Entergy 2006 Annual Report Download - page 53

ENTERGY CORPORATION AND SUBSIDIARIES 2
2000066
Company Authorized ROE Pending Proceedings/Events
Entergy 11.0% ■Base rates have been in effect since 1998. Entergy Arkansas filed a rate case in August 2006 requesting a general base rate increase
Arkansas of $150 million (using an ROE of 11.25%), as well as recovery of FERC-allocated costs pursuant to the FERC decision on the
System Agreement. Entergy Arkansas also requested a capacity management rider to recover incremental capacity costs. A procedural
schedule has been established with a hearing in April 2007 with new rates expected to be effective in June 2007.
■In December 2005, Entergy Arkansas provided notice of its intent to terminate participation in the System Agreement following a
final order from the FERC establishing terms under which Entergy Arkansas may be required to make payments to other Utility
operating companies to achieve rough production cost equalization.
■Entergy Arkansas completed recovery in January 2006 of transition to competition costs through an $8.5 million transition cost
recovery rider that has been in effect since October 2004.
Entergy 10.95% ■Base rates are currently set at rates approved by the PUCT in June 1999.
Gulf States-Texas ■In June 2005, a Texas law was enacted that provides for a base rate freeze until mid-2008, but allows Entergy Gulf States to seek
before then recovery of certain incremental purchased power capacity costs and recover reasonable and necessary transition to
competition costs. An $18 million annual capacity rider was implemented effective December 2005. A $14.5 million annual
transition cost recovery rider was implemented effective March 2006, which the PUCT approved in June 2006. The transition cost
recovery rider is for a 15-year period.
■In December 2006, the PUCT approved the recovery of $353 million (net of expected insurance proceeds of $66 million) in storm
cost recovery expenses plus carrying charges. Entergy Gulf States will file a semi-annual report with the PUCT to reflect any
additional insurance proceeds or other government grant money received, which would be applied against the storm cost recovery
balance. In February 2007, the PUCT voted to approve securitization of the $353 million in storm cost recovery expenses, but it
also offset the securitization amount by $31.6 million, which the PUCT Commissioners determined was the net present value of the
accumulated deferred income tax benefits related to the storm costs. The PUCT further voted to impose certain caps on the amount
of qualified transaction costs that can be included in the total securitization amount. The PUCT is expected to issue a financing
order authorizing the issuance of securitization bonds by early-March 2007, and Entergy Gulf States intends to implement rates to
recover revenues to pay the securitization bonds by mid-2007.
Entergy Gulf States- 9.9%-11.4% ■A three-year formula rate plan is in place with an ROE mid-point of 10.65% for the initial three-year term of the plan. Entergy
Louisiana Gulf States made its first formula rate plan filing in June 2005 for the test year ending December 31, 2004.
■In May 2006, Entergy Gulf States made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Gulf States
implemented a $17.2 million increase, subject to refund, effective September 2006 for 1) recovery of $6.7 million of LPSC-
approved incremental deferred and ongoing capacity costs and 2) $10.5 million of interim storm cost recovery pursuant to an
LPSC order. The filing reflects an 11.1% return on common equity which is within the authorized bandwidth.
■In May 2006, Entergy Gulf States completed the $6 million interim recovery of storm costs through the fuel adjustment clause
pursuant to an LPSC order. Beginning in September 2006, interim recovery of $0.85 million per month was instituted via the
formula rate plan. Interim recovery will continue until a final decision is reached by the LPSC with respect to Entergy Gulf States’
supplemental and amending storm cost recovery application, which was filed in July 2006. Entergy Gulf States supplemented that
filing on February 28, 2007, and seeks to recover $219 million in storm-related costs and to build an $87 million storm reserve. The
February 2007 filing also seeks authority to securitize the storm cost recovery and storm reserve amounts. Hearings are expected to
begin in April 2007.
Entergy Louisiana 9.45%-11.05% ■A three-year formula rate plan is in place with an ROE mid-point of 10.25% for the initial three-year term of the plan. Entergy
Louisiana made its first formula rate plan filing under this plan in May 2006 based on a 2005 test year.
■In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year. Entergy Louisiana
implemented a $143.4 million increase, subject to refund, effective September 2006 for 1) ongoing and deferred incremental
capacity costs of $119.2 million and 2) $24.2 million of interim storm cost recovery pursuant to an LPSC order. In response to an
LPSC Staff report, Entergy Louisiana subsequently reduced rates by $0.5 million annually, effective October 2006, to reflect issues
and errors identified by the staff with which Entergy Louisiana agrees. The modified filing reflects a 9.56% return on common
equity, which is within the authorized bandwidth and a reduction in the collection of ongoing and deferred incremental capacity
costs to $118.7 million. Entergy Louisiana and the LPSC Staff are working to resolve outstanding issues.
■In April 2006, Entergy Louisiana completed the $14 million interim recovery of storm costs through the fuel adjustment clause
pursuant to an LPSC order. Beginning in September 2006, interim recovery of $2 million per month was instituted via the formula
rate plan. Interim recovery will continue until a final decision is reached by the LPSC with respect to Entergy Louisiana’s
supplemental and amending storm cost recovery application, which was filed in July 2006. Entergy Louisiana supplemented that
filing on February 28, 2007, and seeks to recover $561 million in storm-related costs and to build a $141 million storm reserve. The
February 2007 filing also seeks authority to securitize the storm cost recovery and storm reserve amounts. Hearings are expected to
begin in April 2007.
Entergy Mississippi 9.7%-12.4% ■An annual formula rate plan is in place. In April 2006, Entergy Mississippi submitted its annual scheduled formula rate plan filing with the
MPSC reflecting a return on equity of 9.35%, resulting in a deficiency. The MPSC has approved a settlement providing for a $1.8 million
rate increase, which was implemented in August 2006.
■The MPSC approved the purchase of the 480MW Attala power plant and the investment cost recovery through its power
management rider. As a consequence of the events surrounding Entergy Mississippi’s ongoing efforts to recover storm restoration
costs associated with Hurricane Katrina, in October 2006, the MPSC approved a revision to Entergy Mississippi’s power
management rider. The revision has the effect of allowing Entergy Mississippi to recover the annual ownership costs of the Attala
plant until such time as there has been a resolution of Entergy Mississippi’s recovery of its storm restoration costs and a general rate
case can be filed.
■In October 2006, the Mississippi Development Authority approved for payment and Entergy Mississippi received $81 million in
CDBG funding for Hurricane Katrina costs. The MPSC then issued a financing order authorizing the issuance of $48 million of
state bonds, with $8 million for the remainder of Entergy Mississippi’s certified Hurricane Katrina restoration costs not funded by
CDBG and $40 million for the increase in Entergy Mississippi’s storm damage reserve.
Entergy 10.75% - Electric; ■In October 2006, the City Council approved a settlement agreement that calls for a phased-in rate increase to ensure Entergy
New Orleans 10.75% - Gas New Orleans' ability to focus on restoration of electric and gas systems. When fully implemented by January 1, 2008, electric base
rates will increase by $3.9 million. Recovery of all Grand Gulf costs through the fuel adjustment clause will continue. Gas base rates
increased by $4.75 million in November 2006, and will increase an additional $1.5 million in March 2007 and an additional $4.75
million in November 2007. The settlement calls for Entergy New Orleans to file a base rate case by July 31, 2008. The settlement
agreement discontinues the formula rate plan and the generation performance-based plan but permits Entergy New Orleans to file
an application to seek authority to implement formula rate plan mechanisms no sooner than six months following the effective date
of the implementation of the base rates resulting from the July 31, 2008 base rate case. Any storm costs in excess of CDBG funding
and insurance proceeds will be addressed in that base rate case. The settlement also authorizes a $75 million storm reserve for
damage from future storms, which will be created over a ten-year period through a storm reserve rider beginning in March 2007.
■In October 2006, the Louisiana Recovery Authority (LRA) Board endorsed a resolution proposing to allocate $200 million in CDBG
funds to Entergy New Orleans to defray gas and electric utility system repair costs in an effort to provide rate relief for Entergy New
Orleans customers. The action plan was approved by state lawmakers in December 2006 and by the U. S. Department of Housing and
Urban Development in February 2007. In addition, the City Council must review and certify the storm costs before an application can
be filed with the LRA and CDBG funds can be released to Entergy New Orleans. The City Council has stated its intent to complete its
certification by March 2007.
System Energy 10.94% ■ROE approved by July 2001 FERC order. No cases pending before FERC.
MANAGEMENT’S FINANCIAL DISCUSSION and ANALYSIS continued
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