Entergy 2004 Annual Report Download - page 66

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Entergy Corporation and Subsidiaries 2004
discharged any potential liability for claims that relate to Entergy
Gulf States’ fourth, fifth, sixth, seventh, and eighth post-merger
earnings reviews, with the exception of certain issues related to the
calculation of the River Bend Deregulated Asset Plan percentage.
Entergy Gulf States made the refund in February 2003. Should the
LPSC approve the proposed settlement discussed above, the out-
standing issue in these proceedings would be resolved.
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 the acquisition of a generating station and certain
power purchase agreements that, based on current natural gas
prices, would produce fuel and purchased power savings for
customers that substantially mitigate the impact of the requested
base rate increase. The filing also requested an allowed ROE of
11.4%. Entergy Louisiana’s previously authorized ROE mid-point
currently in effect is 10.5%. Hearings concluded in December 2004.
Based on the evidence submitted at the hearing, the LPSC staff is
recommending approximately a $7 million base rate increase. The
LPSC staff proposed the implementation of a formula rate plan that
includes a provision for the recovery of incremental capacity costs,
including those related to the proposed Perryville acquisition,
without filing a traditional base rate proceeding. A decision by the
LPSC is expected in mid- to late-March 2005 on these issues.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
Entergy Mississippi is operating under a December 2002 order
issued by the MPSC. The order endorsed a newpower
management rider schedule designed to moreefficientlycollect
capacity portions of purchased power costs. Also, the order provides
for improvements in the return on equity formula and more robust
performance measures for Entergy Mississippi’s formula rate plan.
Under the provisions of Entergy Mississippi’s formula rate plan, a
bandwidth is placed around the benchmark ROE, and if Entergy
Mississippi earns outside of the bandwidth (as well as outside of a
range-of-no-change at each edge of the bandwidth), then Entergy
Mississippi’s rates will be adjusted, though on a prospective basis
only. Under Mississippi law and Entergy Mississippi’s formula rate
plan, however, if Entergy Mississippi’s earned ROE is above the top
of the range-of-no-change at the top of the formula rate plan band-
width, then EntergyMississippi’s “Allowed ROE” for the next
twelve-month period is the point halfway between such earned
ROE and the top of the bandwidth; and Entergy Mississippi’s retail
rates are set at that halfway-point ROE level. In the situation where
Entergy Mississippi’s earned ROE is not above the top of the
range-of-no-change at the top of the bandwidth, then Entergy
Mississippi’s “Allowed ROE” for the next twelve-month period is
the top of the range-of-no-change at the top of the bandwidth.
EntergyMississippi made its annual formula rate plan filing
with the MPSC in March 2004 based on a 2003 test year. In April
2004, the MPSC approved a joint stipulation entered into between
the Mississippi Public Utilities Staff and Entergy Mississippi that
provides for no change in rates based on a performance adjusted
return on common equity mid-point of 10.77%, establishing an
allowed regulatory earnings range of 9.3% to 12.2%.
Filings with the Council (Entergy New Orleans)
Rate Proceedings
In May 2003, the City Council approved a resolution allowing for a
total increase of $30.2 million in electric and gas base rates effective
June 1, 2003. In April 2004, Entergy New Orleans made filings
with the City Council as required by the earnings review process
prescribed by the Gas and Electric Formula Rate Plans approved by
the City Council in 2003. In August 2004, the City Council
approved an unopposed settlement among Entergy New Orleans,
the Council Advisors, and the intervenors in connection with the
Gas and Electric Formula Rate Plans. In accordance with the reso-
lution approving the settlement agreement, Entergy New Orleans’
gas and electric base rates remain unchanged from the levels set in
May 2003. The resolution ordered Entergy New Orleans to defer
$3.9 million relating to voluntary severance plan costs allocated to
its electric operations and $1.0 million allocated to its gas opera-
tions, which amounts were accrued on its books in 2003, and to
record on its books regulatory assets in those amounts to be amor-
tized over five years effective January 2004. Entergy New Orleans
also was ordered to defer $6.0 million of fossil plant maintenance
expense incurred in 2003 and to record on its books a regulatory
asset in that amount to be amortized over a five-year period
effective January 2003.
Fuel Adjustment Clause Litigation
In April 1999, a group of ratepayers filed a complaint against
Entergy New Orleans, Entergy Corporation, Entergy Services, and
Entergy Power in state courtin Orleans Parish purportedly on
behalf of allEntergy New Orleans ratepayers. The plaintiffs seek
treble damages for alleged injuries arising from the defendants’
alleged violations of Louisiana’s antitrust laws in connection with
certain costs passed on to ratepayers in Entergy New Orleans’ fuel
adjustment filings with the City Council. In particular, plaintiffs
allege that Entergy New Orleans improperly included certain costs
in the calculation of fuel charges and that Entergy New Orleans
imprudently purchased high-cost fuel from other Entergy affiliates.
Plaintiffs allege that Entergy New Orleans and the other defendant
Entergy companies conspired to make these purchases to the
detriment of Entergy New Orleans’ ratepayers and to the benefit of
Entergy’sshareholders, in violationof Louisiana’santitrust laws.
Plaintiffsalso seek to recover interest and attorneys’ fees. Entergy
filed exceptions to the plaintiffs’ allegations, asserting, among other
things, that jurisdiction over these issues rests with the City Council
and FERC. In March 2004, the plaintiffs supplemented and
amended their petition. If necessary, at the appropriate time,
Entergywillalso raise its defenses to the antitrust claims. The suit
in state court has been stayed by stipulation of the parties pending
adecision by the City Council in the proceeding discussed in the
next paragraph.
Plaintiffs also filed this complaint with the City Council in order
to initiate a review by the City Council of the plaintiffs’ allegations
and to force restitution to ratepayers of all costs they allege were
NOTES to CONSOLIDATED FINANCIAL STATEMENTS continued