Entergy 2006 Annual Report Download - page 78

ENTERGY CORPORATION AND SUBSIDIARIES 2
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As discussed above, in March 2006, Entergy Arkansas filed with the
APSC its annual redetermination of the energy cost rate for applica-
tion to the period April 2006 through March 2007. The filed energy
cost rate of $0.02827 per kWh was proposed to replace the interim
rate of $0.01900 per kWh that had been in place since October 2005,
as discussed above. The increase in the energy cost rate was due to
increases in the cost of purchased power primarily due to the natural
gas cost increase and the effect that Hurricanes Katrina and Rita had
on market conditions, increased demand for purchased power during
the ANO 1 refueling and steam generator replacement outage in the
fall of 2005, and coal plant generation curtailments during off-peak
periods due to railroad delivery problems. On March 31, 2006, the
APSC suspended implementation of the $0.02827 per kWh energy
cost rate, and ordered that the $0.01900 per kWh interim rate remain
in effect pending the APSC proceedings on the energy cost recovery
filings discussed above. In June 2006, Entergy Arkansas filed a motion
with the APSC seeking again to implement the redetermined energy
cost rate of $0.02827 per kWh. After a hearing, the APSC approved
Entergy Arkansas’ request and the redetermined rate was implement-
ed in July 2006, subject to refund pending the outcome of the APSC
energy cost recovery investigation.
On January 16, 2007, the APSC issued an order in its review of
Entergy Arkansas’ interim rate, mentioned above. The APSC found
that Entergy Arkansas failed to maintain an adequate coal inventory
level going into the summer of 2005 and that Entergy Arkansas
should be responsible for any incremental energy costs resulting from
two outages caused by employee and contractor error. As stated above,
the coal plant generation curtailments were caused by railroad deliv-
ery problems. The APSC staff was directed to perform an analysis
with Entergy Arkansas’ assistance to determine the additional fuel and
purchased energy costs associated with these findings and file the
analysis within 60 days of the order. After a final determination of the
costs is made by the APSC, Entergy Arkansas would be directed to
refund that amount with interest to its customers as a credit on the
energy cost recovery rider that collects fuel and purchased energy
costs. The order also stated that the APSC would address any addi-
tional issues regarding the energy cost recovery rider in the pending
Entergy Arkansas rate case. Entergy Arkansas has requested rehearing
of the order.
Entergy Gulf States (Texas)
In the Texas jurisdiction, Entergy Gulf States’ rate schedules include a
fixed fuel factor to recover fuel and purchased power costs, including
carrying charges, not recovered in base rates. The fixed fuel factor for-
mula was revised and approved by a PUCT order in August 2006.
The new formula was implemented in September 2006. Under the
new methodology, semi-annual revisions of the fixed fuel factor will
continue to be made in March and September based on the market
price of natural gas and changes in fuel mix. Entergy Gulf States will
likely continue to use this methodology until the start of retail open
access, which has been delayed. The amounts collected under Entergy
Gulf States’ fixed fuel factor and any interim surcharge implemented
until the date retail open access commences are subject to fuel recon-
ciliation proceedings before the PUCT.
Entergy Gulf States filed with the PUCT in July 2005 a request for
implementation of an incremental purchased capacity recovery rider,
consistent with the Texas legislation discussed below under “Electric
Industry Restructuring and the Continued Application of SFAS 71.”
Through this rider Entergy Gulf States sought to recover $23.1 mil-
lion annually in incremental revenues on a Texas retail basis which
represents the incremental purchased capacity costs, including
Entergy Gulf States’ obligation to purchase power from Entergy
Louisiana’s recently acquired Perryville plant, over what is already in
Entergy Gulf States’ base rates. Entergy Gulf States reached an initial
agreement with parties that the date upon which cost recovery and
cost reconciliation would begin is September 1, 2005. A further non-
unanimous settlement was reached with most of the parties that
allowed for the implementation of the $18 million annual rider effec-
tive December 1, 2005. The settlement also provided for a fuel
reconciliation to be filed by Entergy Gulf States by May 15, 2006,
which has been filed as discussed below, that would resolve the
remaining issues in the case with the exception of the amount of pur-
chased power in current base rates and the costs to which load growth
is attributed, both of which were settled. The hearing with respect to
the non-unanimous settlement, which was opposed by the Office of
Public Utility Counsel, was conducted on October 19, 2005 before
the ALJ, who issued a Proposal for Decision supporting the settle-
ment. In December 2005, the PUCT approved the settlement. The
amounts collected by the purchased capacity recovery rider are subject
to reconciliation.
In May 2006, Entergy Gulf States filed with the PUCT a fuel and pur-
chased power reconciliation case covering the period September 2003
through December 2005 for costs recoverable through the Texas fixed fuel
factor rate and the incremental purchased capacity recovery rider.
Entergy Gulf States is reconciling $1.6 billion of fuel and
purchased power costs on a Texas retail basis. Hearings are scheduled for
April 2007 and a PUCT decision is expected by the third quarter of 2007.
In January 2006, Entergy Gulf States implemented a $46.1 million
interim fuel surcharge, including interest, to collect under-recovered
fuel and purchased power expenses incurred from August 2004
through July 2005 as approved by the PUCT. The surcharge was to
be collected over a twelve-month period. In addition, in March 2006,
Entergy Gulf States filed with the PUCT an application to implement
an interim fuel surcharge in connection with the under-recovery of
$97 million, including interest, of eligible fuel costs for the period
August 2005 through January 2006. Entergy Gulf States entered into
a unanimous settlement that reduced the requested surcharge for
actual over-collections from the months of February and March 2006,
resulting in a surcharge of $78.8 million to be implemented over a
twelve-month period beginning in June 2006. The PUCT approved
the surcharge in June 2006. Subsequently, as a result of over-recover-
ies in the months following the implementation of the June 2006
surcharge, Entergy Gulf States entered into a joint agreement with
several parties, which was approved by the PUCT, to remove the first
interim fuel surcharge (the January 2006 surcharge) effective with the
first billing cycle in November 2006. Additionally, Entergy Gulf
States requested that the PUCT remove the second interim surcharge
(the June 2006 surcharge) as of November 2006 as well, which the
PUCT has approved. Amounts collected through the interim fuel sur-
charges are subject to final reconciliation in a future fuel
reconciliation proceeding.
In March 2004, Entergy Gulf States filed with the PUCT a fuel
reconciliation case covering the period September 2000 through
August 2003 reconciling $1.43 billion of fuel and purchased power
costs on a Texas retail basis. This amount included $8.6 million of
under-recovered costs that Entergy Gulf States asked to reconcile and
roll into its fuel over/under-recovery balance to be addressed in the
next appropriate fuel proceeding. This case involved imputed capacity
and River Bend payment issues similar to those decided adversely in
the January 2001 proceeding, which is discussed below. On January
31, 2005, the ALJ issued a Proposal for Decision that recommended
disallowing $10.7 million (excluding interest) related to these two
issues. In April 2005, the PUCT issued an order reversing in part the
ALJ’s Proposal for Decision and allowing Entergy Gulf States to
recover a part of its request related to the imputed capacity and River
Bend payment issues. The PUCT’s order reduced the disallowance in
NOTESto CONSOLIDATED FINANCIAL STATEMENTS continued