Entergy 2007 Annual Report Download - page 16

Entergy Corporation and Subsidiaries 2007
14
“Our utilities unlock value by finding better ways to provide clean
plans that are in the best interests of their respective customers and aligned
with the public policy direction in their respective jurisdictions, including
resource planning.
In another positive development, in December 2007, Entergy New Orleans
announced a voluntary plan to return $10.6 million to its customers in 2008
through a 6.15 percent base rate credit on electric bills. With New Orleans
repopulation taking place faster than forecasted, Entergy New Orleans is in
the fortunate position of being able to oer rate relief at a critical time in the
city’s recovery. e recovery credit recognizes the timely and decisive support
provided by the New Orleans City Council and the community.
While regulatory proceedings in 2007 were constructive overall, we were
disappointed by certain actions taken by state regulators that create challenges
for our utility operations. In June, Entergy’s utility operating companies
implemented FERC’s remedy for the System Agreement litigation, establishing
parameters for rough production cost equalization. e $252 million payment
required for Entergy Arkansas created regulatory challenges in Arkansas.
In its ruling on the Entergy Arkansas rate case, among other actions, the
Arkansas Public Service Commission ordered a 9.9 percent return on equity, a
decrease from the previous allowed return of 11 percent, implementation of an
annual earnings review process to be developed, sunset of System Agreement
production cost allocation and fuel recovery riders at the end of 2008 unless
certain conditions were met, and the APSC imposed a hypothetical capital
structure on the company. Entergy Arkansas’ petition for rehearing was denied
by the APSC in August 2007. In January 2008, Entergy Arkansas led briefs in
its judicial appeal with the Arkansas State Court of Appeals seeking a reversal
of the APSC’s rate case decision on 16 issues. Entergy Arkansas expects a ruling
later this year.
In December, the APSC subsequently issued a consolidated order addressing
several issues. Citing a lack of consensus among parties, the APSC decided
against implementing an annual earnings review process, nding that moving
forward would be detrimental to the public interest. Upon elimination of this
process, the APSC ruled that going forward, Entergy Arkansas may petition for
extraordinary storm damage nancial relief, as it has done in the past. Further,
the APSC replaced the automatic sunset provisions currently in eect with a
provision calling for an 18-month advance notice to Entergy Arkansas of any
potential future termination which could occur only following due process.
Finally, the APSC approved Entergy Arkansas’ proposed recovery mechanism
for capacity payments through a separate rider from the interim tolling agreement
of the Ouachita Power Plant that Entergy Arkansas has proposed to purchase.
Some parties requested rehearing on these decisions, which were denied by
the APSC. Entergy Arkansas is encouraged by these actions as they indicate a
willingness to fairly balance the interests of customers and shareholders.
Despite the ongoing litigation, Entergy’s utility operating companies still
see merit in a systemwide pooling concept. Accordingly, they will continue
to evaluate a replacement agreement, one that balances the need to achieve
economies and eciencies for their utility customers, while eliminating the
disputes and litigation that have characterized the period since the current
Page 1
INT. LARGE MEETING ROOM - DAY
JWL holds open session with all interested utility
stakeholders to answer questions about the proposed spin-off
of non-utility nuclear assets.
INVESTOR
One question, Wayne. Where’s the value in the
utility? Why would I want to own Entergy
shares after the spin?
JWL
Great question. Our utility business
offers a unique growth opportunity. We are
confident there is substantial value to be
realized in the transformation of our generation
portfolio with new and/or repowered sources.
INVESTOR
So what kind of growth are you talking about?
JWL
Going forward, Entergy Classic aspires
to a 6 to 8 percent growth in EPS
with share accretion and a 70 to 75 percent
dividend payout.
Investor nods while making notes and CUSTOMER steps up.
CUSTOMER
Great for your investors, Wayne but
what’s in it for me?
JWL
You will have the undivided attention
of Entergy’s leadership team focused on
finding better ways to provide you with clean,
reliable and affordable power. We’ve kept
your nominal base rates for residential power
flat for nine years and we aspire to deliver a
“real” decrease in base rates for the next
five years.
Page 2
CUSTOMER
Can’t argue with that.
REGULATOR steps in front of customer.
REGULATOR
It sounds good but what about the nuclear
assets in your utility business. Is all
your operating knowledge going with the
non-utility assets?
JWL
No way. The same talented, dedicated
operators and engineers who run our
utility nuclear assets today will be
running them after the spin-off.
REGULATOR
And your new nuclear efforts?
What happens to them?
JWL
No change. We still see potential for
development of new nuclear capacity at
our Grand Gulf Nuclear Station and
River Bend Station. If anything, our
focus on the opportunities in our utility
business will be stronger than ever
following the spin-off.
Regulator
Does that mean it wasn’t your focus before...
JWL
It’s always been our focus... and it’s
stronger than ever.
PRE-PRODUCTION
We considered the impact the transaction would have on our
many stakeholders, striving to script a positive outcome for each.
The Making of The Value Trilogy