1. Review of Total Compensation Testimony for Rate Case September 16, 2015

2. Contents Overview Key Elements of OGE’s Compensation Philosophy Analysis of Compensation Programs Summary Findings Long-Term Granting Practices Appendix 2

3. Overview OGE Energy (“OGE”) performs an annual market analysis to assess the competitive positioning of its salary and incentive compensation programs relative to similar companies in the utility industry. The objective of this analysis is to provide a review of the competitive perspective for similar companies on the position to market for base salary and target cash compensation. OGE’s programs have been compared against the utility and general industries. Data from relevant compensation surveys were used. The following pages present OGE’s compensation philosophy, analysis of compensation programs, long term incentive granting practices, and the results of the analysis. 3

4. Key Elements of OGE’s Compensation Philosophy OGE's Compensation Philosophy supports the development of compensation programs that are performance-based and align with the business strategy. OGE incorporates the establishment of market-based levels of compensation that enable the company to compete for, attract and retain experienced, motivated and diverse members with skill sets necessary to execute the business strategy. Linking pay to performance is key to OGE being a performance-driven company. Our compensation programs allow members to personally succeed when they perform well. OGE uses external market data to establish levels of compensation that reflect the industries and companies competing with OGE for highly qualified members. We offer compensation levels that are competitive in the marketplace and provide the ability to hire and move high performers to above average market salaries when appropriate. OGE offers our members the opportunity to earn competitive incentive awards that aid in driving performance initiatives that are aligned with business goals. Incentive compensation is based on the achievement of expected performance targets, with upside potential tied to achieving superior performance. 4

5. Analysis of Compensation Programs This review addresses the level of base salary and target cash compensation and granting practice for those receiving long term incentive awards at OGE. The objective was to determine whether these pay levels and granting practices at OGE were consistent with the market.  To conduct this analysis, a sample of 184 jobs at OGE was selected. This sample is intended to reflect positions across OGE and is a representative sample of positions in the management, professional exempt and non-exempt/hourly member ranks. The number of positions in each category are below:  Directors: 10  Managers: 55  Professional Exempt: 68  Non-Exempt/Hourly: 51 These positions covered approximately 1,300 members and approximately 60% of the member population at OGE. The list of the positions is attached in appendix. 5

6. Analysis of Compensation Programs A comparison of base salaries and target cash compensation was done for each of the 184 jobs. Salary survey data was aged to July 2015. These terms are defined as follows:  Base salary: Amount members earned at the end of the test year (6/30/15)  Target annual incentive: Annual incentive opportunity as a percent of base salary earned at the end of the test year (6/30/15)  Target cash compensation: Sum of base salary plus target annual incentive A review of granting practices was performed for jobs receiving annual long term incentives 6

7. Summary Findings A detailed compensation comparison of OGE relative to the survey data at the market competitive levels (50 th percentile) shows that OGE’s base salaries are slightly below the external market whereas target cash compensation levels are slightly above the external market as reflected below: Conclusions: 1.) The target cash compensation levels (base salary plus target annual bonus) are competitive relative to similar companies and are cost effective for ratepayers. 2.) Without the additional pay provided by the annual incentive plan, OGE base salaries alone would be approximately 8% below the external market target annual compensation. 7

8. Long-Term Incentive Granting Practices  OGE engaged Towers Watson to provide an overview of long-term incentive (LTI) market practices and to review OGE’s current plan design and granting practices  The analysis of LTI plans included a review of practices within our industry peer group consisting of 64 companies. The analysis included:  Prevalence of LTI plans  Granting Trends  Data were analyzed to determine if OGE’s LTI granting practices are competitive with the external market for Utilities 8

9. Long-Term Incentive Granting Practices The table below shows the prevalence of various types of LTI vehicles in the Utility services marketplace Recent trends show an increased use of performance plans, particularly for senior executives. This supports OGE’s LTI program which is 100% performance based. 100% of companies within the Towers Watson survey included Total Shareholder Return (TSR) as a performance metric for their performance based LTI grants 9 LTI Vehicle Energy Services Industry Total Sample Performance Plans86% Restricted Stock/Units65% Stock Options21%

10. Long-Term Incentive Granting Practices 10 Because of our philosophy of performance-based compensation programs, we grant performance-based LTI to approximately 4.7% of the total OGE member population (officers, directors, and select senior managers) Results from Towers Watson custom survey reflect 3.8% of the population of Utility Companies are receiving performance based grants Other Utilities are more broadly granting time-based LTI in addition to performance-based The existence of the OGE LTI program and its design is consistent with market practices and supports management’s focus on developing the long- term competitiveness of OGE

11. Long-Term Incentive Granting Practices 11 Conclusions: The LTI program at OGE continues to provide a consistent framework for granting equity ensuring the company remains competitive with overall market practices and providing retention incentives to select management members. Therefore, LTI metrics focus on key long-term strategic objectives such as total shareholder return and earnings per share – goals which have a longer time horizon than an annual incentive plan. If OGE did not offer LTI awards, we would need to offer another form of compensation to our members which may not effectively address the long term goals of the Company.

12. Appendix 12

13. Sources of Market Data Survey Sources Used to Conduct Research AON Hewitt IEHRA Energy Industry Survey EAPDIS Energy Technical Craft Clerical Survey Hay Group  General Market Executive  General Market Professional/Managerial  Energy Industry Intelligent Comp, Southwest HR Group Survey Mercer (Energy)  Energy Industry – Cross Segment  Energy Industry – Field/Hourly  Energy Industry – General Benchmark  Energy Industry - Utilities 13 Mercer (General Industry)  Engineering & Design Survey  Executive Survey  Finance, Accounting and Legal Survey  Human Resources Survey  Information Technology Survey  Logistics & Supply Chain  Metro Benchmark – South Central Survey  Sales, Marketing & Communications Survey Towers Watson  CDB General Industry Executive Survey  CDB Energy Services Executive Survey  Long Term Incentive Marketplace Overview Western Management Utilities

14. Benchmark Director Positions Position______________________________________ Chief Security Officer Dir PD Resource Planning & Coordination Director Distribution Engineering Tech Services Director Enterprise Information Management Director Fuels Director Marketing Director Real Estate Director Supply Chain Director Tax Director Trans & Distribution Construction Ops 14

15. Benchmark Manager Positions Position____________________________ Community Affairs Manager HR Business Partner Senior Manager Manager Applications Management Manager Customer Operations Manager Customer Programs Manager Engineering Manager Finance Manager Fleet Services Manager Health & Safety Manager Information Systems Security Manager Metro Electric Department Manager of Load Analysis Manager of Plant Maintenance Manager of Plant Operations Manager SCADA EMS-Utility Manager SEC Reporting & Acctg Research Manager Specialty Accounting Manager Strategic Sourcing 15 Position_______________________________________ Manager Substation Operations Manager Supply Chain Strategy & Research Manager Air Quality Manager Land Management Plant Manager Products & Services Portfolio Manager Shift Supervisor Senior Manager Accounting Senior Manager Engineering Senior Manager Finance Senior Manager Strategic Sourcing Senior Manager Technical Learning Senior Manager Corp Insurance Management Senior Manager Sales and Customer Support Management Senior Plant Manager Supervisor Applications Management Supervisor Call Center Supervisor Customer Operations I

16. Benchmark Manager Positions (Cont’d) Position________________________ Supervisor Customer Operations II Supervisor Distribution Control Ops Supervisor Facilities Construction Supervisor Field Construction Supervisor Field Service Supervisor Field Services Operations Supervisor Fleet Services Maintenance Supervisor Fleet Support Supervisor HR Solutions Supervisor Integrated Operations Center Supervisor Plant Maintenance Supervisor Power Delivery Metering Supervisor Security Supervisor Substation Const Supervisor Technical Learning Supervisor Telecom Field Services Supervisor Underground Network Supervisor Area Distribution Construction 16 Supervisor Enviro Compliance/Operational Chem Supervisor Facilities Operations/Services Position_____________________________________

17. Benchmark Professional Positions Position__________________________ Accountant Associate Accountant Lead/Specialist Accountant Senior Accountant Staff Attorney Senior Attorney Specialist Attorney Staff Auditor Associate Auditor Senior Auditor Staff BPI Project Manager Senior BPI Project Manager Staff Business Analyst Expert Business Analyst Lead/Specialist Business Analyst Senior Buyer Senior Buyer Staff Coal/Rail Manager Communications Specialist Senior 17 Position_______________________________ Community Affairs Lead/Spec Compliance Specialist Lead/Specialist Developer Lead/Specialist Developer Senior Developer Software Solutions Specialist Developer Software Solutions V Developer Staff Economic Development Lead/Spec Engineer Associate Engineer Expert Engineer Lead/Spec Engineer Senior Engineer Staff Envirochemist Staff Financial Analyst Lead/Specialist Financial Analyst Senior Financial Analyst Staff Government Affairs Expert Health and Safety Representative Associate

18. Benchmark Professional Positions (Cont’d) Position________________________________ Health and Safety Representative Spec Health and Safety Representative Staff HR Business Partner Senior HR Business Partner Staff Information Architect Senior Integrated Ops Center Incident Coordinator Market Operator Staff Network Admin Senior Organizational Development Consultant Lead/Spec Organizational Development Consultant Senior Planner Senior Planner Staff Project Mgr PD/Utility Tech Support Lead Solution Architect Expert Solution Architect Lead/Spec Strategic Planner Staff Supply Chain Project Manager System Operator Senior System Operator Staff 18 Position_________________________ Systems Administrator Lead/Spec Systems Administrator Senior Systems Analyst Lead/Spec Systems Analyst Senior Systems Analyst Staff Systems Security Analyst Associate Systems Security Analyst Lead/Spec Systems Security Analyst Senior Systems Security Analyst Staff Technical Training Specialist Senior Utility Ops Compliance Analyst Senior

19. Benchmark Nonexempt/Hourly Positions Position________________________ Accounting Clerk I Administrative Assistant II Administrative Assistant III Area Service Technician Building Mechanic I Building Mechanic II Business Customer Account Rep I Buyer Associate Cable Locator Cable Splicer Call Center Rep Senior Call Center Rep Staff CEMS Technician I Clerk II Clerk III Clerk IV Clerk V Coordinator Material Parts-PS 19 Position___________________________ Distribution Construction Customer Rep Distribution Control Ctr Dispatcher Sr Drafter Senior Regulated Employee Benefits Representative Engineering Tech PS Engineering Technician Senior Engineering Technician Staff II Equipment Operator Equipment Operator ES Executive Assistant I Foreman - B Construction Foreman A Transmission GIS Tech Staff Health and Safety Representative Senior Instrument and Control Technician Lineman Mail Handler Associate Material Handler II

20. Benchmark Nonexempt/Hourly Positions (Cont’d) Position Meter Technician I Meter Technician II Operator I Operator II Plant Chemist Plant Electrician Plant Mechanic Power Quality Technician Relay Technician Security Guard Senior Service Technician Substation Construction Tech Technician Substation Maintenance Telecom Tech Staff Testing Technician 20