Entergy 2002 Annual Report Download - page 60

Entergy Arkansas filed its final storm damage cost determina-
tion, which reflected costs of approximately $195 million. In the
March 2002 settlement, the parties agreed that $153 million of
the ice storm costs would be classified as incremental ice storm
expenses that can be offset against the TCA, and any excess of
ice storm costs over the amount available in the TCA would be
deferred and amortized over 30 years, although such excess
costs were not allowed to be included as a separate component
of rate base. The allocated ice storm expenses exceeded the
available TCA funds by $15.8 million and this was recorded as a
regulatory asset in June 2002. Of the remaining ice storm costs,
$32.2 million will be addressed through established ratemaking
procedures, including $22.2 million classified as capital addi-
tions. $3.8 million of the ice storm costs will not be recovered
through rates.
Filings with the PUCT and Texas Cities
RETAIL RATES – Entergy Gulf States is operating in Texas under
the terms of a June 1999 settlement agreement. The settlement
provided for a base rate freeze that has remained in effect
during the delay in implementation of retail open access in
Entergy Gulf States’ Texas service territory.
RECOVERY OF RIVER BEND COSTS –In March 1998, the PUCT
disallowed recovery of $1.4 billion of company-wide abeyed
River Bend plant costs, which have been held in abeyance since
1988. Entergy Gulf States appealed the PUCT’s decision on this
matter to the Travis County District Court in Texas. A 1999
settlement agreement limits potential recovery of the remaining
plant asset to $115 million as of January 1, 2002, less deprecia-
tion after that date. Entergy Gulf States accordingly reduced the
value of the plant asset in 1999. Entergy Gulf States has also
agreed in a subsequent settlement that it will not seek recovery
of the abeyed plant costs through any additional charge to Texas
ratepayers. In an interim order approving this agreement, how-
ever, the PUCT recognized that any additional River Bend
investment found prudent, subject to the $115 million cap,
could be used as an offset against stranded benefits, should leg-
islation be passed requiring Entergy Gulf States to return strand-
ed benefits to retail customers.
In April 2002, the Travis County District Court issued an order
affirming the PUCT’s order on remand disallowing recovery of
the abeyed plant costs. Entergy Gulf States has appealed this
ruling to the Third District Court of Appeals. The Court of
Appeals heard oral argument in November 2002 but has not yet
issued a final decision. The financial statement impact of the
retail rate settlement agreement on the remaining abeyed plant
costs will ultimately depend on several factors, including the
possible discontinuance of SFAS 71 accounting treatment for
the Texas generation business, the determination of the market
value of generation assets, and any future legislation in Texas
addressing the pass-through or sharing of any stranded benefits
with Texas ratepayers. While Entergy Gulf States expects to
prevail in its lawsuit, no assurance can be given that additional
reserves or write-offs will not be required in the future.
Filings with the LPSC
ANNUAL EARNINGS REVIEWS (ENTERGY GULF STATES) – In
December 2002, the LPSC approved a settlement between
Entergy Gulf States and the LPSC staff pursuant to which
Entergy Gulf States agreed to make a base rate refund of
$16.3 million, including interest, and to implement a $22.1 million
prospective base rate reduction effective January 2003. The
settlement discharged any potential liability relating to remaining
issues that arose in Entergy Gulf States’ fourth, fifth, sixth,
seventh, and eighth post-merger earnings reviews. Entergy Gulf
States made the refund in February 2003. In addition to resolving
and discharging all liability associated with the fourth through
eighth earnings reviews, the settlement provides that Entergy
Gulf States shall be authorized to continue to reflect in rates a
ROE of 11.1% until a different ROE is authorized by a final
resolution disposing of all issues in the proceeding that was
commenced with Entergy Gulf States’ May 2002 filing.
In May 2002, Entergy Gulf States filed its ninth and last
required post-merger analysis with the LPSC. The filing included
an earnings review filing for the 2001 test year that resulted in a
rate decrease of $11.5 million, which was implemented effective
June 2002. The filing also contained a prospective revenue
requirement study based on the 2001 test year that shows that a
prospective rate increase of approximately $21.7 million would
be appropriate. Both components of the filing are subject to
review by the LPSC and may result in changes in rates other
than those sought in the filing. A procedural schedule has been
adopted and hearings are scheduled for October 2003.
FORMULA RATE PLAN FILINGS (ENTERGY LOUISIANA) – In July
2002, the LPSC approved a settlement between Entergy
Louisiana and the LPSC Staff in Entergy Louisiana’s 2000 and
2001 formula rate plan proceedings. Entergy Louisiana agreed
to a $5 million rate reduction effective August 2001. The
prospective rate reduction was implemented beginning in
August 2002 and the refund for the retroactive period occurred
in September 2002. As part of the settlement, Entergy
Louisiana’s current rates, including its previously authorized
ROE midpoint of 10.5%, remain in effect until changed
pursuant to a new formula rate plan filing or a revenue
requirement analysis to be filed by June 30, 2003.
In May 1997, Entergy Louisiana made its second annual
performance-based formula rate plan filing with the LPSC for
the 1996 test year. This filing resulted in a rate reduction of
approximately $54.5 million, which was implemented in July 1997.
At the same time, rates were reduced by an additional $0.7 million
and by an additional $2.9 million effective March 1998. Upon
completion of the hearing process in December 1998, the LPSC
issued an order requiring an additional rate reduction and
refund based upon the LPSC’s contention that it could inter-
pret and enforce a FERC rate schedule. The resulting amounts
were not quantified, although they are expected to be immaterial.
Entergy Louisiana appealed this order and obtained a prelim-
inary injunction pending a final decision on appeal. The
Louisiana Supreme Court rendered a non-unanimous decision in
April 2002 affirming the LPSC’s order. Entergy Louisiana filed
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued