Entergy 2011 Annual Report Download - page 77

Entergy Corporation and Subsidiaries 2011
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
AmerenUE argued that its current wholesale power contract with
Entergy Arkansas, pursuant to which Entergy Arkansas sells power
to AmerenUE, does not permit Entergy Arkansas to flow through to
AmerenUE any portion of Entergy Arkansas’s bandwidth payment.
According to AmerenUE, Entergy Arkansas has sought to collect from
AmerenUE approximately $14.5 million of the 2007 Entergy Arkansas
bandwidth payment. The AmerenUE contract expired in August 2009.
In April 2008, AmerenUE filed a complaint with the FERC seeking
refunds of this amount, plus interest, in the event the FERC ultimately
determines that bandwidth payments are not properly recovered
under the AmerenUE contract. In response to the FERC’s decision
discussed in the previous paragraph, Entergy Arkansas recorded a
regulatory provision in the fourth quarter 2009 for a potential refund
to AmerenUE.
2008 Rate Filing Based on Calendar Year 2007
Production Costs
Several parties intervened in the 2008 rate proceeding at the FERC,
including the APSC, the LPSC, and AmerenUE, which have also filed
protests. Several other parties, including the MPSC and the City
Council, have intervened in the proceeding without filing a protest.
In direct testimony filed on January 9, 2009, certain intervenors and
also the FERC staff advocated a number of positions on issues that
affect the level of production costs the individual Utility operating
companies are permitted to reflect in the bandwidth calculation,
including the level of depreciation and decommissioning expense
for the nuclear and fossil-fueled generating facilities. The effect of
these various positions would be to reallocate costs among the Utility
operating companies. In addition, three issues were raised alleging
imprudence by the Utility operating companies, including whether the
Utility operating companies had properly reflected generating units’
minimum operating levels for purposes of making unit commitment
and dispatch decisions, whether Entergy Arkansas’s sales to third
parties from its retained share of the Grand Gulf nuclear facility were
reasonable, prudent, and non-discriminatory, and whether Entergy
Louisiana’s long-term Evangeline gas purchase contract was prudent
and reasonable.
The parties reached a partial settlement agreement of certain of
the issues initially raised in this proceeding. The partial settlement
agreement was conditioned on the FERC accepting the agreement
without modification or condition, which the FERC did on August
24, 2009. A hearing on the remaining issues in the proceeding was
completed in June 2009, and in September 2009 the ALJ issued an
initial decision. The initial decision affirms Entergy’s position in
the filing, except for two issues that may result in a reallocation of
costs among the Utility operating companies. In October 2011 the
FERC issued an order on the ALJ’s initial decision. The FERC’s order
resulted in a minor reallocation of payments/receipts among the Utility
operating companies on one issue in the 2008 rate filing. Entergy
made a compliance filing in December 2011 showing the updated
payment/receipt amounts. The LPSC filed a protest in response to the
compliance filing.
2009 Rate Filing Based on Calendar Year 2008
Production Costs
Several parties intervened in the 2009 rate proceeding at the FERC,
including the LPSC and Ameren, which have also filed protests. In July
2009 the FERC accepted Entergy’s proposed rates for filing, effective
June 1, 2009, subject to refund, and set the proceeding for hearing and
settlement procedures. Settlement procedures were terminated and
a hearing before the ALJ was held in April 2010. In August 2010 the
ALJ issued an initial decision. The initial decision substantially affirms
Entergy’s position in the filing, except for one issue that may result
in some reallocation of costs among the Utility operating companies.
The LPSC, the FERC trial staff, and Entergy have submitted briefs on
exceptions in the proceeding.
2010 Rate Filing Based on Calendar Year 2009
Production Costs
In May 2010, Entergy filed with the FERC the 2010 rates in accordance
with the FERC’s orders in the System Agreement proceeding, and
supplemented the filing in September 2010. Several parties intervened
in the proceeding at the FERC, including the LPSC and the City
Council, which have also filed protests. In July 2010 the FERC accepted
Entergy’s proposed rates for filing, effective June 1, 2010, subject to
refund, and set the proceeding for hearing and settlement procedures.
Settlement procedures have been terminated, and the ALJ scheduled
hearings to begin in March 2011. Subsequently, in January 2011 the ALJ
issued an order directing the parties and FERC Staff to show cause
why this proceeding should not be stayed pending the issuance of
FERC decisions in the prior production cost proceedings currently
before the FERC on review. In March 2011 the ALJ issued an order
placing this proceeding in abeyance.
INTERRUPTIBLE LOAD PROCEEDING
In April 2007 the U.S. Court of Appeals for the D.C. Circuit issued its
opinion in the LPSC’s appeal of the FERC’s March 2004 and April 2005
orders related to the treatment under the System Agreement of the
Utility operating companies’ interruptible loads. In its opinion, the D.C.
Circuit concluded that the FERC (1) acted arbitrarily and capriciously
by allowing the Utility operating companies to phase-in the effects
of the elimination of the interruptible load over a 12-month period of
time; (2) failed to adequately explain why refunds could not be ordered
under Section 206(c) of the Federal Power Act; and (3) exercised
appropriately its discretion to defer addressing the cost of sulfur
dioxide allowances until a later time. The D.C. Circuit remanded the
matter to the FERC for a more considered determination on the issue
of refunds. The FERC issued its order on remand in September 2007,
in which it directed Entergy to make a compliance filing removing all
interruptible load from the computation of peak load responsibility
commencing April 1, 2004 and to issue any necessary refunds to
reflect this change. In addition, the order directed the Utility operating
companies to make refunds for the period May 1995 through July 1996.
In November 2007 the Utility operating companies filed a refund report
describing the refunds to be issued pursuant to the FERC’s orders. The
LPSC filed a protest to the refund report in December 2007, and the
Utility operating companies filed an answer to the protest in January
2008. The refunds were made in October 2008 by the Utility operating
companies that owed refunds to the Utility operating companies
that were due a refund under the decision. The APSC and the Utility
operating companies appealed the FERC decisions to the D.C. Circuit.
Because of its refund obligation to its customers as a result of this
proceeding and a related LPSC proceeding, Entergy Louisiana recorded
provisions during 2008 of approximately $16 million, including interest,
for rate refunds. The refunds were made in the fourth quarter 2009.
Following the filing of petitioners’ initial briefs, the FERC filed
a motion requesting the D.C. Circuit hold the appeal of the FERC’s
decisions ordering refunds in the interruptible load proceeding in
abeyance and remand the record to the FERC. The D.C. Circuit
granted the FERC’s unopposed motion in June 2009. In December 2009
the FERC established a paper hearing to determine whether the FERC
had the authority and, if so, whether it would be appropriate to order
refunds resulting from changes in the treatment of interruptible load in
the allocation of capacity costs by the Utility operating companies. In
August 2010 the FERC issued an order stating that it has the authority
and refunds are appropriate. The APSC, MPSC, and Entergy requested
rehearing of the FERC’s decision. In June 2011 the FERC issued an
order granting rehearing in part and denying rehearing in part, in
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