Entergy 2003 Annual Report Download - page 67

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ENTERGY CORPORATION AND SUBSIDIARIES 2003
ENTERGY NEW ORLEANS
Effective June 2003, Entergy New Orleans electric rate
schedules include a fuel adjustment tariff designed to reflect
no more than targeted fuel and purchased power costs
adjusted by a surcharge or credit for deferred fuel expense
arising from monthly reconciliations, including carrying
charges. Entergy New Orleans’ gas rate schedules include
estimates for the billing month adjusted by a surcharge or
credit for deferred fuel expense arising from monthly recon-
ciliations, including carrying charges.
RETAIL RATE PROCEEDINGS
Filings with the APSC (Entergy Arkansas)
RETAIL RATES
No significant retail rate proceedings are pending in Arkansas
at this time.
Filings with the PUCT and Texas Cities
(Entergy Gulf States)
RETAIL RATES
Entergy Gulf States is operating in Texas under the terms
of a June 1999 PUCT-approved 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 agree-
ment limits potential recovery of the remaining plant asset
to $115 million as of January 1, 2002, less depreciation
after that date. Entergy Gulf States accordingly reduced the
value of the plant asset in 1999. Entergy Gulf States has
also agreed 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, however,
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
legislation be passed requiring Entergy Gulf States to
return stranded 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
appealed this ruling to the Third District Court of Appeals.
In July 2003, the Third District Court of Appeals unani-
mously affirmed the judgment of the Travis County District
Court. After considering the progress of the proceeding in
light of the decision of the Court of Appeals, management
has concluded that it is prudent to accrue for the loss that
would be associated with a final, non-appealable decision
disallowing the abeyed plant costs. The net carrying value
of the abeyed plant costs was $107.7 million as of June 30,
2003, and after this accrual Entergy Gulf States provided
for all potential loss related to current or past contested
costs of construction of the River Bend plant. Accrual of the
loss was recorded in the second quarter 2003 and reduced
net income by $65.6 million. In January 2004, the Texas
Supreme Court asked for full briefing on the merits of the
case in response to Entergy Gulf States’ petition for review.
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 for claims that relate to 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. In April 2003, the LPSC
staff filed testimony in which it recommended that the LPSC
require a rate refund of $30.3 million and a prospective rate
reduction of $75.9 million, before taking into account the
$11.5 million rate reduction that Entergy Gulf States imple-
mented effective June 2002. In July 2003, Entergy Gulf
States filed testimony rebutting the LPSC staff’s testimony
and supporting the filing. During discovery, the LPSC staff
requested that Entergy Gulf States provide updated cost of
service data to reflect changes in costs, revenues, and rate
base through December 31, 2002. In September 2003,
Entergy Gulf States supplied the updated data. In December
2003, the LPSC staff recommended a rate refund of
$30.6 million and a prospective rate reduction of approxi-
mately $50 million. Hearings are scheduled to begin in
April 2004. Entergy Gulf States cannot predict the ultimate
outcome of this proceeding.
RETAIL RATES (ENTERGY LOUISIANA)
In January 2004, Entergy Louisiana made a rate filing with
the LPSC requesting a base rate increase of approximately
$167 million. In that filing, Entergy Louisiana noted that
approximately $73 million of the base rate increase was
attributable to certain power purchase agreements, the