Entergy 2007 Annual Report Download - page 68

66
Entergy Corporation and Subsidiaries 2007
Notes to Consolidated Financial Statements continued
Energy Cost Recovery Rider
Entergy Arkansas’ retail rates include an energy cost recovery rider.
In December 2007, the APSC issued an order stating that Entergy
Arkansas’ energy cost recovery rider will remain in eect, and any
future termination of the rider will be subject to eighteen months
advance notice by the APSC, which would occur following notice
and hearing.
In March 2007, Entergy Arkansas led its annual redetermination
of its energy cost rate and implemented a rate of $0.01179 per kWh in
April 2007, which will be eective through March 2008. is updated
rate was a reduction from the prior rate of $0.02827 per kWh led
with the APSC in March 2006. e March 2006 rate was signicantly
higher than prior periods due to increases in the cost of purchased
power primarily due to increased natural gas cost and the eect that
Hurricane Katrina and Hurricane 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 o-peak periods due to railroad
delivery problems.
APSC Investigations
In September 2005, Entergy Arkansas led with the APSC an interim
energy cost rate per the energy cost recovery rider, which provides for
an interim adjustment should the cumulative over- or under-recovery
for the energy period exceed 10 percent of the energy costs for that
period. As of the end of July 2005, the cumulative under-recovery
of fuel and purchased power expenses had exceeded the 10 percent
threshold due to increases in purchased power expenditures resulting
from higher natural gas prices. e interim cost rate of $0.01900 per
kWh became eective the rst billing cycle in October 2005.
In early October 2005, the APSC initiated an investigation into
Entergy Arkansas’ interim energy cost rate. e investigation is focused
on Entergy Arkansas’ 1) gas contracting, portfolio, and hedging
practices; 2) wholesale purchases during the period; 3) management of
the coal inventory at its coal generation plants; and 4) response to the
contractual failure of the railroads to provide coal deliveries. In March
2006, the APSC extended its investigation to cover the costs included in
Entergy Arkansas’ March 2006 ling that requested an energy cost rate
of $0.02827 per kWh, suspended implementation of the $0.02827 per
kWh energy cost rate, and ordered that the $0.01900 per kWh interim
rate remain in eect pending the APSC proceedings on the energy
cost recovery lings. On April 7, 2006, the APSC issued a show cause
order in the investigation proceeding that ordered Entergy Arkansas
to le a cost of service study by June 8, 2006. e order also directed
Entergy Arkansas to le testimony to support the cost of service study,
to support the $0.02827 per kWh cost rate, and to address the general
topic of elimination of the energy cost recovery rider.
In June 2006, Entergy Arkansas led a cost of service study and
testimony supporting the redetermined energy cost rate of $0.02827
per kWh and testimony addressing the prospective elimination of the
energy cost recovery rider as ordered by the APSC. Entergy Arkansas
also led a motion with the APSC seeking again to implement the
redetermined energy cost rate of $0.02827 per kWh. Aer a hearing,
the APSC approved Entergy Arkansas’ request and the redetermined
rate was implemented in July 2006, subject to refund pending the
outcome of the APSC energy cost recovery investigation. A hearing was
held in the APSC energy cost recovery investigation in October 2006.
In January 2007, the APSC issued an order in its review of Entergy
Arkansas’ September 2005 interim rate. e 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. e coal plant generation curtailments
were caused by railroad delivery problems and Entergy is currently
in litigation with the railroad regarding the delivery problems. e
APSC sta was directed to perform an analysis with Entergy Arkansas’
assistance to determine the additional fuel and purchased energy costs
associated with these ndings and le the analysis within 60 days of
the order. Aer a nal 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.
e order also stated that the APSC would address any additional
issues regarding the energy cost recovery rider in Entergy Arkansas’
rate case led in August 2006. Entergy Arkansas requested rehearing
of the order. In March 2007, in order to allow further consideration by
the APSC, the APSC granted Entergy Arkansas’ petition for rehearing
and for stay of the APSC order. e APSC has taken no action in the
proceeding since this March 2007 order.
Entergy Texas
Entergy Texas’ rate schedules include a xed fuel factor to recover fuel
and purchased power costs, including carrying charges, not recovered
in base rates. e xed fuel factor formula was revised and approved
by a PUCT order in August 2006. e new formula was implemented
in September 2006. Under the new methodology, semi-annual
revisions of the xed 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 Texas will likely continue to use this methodology until
the start of retail open access, which has been delayed. e amounts
collected under Entergy Texas’ xed fuel factor and any interim
surcharge implemented until the date retail open access commences
are subject to fuel reconciliation proceedings before the PUCT.
Entergy Texas led 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.” rough this rider, Entergy Texas sought
to recover $23.1 million annually in incremental revenues which
represents the incremental purchased capacity costs, including Entergy
Texas’ obligation to purchase power from Entergy Louisiana’s recently
acquired Perryville plant, over what is already in Entergy Texas’ base
rates. A non-unanimous settlement was reached with most of the
parties that allowed for the implementation of an $18 million annual
rider eective December 1, 2005. e settlement also provided for a
fuel reconciliation to be led by Entergy Texas by May 15, 2006, which
has been led as discussed below, that would resolve the remaining
issues in the case with the exception of the amount of purchased
power in current base rates and the costs to which load growth is
attributed, both of which were settled. e hearing with respect to the
non-unanimous settlement was conducted in October 2005 before an
Administrative Law Judge (ALJ), who issued a Proposal for Decision
supporting the settlement. In December 2005, the PUCT approved
the settlement and entered an order consistent with this approval
in February 2006. e amounts collected by the purchased capacity
recovery rider are subject to reconciliation.
In September 2007, Entergy Texas led with the PUCT a request
to increase its incremental purchased capacity recovery rider to
collect approximately $25 million on an annual basis. is ling
also includes a request to implement an interim surcharge to collect
approximately $10 million in under-recovered incremental purchased
capacity costs incurred through July 2007. In January 2008, Entergy
Texas led with the PUCT a stipulation and settlement agreement
among the parties that agrees to implementation of the interim