Entergy 2006 Annual Report Download - page 83

ENTERGY CORPORATION AND SUBSIDIARIES 2
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incremental deferred and ongoing capacity costs. The increase
was implemented, subject to refund, with the first billing cycle of
September 2006.
Retail Rates – Gas (Entergy Gulf States)
In July 2004, Entergy Gulf States filed with the LPSC an application
for a change in its rates and charges seeking an increase of $9.1 mil-
lion in gas base rates in order to allow Entergy Gulf States an
opportunity to earn a fair and reasonable rate of return. In June 2005,
the LPSC unanimously approved Entergy Gulf States’ proposed set-
tlement that included a $5.8 million gas base rate increase effective
the first billing cycle of July 2005 and a rate stabilization plan with an
ROE mid-point of 10.5%.
In January 2006, Entergy Gulf States filed with the LPSC its gas
rate stabilization plan. The filing showed a revenue deficiency of $4.1
million based on an ROE mid-point of 10.5%. In May 2006, Entergy
Gulf States implemented a $3.5 million rate increase pursuant to an
uncontested agreement with the LPSC Staff.
In January 2007, Entergy Gulf States filed with the LPSC its gas
rate stabilization plan for the test year ending September 30, 2006.
The filing showed a revenue deficiency of $3.5 million based on an
ROE mid-point of 10.5%. A decision by the LPSC and implementa-
tion is not expected until the second quarter of 2007.
Filings with the MPSC
Formula Rate Plan Filings
In March 2006, Entergy Mississippi made its annual scheduled
formula rate plan filing with the MPSC. The filing was amended
by an April 2006 filing. The amended filing showed that an increase
of $3.1 million in electric revenues is warranted. The MPSC has
approved a settlement providing for a $1.8 million rate increase,
which was implemented in August 2006.
Power Management Rider
In November 2005, the MPSC approved the purchase of the 480MW
Attala power plant. In December 2005, the MPSC issued an order
approving the investment cost recovery through its power manage-
ment rider and limited the recovery to a period that begins with the
closing date of the purchase and ends the earlier of the date costs are
incorporated into base rates or December 31, 2006. 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.
Filings with the City Council
Formula Rate Plans and Storm-related Riders
In June 2006, Entergy New Orleans made its annual formula rate
plan filings with the City Council. The filings presented various alter-
natives to reflect the effect of Entergy New Orleans’ lost customers
and decreased revenue following Hurricane Katrina. The alternative
that Entergy New Orleans recommended adjusts for lost customers
and assumes that the City Council’s June 2006 decision to allow
recovery of all Grand Gulf costs through the fuel adjustment clause
stays in place during the rate-effective period (a significant portion of
Grand Gulf costs was previously recovered through base rates).
At the same time as it made its formula rate plan filings, Entergy
New Orleans also filed with the City Council a request to implement
two storm-related riders. With the first rider, Entergy New Orleans
sought to recover the electric and gas restoration costs that it had
actually spent through March 31, 2006. Entergy New Orleans also
proposed semiannual filings to update the rider for additional restora-
tion spending and also to consider the receipt of CDBG funds or
insurance proceeds that it may receive. With the second rider, Entergy
New Orleans sought to establish a storm reserve to provide for the risk
of another storm.
In October 2006, the City Council approved a settlement agree-
ment that resolves Entergy New Orleans’ rate and storm-related rider
filings by providing for phased-in rate increases, while taking into
account with respect to storm restoration costs the anticipated receipt
of CDBG funding as recommended by the Louisiana Recovery
Authority. The settlement provides for a 0% increase in electric base
rates through December 2007, with a $3.9 million increase imple-
mented in January 2008. 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 by 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 for-
mula 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. These storm reserve funds will be held in a restricted
escrow account.
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 court in Orleans Parish purportedly on behalf of all
Entergy 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’s shareholders, in violation of
Louisiana’s antitrust laws. Plaintiffs also 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 the FERC. In March 2004, the plaintiffs
supplemented and amended their petition. If necessary, at the appro-
priate time, Entergy will also raise its defenses to the antitrust claims.
The suit in state court has been stayed by stipulation of the parties
pending review of the decision by the City Council in the proceeding
discussed in the next paragraph.
Plaintiffs also filed a corresponding complaint with the City
Council in order to initiate a review by the City Council of the plain-
tiffs’ allegations and to force restitution to ratepayers of all costs they
allege were improperly and imprudently included in the fuel adjust-
ment 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
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