Entergy 2005 Annual Report Download - page 76

ENTERGY CORPORATION AND SUBSIDIARIES 2005
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they allege were improperly and imprudently included in the fuel
adjustment filings. Testimony was filed on behalf of the plaintiffs in this
proceeding asserting, among other things, that Entergy New Orleans
and other defendants have engaged in fuel procurement and power
purchasing practices and included costs in Entergy New Orleans’
fuel adjustment that could have resulted in Entergy New Orleans
customers being overcharged by more than $100 million over a period
of years. Hearings were held in February and March 2002. In February
2004, the City Council approved a resolution that resulted in a refund
to customers of $11.3 million, including interest, during the months of
June through September 2004. The resolution concludes, among
other things, that the record does not support an allegation that
Entergy New Orleans’ actions or inactions, either alone or in concert
with Entergy or any of its affiliates, constituted a misrepresentation or
a suppression of the truth made in order to obtain an unjust advantage
of Entergy New Orleans, or to cause loss, inconvenience or harm to its
ratepayers. Management believes that it has adequately provided for
the liability associated with this proceeding. The plaintiffs appealed the
City Council resolution to the state courts. On May 26, 2005, the Civil
District Court for the Parish of Orleans affirmed the City Council
resolution that resulted in a refund to customers of $11.3 million,
including interest, during the months of June through September
2004, finding no support for the plaintiffs’ claim that the refund
amount should be higher.
In June 2005, the plaintiffs appealed the Civil District Court deci-
sion to the Louisiana Fourth Circuit Court of Appeal. Subsequent to
Entergy New Orleans’ filing of a bankruptcy petition in the Eastern
District of Louisiana, Entergy New Orleans filed a Notice of Stay with
the Court of Appeal. The Bankruptcy Court lifted the stay with respect
to the plaintiffs’ appeal of the Civil District Court decision, but the
class action lawsuit remains stayed. In February 2006, Entergy New
Orleans filed a notice removing the class action lawsuit from the Civil
District Court to the U.S. District Court for the Eastern District of
Louisiana. Additionally, in the Entergy New Orleans bankruptcy pro-
ceeding, the named plaintiffs in the Entergy New Orleans fuel clause
lawsuit, together with the named plaintiffs in the Entergy New
Orleans rate of return lawsuit, filed a Complaint for Declaratory
Judgment asking the court to declare that Entergy New Orleans,
Entergy Corporation, and Entergy Services are a single business enter-
prise, and as such, are liable in solido with Entergy New Orleans for
any claims asserted in the Entergy New Orleans fuel clause lawsuit and
the Entergy New Orleans rate of return lawsuit, and alternatively, that
the automatic stay be lifted to permit the movants to pursue the same
relief in state court. Answers were due in this adversary proceeding in
February 2006, but Entergy New Orleans has requested an extension to
answer until March 2006.
ELECTRIC INDUSTRY RESTRUCTURING AND THE
CONTINUED APPLICATION OF SFAS 71
Although Arkansas and Texas enacted retail open access laws, the
retail open access law in Arkansas has now been repealed. Retail
open access in Entergy Gulf States’ service territory in Texas has
been delayed. Entergy believes that significant issues remain to be
addressed by Texas regulators, and the enacted law does not provide
sufficient detail to allow Entergy Gulf States to reasonably deter-
mine the impact on Entergy Gulf States’ regulated operations.
Entergy therefore continues to apply regulatory accounting princi-
ples to the retail operations of all of the domestic utility companies.
Texas (Entergy Gulf States)
As ordered by the PUCT, in January 2003, Entergy Gulf States filed
its proposal for an interim solution (retail open access without a
FERC-approved RTO), which among other elements, included:
■the recommendation that retail open access in Entergy Gulf
States’ Texas service territory, including corporate unbundling,
occur by January 1, 2004, or else be delayed until at least
January 1, 2007. If retail open access is delayed past January 1,
2004, Entergy Gulf States requested authorization to separate
into two bundled utilities, one subject to the retail jurisdiction
of the PUCT and one subject to the retail jurisdiction of
the LPSC.
■the recommendation that Entergy’s transmission organization,
possibly with the oversight of another entity, will continue to
serve as the transmission authority for purposes of retail open
access in Entergy Gulf States’ service territory.
■the recommendation that the decision points be identified that
would require prior to January 1, 2004, the PUCT’s determina-
tion, based upon objective criteria, whether to proceed with
further efforts toward retail open access in Entergy Gulf States’
Texas service territory.
After considering the proposal, in an April 2003 order the PUCT
set forth a sequence of proceedings and activities designed to initi-
ate an interim solution. These proceedings and activities included
initiating a proceeding to certify an independent organization to
administer market protocols and ensure nondiscriminatory access
to transmission and distribution systems.
In July 2004, the PUCT denied Entergy’s application to certify
Entergy’s transmission organization as an independent organization
under Texas law. In its order, the PUCT also ordered: the cessation of
efforts to develop an interim solution for retail open access in Entergy
Gulf States’ Texas service territory, termination of the pilot project in
that territory, and a delay in retail open access in that territory until
either a FERC-approved RTO is in place or some other independent
transmission entity is certified under Texas law. Several parties have
appealed the termination of the pilot program aspect of the order,
claiming the issue was not properly a part of the proceeding.
In June 2005, a Texas law was enacted which provides that:
■Entergy Gulf States is authorized by the legislation to proceed
with a jurisdictional separation into two vertically integrated
utilities, one subject solely to the retail jurisdiction of the LPSC
and one subject solely to the retail jurisdiction of the PUCT;
■the portions of all prior PUCT orders requiring Entergy Gulf
States to comply with any provisions of Texas law governing
transition to retail competition are void;
■Entergy Gulf States must file a plan by January 1, 2006,
identifying the power region(s) to be considered for certification
and the steps and schedule to achieve certification
(as discussed below);
■Entergy Gulf States must file a transition to competition plan
no later than January 1, 2007, that would address how Entergy
Gulf States intends to mitigate market power and achieve full
customer choice, including potential construction of additional
transmission facilities, generation auctions, generation capacity
divestiture, reinstatement of a customer choice pilot project,
establishment of a price to beat, and other measures;
■Entergy Gulf States’ rates are subject to cost-of-service regula-
tion until retail customer choice is implemented;
NOTES to CONSOLIDATED FINANCIAL STATEMENTS continued