview Allocation Objectives Allocation
Table of Contents Allocation Overview Allocation Objectives Allocation Categories Driver Based Settlements Distrigas Allocations Total Allocations for 2013 Overheads Applied Direct Support Indirect Support 3 5 6 9 10 12 13 14 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. 3
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). 4
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. 5
Allocation Categories - Overhead 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/R 3 (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. 6
Allocation Categories - Overheads Applied Detail 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 Overheads • Applied 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. 7
Allocation Categories Direct 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 Corporate Secretary, Compliance, Security Public Affairs Accounting, Finance, Treasury Strategy, Marketing Information Technology Business Process Improvements Audit Legal Human Resources Regulatory Corporate Risk Supply Chain 8
Driver Based Settlements 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 when 0001 BASIS 0001 RCC for all CE Perpetual Accounting Holding Company costs that do not get allocated. These costs remain in Co 0001. 0400 BASIS 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 Non 0001 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 9
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 10
Three Factor (Distrigas) Allocations For the Year 2013 Distrigas Based on 12 Months Ended August 2012 OG&E Net Operating Revenue Enogex $1, 231, 568 $470, 105 $1, 701, 673 72. 37% Gross Plant 8, 335, 575 27. 63% 2, 812, 744 74. 77% Payroll 186, 233 % Allocation 100. 00% 11, 148, 319 25. 23% 71, 894 72. 15% Total 100. 00% 258, 127 27. 85% 100. 00% $9, 753, 377 $3, 354, 744 $13, 108, 121 73. 10% 26. 90% 100. 00% 11
Total Allocations for 2013 Based on 2013 Budget $ in 000’s Power Supply Power Delivery Retail Energy OG&E Utility Corporate Utility Services Enogex Capital Enogex Other Total Capital 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 47, 293 Total Allocations from Enterprise Services 4, 123 972 12, 856 $ 37, 965 $ 54, 259 $ 17, 083 $ (7, 325) $ 27, 956 $ 13, 752 $ 1, 954 $ 101 $ 145, 745 12
Overheads Applied to Work Based on 2013 Budget $ in 000’s Power Supply Purchasing Warehousing $ 203 Power Delivery Retail Energy $ 177 $ 14 OG&E Utility Corporate Services $ 68 Utility Capital Enogex Other Capital Total Overheads Applied $ 112 $ 3, 222 $ 958 $ 14 $ 4, 768 1, 065 231 - 1 1 4, 445 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, 424 187 257 50 72 220 284 22 1 1, 093 - (130) 700 Radio Planning Adjustments Total Overheads Applied $ 7, 114 (700) - 224 - 130 - 5, 967 - $ 4, 429 $ 2, 083 $ 2, 270 $ 6, 401 $ 13, 752 $ 1, 954 $ 101 $ 38, 104 13
Direct Support Based on 2013 Budget ($ in 000’s). Power Supply Executive Corporate Secretary and Compliance Audit Public Affairs Accounting, Finance & Treasury Human Resources Legal Strategy and Marketing Corporate Risk Regulatory Affairs Information Technology Supply Chain Business Process Improvements Utility Technical Training Total Indirect Support Power Delivery $ 1, 402 $ 2, 540 Retail Energy $ 394 OG&E Utility Corporate Enogex Services $ (1, 442) Total Allocations $ 297 $ 3, 191 3, 143 2, 250 470 - 250 6, 113 124 161 126 - 354 765 3 6 1 545 - 555 2, 555 4, 031 749 632 2, 246 10, 213 1, 776 3, 111 626 - - 5, 513 1, 782 2, 553 464 - 10 4, 809 1, 189 2, 237 4, 965 (7, 234) 1 1, 158 1, 674 3, 146 677 - 4, 541 10, 038 - - - 5 854 3, 314 871 - 790 5, 829 3, 074 4, 164 817 - 210 8, 265 1, 204 2, 015 675 - - 3, 894 1, 579 1, 452 42 (3, 073) - $ 30, 980 $ 10, 877 $ (10, 567) $ 8, 699 $ 20, 359 $ 60, 348 14
Indirect Support Based on 2013 Budget ($ in 000’s). Power Supply Executive Corporate Secretary and Compliance Audit Public Affairs Accounting, Finance & Treasury Human Resources Legal Strategy and Marketing Corporate Risk Information Technology Supply Chain Business Process Improvements Total Indirect Support $ 945 Power Delivery Retail Energy $ 1, 776 $ 382 OG&E Utility Corporate Services Enogex $ (8) $ 1, 142 Total Allocations $ 4, 237 970 1, 818 390 2 1, 167 4, 347 307 578 124 - 371 1, 380 864 1, 520 343 145 1, 053 3, 925 1, 119 1, 796 373 199 1, 487 4, 974 1, 352 2, 081 512 634 1, 669 6, 248 408 767 166 - 493 1, 834 324 610 131 - 392 1, 457 233 439 95 - 282 1, 049 2, 712 5, 099 1, 098 - 3, 279 12, 188 1, 255 2, 360 508 - 1, 517 5, 640 3 6 1 4 14 $ 10, 492 $ 18, 850 $ 4, 123 $ 12, 856 $ 47, 293 - $ 972 15
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