Entergy 2002 Annual Report Download - page 62

issues in which they allege that Entergy New Orleans ratepayers
may have been overcharged by more than $32 million, the vast
majority of which is reflected in the plaintiffs’ claim. However, it
is not clear precisely what periods and damages are being
alleged in the proceeding. Entergy intends to defend this
matter vigorously, both in court and before the City Council.
Hearings were held in February and March 2002. The parties
have submitted post-hearing briefs and the matter has been
submitted to the City Council for a decision. In October 2002,
the plaintiffs filed a motion to re-open the evidentiary record, or
in the alternative, a motion for a new trial seeking to re-open the
record to accept certain testimony filed by the City Council
advisors in a separate proceeding at the FERC. The ultimate
outcome of the lawsuit and the City Council proceeding cannot
be predicted at this time.
SYSTEM ENERGY’S1995 RATE PROCEEDING
System Energy applied to FERC in May 1995 for a rate increase,
and implemented the increase in December 1995. The request
sought changes to System Energy’s rate schedule, including
increases in the revenue requirement associated with decom-
missioning costs, the depreciation rate, and the rate of
return on common equity. The request proposed a 13% return
on common equity. In July 2000, FERC approved a rate of
return of 10.58% for the period December 1995 to the date
of FERC’s decision, and prospectively adjusted the rate of return
to 10.94% from the date of FERC’s decision. FERC’s decision
also changed other aspects of System Energy’s proposed rate
schedule, including the depreciation rate and decommissioning
costs and their methodology. FERC accepted System Energy’s
compliance tariff in November 2001. System Energy made
refunds to the domestic utility companies in December 2001.
In accordance with regulatory accounting principles, during
the pendency of the case, System Energy recorded reserves for
potential refunds against its revenues. Upon the order
becoming final, Entergy Arkansas, Entergy Louisiana, Entergy
Mississippi, Entergy New Orleans, and System Energy recorded
entries to spread the impacts of FERC’s order to the various
revenue, expense, asset, and liability accounts affected, as if the
order had been in place since commencement of the case in
1995. System Energy also recorded an additional reserve
amount against its revenue, to adjust its estimate of the impact
of the order, and recorded additional interest expense on that
reserve. System Energy also recorded reductions in its deprecia-
tion and its decommissioning expenses to reflect the lower
levels in FERC’s order, and reduced tax expense affected by
the order.
Entergy Arkansas refunded $54.3 million, including interest,
through the issuance of refund checks in March 2002 as
approved by the APSC.
Entergy Louisiana refunded $4.9 million, including interest,
to its customers through a credit on the September 2002 bills as
approved by the LPSC.
Entergy Mississippi’s allocation of the proposed System
Energy wholesale rate increase was $21.6 million annually. In
July 1995, Entergy Mississippi filed a schedule with the MPSC
that deferred the retail recovery of the System Energy rate
increase. The deferral plan, which was approved by the MPSC,
began in December 1995, the effective date of the System
Energy rate increase, and was effective until the issuance of the
final order by FERC. Entergy Mississippi revised the deferral
plan two times during the pendency of the System Energy
proceeding. As a result of the final resolution of the FERC order
and in accordance with Entergy Mississippi’s second revised
deferral plan, refunds to Entergy Mississippi from System
Energy, including interest, have been credited against deferral
balances and a refund of the remaining $14.8 million in excess
of the deferral balances was included as credits to the amounts
billed to Entergy Mississippi’s customers in October 2001
through September 2002 under its Grand Gulf Riders.
Entergy New Orleans’ allocation of the proposed System
Energy wholesale rate increase was $11.1 million annually. In
February 1996, Entergy New Orleans filed a plan with the
Council to defer 50% of the amount of the System Energy rate
increase. In December 2001, the Council approved a refund to
customers. The total amount of the refund to Entergy New
Orleans’ customers was $43 million. In anticipation of the
FERC order, Entergy New Orleans advanced the refunding of
$10 million in February 2001 to customers to assist with unex-
pected high energy bills. The total refund was also reduced by
an additional $6 million which was used for the establishment
of a public benefits and payments assistance program. The
remaining $27 million was refunded through the issuance of
refund checks during the first quarter of 2002.
FERC SETTLEMENT
In November 1994, FERC approved an agreement settling a
long-standing dispute involving income tax allocation proce-
dures of System Energy. In accordance with the agreement,
System Energy has been refunding a total of approximately
$62 million, plus interest, to Entergy Arkansas, Entergy
Louisiana, Entergy Mississippi, and Entergy New Orleans
through June 2004. System Energy also reclassified from utility
plant to other deferred debits approximately $81 million of
other Grand Gulf 1 costs. Although such costs are excluded
from rate base, System Energy is amortizing and recovering
these costs over a 10-year period. Interest on the $62 million
refund and the loss of the return on the $81 million of other
Grand Gulf 1 costs is reducing Entergy’s and System Energy’s
net income by approximately $10 million annually.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued