Entergy 2006 Annual Report Download - page 57

ENTERGY CORPORATION AND SUBSIDIARIES 2
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submitted requests for rehearing of the various FERC orders approv-
ing the ICT proposal. These requests for rehearing are also pending
before the FERC.
On October 30, 2006, the Utility operating companies filed revi-
sions to their Open Access Transmission Tariff (“OATT”) with the
FERC to establish a mechanism to recover from their wholesale trans-
mission customers the (1) costs incurred to develop or join an RTO
and to develop the ICT; and (2) the on-going costs that will be
incurred under the ICT agreement. Several parties intervened oppos-
ing the proposed tariff revisions. On December 22, 2006 the FERC
accepted for filing Entergy’s proposed tariff revisions, and set them for
hearing and settlement procedures. In its Order, the FERC conclud-
ed that the Utility operating companies “should be allowed the
opportunity to recover its start up costs associated with its formation
of the ICT and its participation in prior failed attempts to form an
RTO,” but that the proposed tariffs raised issues of fact that are more
properly addressed through hearing and settlement procedures.
Settlement discussions with the intervenors are currently ongoing.
In March 2004, the APSC initiated a proceeding to review
Entergy’s proposal and compare the benefits of such a proposal to the
alternative of Entergy joining the Southwest Power Pool RTO. The
APSC sought comments from all interested parties on this issue.
Various parties, including the APSC General Staff, filed comments
opposing the ICT proposal. A public hearing has not been scheduled
by the APSC at this time, although Entergy Arkansas has responded
to various APSC data requests. In May 2004, Entergy Mississippi
filed a petition for review with the MPSC requesting MPSC support
for the ICT proposal. A hearing in that proceeding was held in August
2004. Entergy New Orleans appeared before the Utility Committee
of the City Council in June 2005 to provide information on the ICT
proposal. Entergy Louisiana and Entergy Gulf States filed an applica-
tion with the LPSC requesting that the LPSC find that the ICT
proposal is a prudent and appropriate course of action. A hearing in
the LPSC proceeding on the ICT proposal was held in October 2005,
and the LPSC voted to approve the ICT proposal in July 2006.
Available Flowgate Capacity (AFC) Proceeding
On March 22, 2005, the FERC issued an order that holds Entergy’s
AFC hearing in abeyance pending action on Entergy’s ICT filing. The
order holding the hearing in abeyance further indicated that it would
cancel the hearing when the ICT begins to perform its functions. On
December 18, 2006, the Utility operating companies filed with the
FERC a request to cancel the AFC hearing now that the ICT had
been installed and assumed its responsibilities. One intervenor
opposed the cancellation of the AFC hearing and other intervenors
filed requesting that the FERC clarify that if the motion to cancel the
hearing is granted, that such cancellation “does not affect the contin-
uing obligation of Entergy to provide transmission meeting the
standard of good utility practice.”
FERC Investigations
In 2005, the Utility operating companies notified the FERC’s Office
of Market Oversight and Investigations (FERC enforcement) that cer-
tain historic data related to the hourly AFC models was inadvertently
lost due to errors in the implementation of a data archiving process.
The data at issue is hourly AFC data for the nine-month period
April 27, 2004 through January 31, 2005. Subsequently, the Utility
operating companies notified FERC enforcement that: (1) Entergy
had identified certain instances in which transmission service either
was granted when there was insufficient transmission capacity or was
not granted when there was sufficient transmission capacity; and
(2) Entergy had failed to timely post to Entergy’s OASIS site certain
curtailment and schedule information. Entergy cooperated fully and
timely in the investigation of these instances. In January 2007, the
FERC approved a settlement agreement between the Utility operating
companies and the FERC enforcement staff resolving all issues arising
out of or related to these issues. The Order accepting the Stipulation
and Consent Agreement indicates that the matters “were generally the
result of low-level employees’ inadvertent actions, done without the
knowledge or acquiescence of senior management. The matters did
not reflect undue preference or undue discrimination and resulted in
little or no quantifiable harm.” Pursuant to the Stipulation and
Consent Agreement, Entergy agreed to pay a $2 million civil penalty
and to make a $1 million payment to the Nike/Entergy Green
Schools for New Orleans Partnership. Additionally, the Stipulation
and Consent Agreement required the establishment of a compliance
plan that includes independent auditing provisions.
Following the notification of the potential loss by the Utility oper-
ating companies of AFC data, a separate, non-public investigation was
initiated by the FERC to review the Utility operating companies’
record retention policies and practices. In October 2006, FERC
enforcement issued an audit report addressing the Utility operating
companies’ compliance with the FERC’s records retention regula-
tions. The audit report notes the following: (i) one instance where the
Utility operating companies’ treatment of a contract failed to comply
with a FERC-imposed record retention period and notification
requirement; (ii) one instance where the Utility operating companies
temporarily lost an individual record but were subsequently able to
reproduce it; (iii) four instances where records were retained for the
full period required by the FERC, but may have been inadvertently
lost prior to a retention period required by a different agency or the
Utility operating companies’ internal retention requirements;
and (iv) a limited number of instances where the Utility operating
companies’ internal policies could be improved. The findings and
recommendations in the audit report, which were agreed to by the
Utility operating companies, represent a consensual resolution of
the audit. Although these findings are not indicative of any significant
areas of non-compliance, the Utility operating companies believe
that the audit staff’s recommendations will improve the records
retention program and therefore agreed to implement the audit
staff’s recommendations.
The FERC is currently reviewing certain wholesale sales and pur-
chases involving EPMC that occurred during the 1998-2001 time
period. EPMC was an Entergy subsidiary engaged in non-regulated
wholesale marketing and trading activities prior to the formation of
Entergy-Koch. Entergy is working with the FERC investigation staff
to provide information regarding these transactions.
Interconnection Orders
The Utility operating companies (except Entergy New Orleans) have
been parties to several proceedings before the FERC in which inde-
pendent generation entities (GenCos) are seeking a refund of monies
that the GenCos had previously paid to the Entergy companies for
facilities necessary to connect their generation facilities to Entergy’s
transmission system. In some of these cases the Utility operating com-
panies filed rehearing requests that challenged the FERC’s decision to
grant the GenCos a refund of such amounts. Recently, the FERC
issued orders that denied the Utility operating companies’ rehearing
requests, thereby upholding the refund of monies to the GenCos that
was previously directed by the FERC. These recent findings retained
Entergy’s obligation to refund approximately $124.0 million, includ-
ing interest, in expenses and tax obligations previously paid by the
GenCos, including $35.7 million for Entergy Arkansas, $32.5 million
for Entergy Gulf States, $32.6 million for Entergy Louisiana,
MANAGEMENT’S FINANCIAL DISCUSSION and ANALYSIS continued
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