Entergy 2008 Annual Report Download - page 70

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
Notes to Consolidated Financial Statements continued
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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. 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.
The coal plant generation curtailments were caused by railroad
delivery problems and Entergy has since resolved litigation with
the railroad regarding the delivery 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. The order also stated that the APSC would address
any additional issues regarding the energy cost recovery rider in
Entergy Arkansas’ rate case filed 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.
In October 2008, Entergy Arkansas filed a motion to lift the
stay and to rescind the APSC’s January 2007 order in light of the
arguments advanced in Entergy Arkansas’ rehearing petition and
because the value for the Entergy Arkansas’ customers obtained
through the resolved railroad litigation is significantly greater
than the incremental cost of actions identified by the APSC as
imprudent. The APSC staff, the AEEC, and the Arkansas attorney
general support the lifting of the stay but request additional
proceedings. In December 2008, the APSC denied the motion
to lift the stay pending resolution of Entergy Arkansas’ rehearing
request and of the unresolved issues in the proceeding. The APSC
also established a separate docket to consider the resolved railroad
litigation, but a procedural schedule has not been established in
the new docket at this time. The APSC ordered the parties to submit
their unresolved issues list in the pending proceeding, which the
parties have done. The unresolved issues will not be relitigated
but will be decided by the APSC based upon the evidence already
submitted in the proceeding.
Entergy Gulf States Louisiana and Entergy Louisiana
In Louisiana, Entergy Gulf States Louisiana and Entergy Louisiana
recover electric fuel and purchased power costs for the upcoming
month based upon the level of such costs from the prior month.
Entergy Gulf States Louisiana’s purchased gas adjustments include
estimates for the billing month adjusted by a surcharge or credit that
arises from an annual reconciliation of fuel costs incurred with fuel
cost revenues billed to customers, including carrying charges.
In August 2000, the LPSC authorized its staff to initiate a
proceeding to audit the fuel adjustment clause filings of Entergy
Louisiana pursuant to a November 1997 LPSC general order. The
time period that is the subject of the audit is January 1, 2000 through
December 31, 2001. In September 2003, the LPSC staff issued its
audit report and recommended a disallowance with regard to an
alleged failure to uprate Waterford 3 in a timely manner. This issue
was resolved with a March 2005 global settlement. Subsequent to the
issuance of the audit report, the scope of this docket was expanded
to include a review of annual reports on fuel and purchased power
transactions with affiliates and a prudence review of transmission
planning issues and to include the years 2002 through 2004.
Hearings were held in November 2006. In May 2008 the ALJ
issued a final recommendation that found in Entergy Louisiana’s
favor on the issues, except for the disallowance of hypothetical
SO2 allowance costs included in affiliate purchases. The ALJ
recommended a refund of the SO2 allowance costs collected to
date and a realignment of these costs into base rates prospectively
with an amortization of the refunded amount through base rates
over a five-year period. The LPSC issued an order in December
2008 affirming the ALJ’s recommendation. Entergy Louisiana
recorded a provision for the disallowance, including interest, and
will refund approximately $7 million to customers in 2009.
In January 2003, the LPSC authorized its staff to initiate a
proceeding to audit the fuel adjustment clause filings of Entergy
Gulf States Louisiana and its affiliates pursuant to a November
1997 LPSC general order. The audit will include a review of the
reasonableness of charges flowed by Entergy Gulf States Louisiana
through its fuel adjustment clause in Louisiana for the period
January 1, 1995 through December 31, 2002. Discovery is underway,
but a detailed procedural schedule extending beyond the discovery
stage has not yet been established, and the LPSC staff has not yet
issued its audit report. In June 2005, the LPSC expanded the audit
period to include the years through 2004.
Entergy Mississippi
Entergy Mississippi’s rate schedules include an energy cost recovery
rider which is adjusted quarterly to reflect accumulated over- or
under-recoveries from the second prior quarter.
In July 2008 the MPSC began a proceeding to investigate the
fuel procurement practices and fuel adjustment schedules of the
Mississippi utility companies, including Entergy Mississippi. A two-
day public hearing was held in July 2008, and after a recess during
which the MPSC reviewed information, the hearing resumed on
August 5, 2008, for additional testimony by an expert witness
retained by the MPSC. The MPSC’s witness presented testimony
regarding a review of the utilities’ fuel adjustment clauses. The
MPSC stated that the goal of the proceeding is fact-finding so that
the MPSC may decide whether to amend the current fuel cost
recovery process. In February 2009, the MPSC published a final
report of its expert witness, which discussed Entergy Mississippi’s
fuel procurement activities and made recommendations regarding
fuel recovery practices in Mississippi.
In addition, in October 2008 the MPSC issued a subpoena to
Entergy Mississippi and Entergy Services requesting documents
associated with fuel adjustment clause litigation in Louisiana
involving Entergy Louisiana and Entergy New Orleans, and in
January 2009 issued an order requiring Entergy Mississippi to
provide additional information related to the long-term Evangeline
gas contract that had been an issue in the fuel adjustment clause
litigation in Louisiana. Entergy Mississippi and Entergy Services filed
a response to the MPSC order stating that gas from the Evangeline
gas contract had been sold into the Entergy System exchange and
had an effect on the costs paid by Entergy Mississippi’s customers.
The MPSC’s investigation is ongoing.
In addition, in January 2009 the MPSC issued an order declining
to adopt the Public Utilities Staff’s annual fuel audit report.
Among other things, the order stated that the MPSC will open
a rulemaking to define what constitutes efficient and economical
procurement and use of energy; establish guidelines for defining
what elements constitute a just and reasonable fuel adjustment
clause; and establish guidelines for making the required review
of fuel adjustment clauses. In the order, the MPSC also requested
that the legislature extend the deadline for certification of this