Entergy 2004 Annual Report Download - page 65

Entergy Corporation and Subsidiaries 2004
-63 -
Filings with the PUCT and Texas Cities
(Entergy Gulf States)
Retail Rates
Entergy Gulf States is operating in Texas under the terms of a
December 2001 settlement agreement approved by the PUCT. The
settlement provided for base rates that have remained in effect
during the delay in the implementation of retail open access in
Entergy Gulf States’ Texas service territory. In view of the PUCT
order in July 2004 to further delay retail open access in the Texas
service territory, Entergy Gulf States filed a retail electric rate case
and fuel reconciliation proceeding with the PUCT in August 2004
seeking the following:
•approval of a base rate increase of $42.6 million annually for the
Texas retail jurisdiction;
•approval to implement a $14.1 million per year rider to recover,
over a 15-year period, $110.9 million of incurred costs related to
its efforts to transition to a competitive retail market in
accordance with the Texas restructuring law;
•approval to implement a proposed $11.3 million franchise fee
rider to recover payments to municipalities charging such
fees; and
•a requested return on equityof 11.5%.
In addition, Entergy Gulf States’ fuel reconciliation filing made
in conjunctionwith the base rate case sought to reconcile
approximately $288 million in fuel and purchased power costs
incurred during the period September 2003 through March 2004.
In October 2004, the PUCT issued a written order in which it
dismissed the rate case and fuel reconciliation proceeding indicating
that Entergy Gulf States is still subject to a rate freeze based on a
PUCT-approved agreement in 2001 stipulating that a rate freeze
would remain in effect until retail open access commenced
in Entergy Gulf States’ service territory, unless the rate freeze is
lifted by the PUCT prior thereto. Entergy Gulf States believes
the PUCT has misinterpreted the settlement and has appealed the
PUCT order to the Travis CountyDistrict Court and intends to
pursue other available remedies.
In February 2005, bills were submitted in the Texas Legislature
that would clarify that Entergy Gulf States is no longer subject to a
rate freeze and specify that retail open access will not commence in
Entergy Gulf States’ Texas service territory until the PUCT
certifies a power region.
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. 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 unanimously affirmed the
judgment of the Travis County District Court. After considering
the progress of the proceeding in light of the decisionof the Court
of Appeals, Entergy Gulf States accrued 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 at the time of the Court of Appeals decision.
Accrual of the $107.7 million loss was recorded in the second
quarter of 2003 as miscellaneous other income (deductions) and
reduced net income by $65.6 million after-tax. In September 2004,
the Texas Supreme Court denied Entergy Gulf States’ petition for
review, and Entergy Gulf States filed a motion for rehearing. In
February 2005, the Texas Supreme Court denied the motion for
rehearing, and the proceeding is now final.
Filings with the LPSC
Proposed Settlement
In September 2004, the LPSC consolidated various dockets that
were the subject of settlement discussions between the LPSC staff
and Entergy Gulf States and Entergy Louisiana. The LPSC
directed its staff to continue the settlement discussions and submit
any proposed settlement to the LPSC for its consideration. In
January 2005, Entergy Gulf States and Entergy Louisiana filed
testimony with the LPSC in support of a proposed settlement that
currently includes an offer to refund $76 million to Entergy Gulf
States’ Louisiana customers, with no immediate change in current
base rates and to refund $14 millionto Entergy Louisiana’s
customers. If the LPSC approves the proposed settlement, Entergy
Gulf States willbe regulated under a three-year formula rate plan
that, among other provisions, establishes an ROE mid-point of
10.65% and permits Entergy Gulf States to recover incremental
capacity costs without filing a traditional base rate proceeding. The
settlement resolves all issues in, and will result in the dismissal of,
Entergy Gulf States’ fourth, fifth, sixth, seventh, and eighth annual
earnings reviews, Entergy Gulf States’ ninth post-merger earnings
reviewand revenue requirement analysis, a fuel review for Entergy
Gulf States, dockets established to consider issues concerning
power purchases for both Entergy Gulf States and Entergy
Louisiana for the summers of 2001, 2002, 2003, and 2004, and a
docket concerning retail issues arising under the Entergy
System Agreement. The settlement does not include the System
Agreement case pending at FERC. The LPSC has solicited
comments on the proposed settlement from the parties to the
various proceedings at issue in the proposed settlement. The
proposed settlement is scheduled to be presented to the LPSC for
consideration onMarch 23, 2005.
Annual Earnings Reviews (Entergy Gulf States)
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 its latest testimony, in December 2003, the LPSC staff
recommended a rate refund of $30.6 million and a prospective rate
reductionof approximately $50 million. Hearings concluded in
May 2004. Should the LPSC approve the proposed settlement
discussed above, the ninth post-merger analysis would be resolved.
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
NOTES to CONSOLIDATED FINANCIAL STATEMENTS continued