Entergy 2008 Annual Report Download - page 71

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
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Notes to Consolidated Financial Statements continued
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annual fuel audit by one year, while it seeks approval to conduct an
independent audit and assessment of Entergy Mississippi’s practices
for economical purchases and use of fuel and electric energy.
Mississippi Attorney General Complaint
The Mississippi attorney general filed a complaint in state court in
December 2008 against Entergy Corporation, Entergy Mississippi,
Entergy Services, and Entergy Power alleging, among other things,
violations of Mississippi statutes, fraud, and breach of good faith and fair
dealing, and requesting an accounting and restitution. The litigation is
wide ranging and relates to tariffs and procedures under which Entergy
Mississippi purchases power not generated in Mississippi to meet
electricity demand. Entergy believes the complaint is unfounded. On
December 29, 2008, the defendant Entergy companies filed to remove
the attorney general’s suit to U.S. District Court (the forum that Entergy
believes is appropriate to resolve the types of federal issues raised in
the suit), where it is currently pending, and additionally answered the
complaint and filed a counter-claim for relief based upon the Mississippi
Public Utilities Act and the Federal Power Act. The Mississippi
attorney general has filed a pleading seeking to remand the matter to
state court.
Entergy New Orleans
Entergy New Orleans’ electric rate schedules include a fuel
adjustment tariff designed to reflect no more than targeted fuel
and purchased power costs, adjusted by a surcharge or credit for
deferred fuel expense arising from the monthly reconciliation
of actual fuel and purchased power costs incurred with fuel cost
revenues billed to customers, including carrying charges. In June
2006, the City Council authorized the recovery of all Grand Gulf
costs through Entergy New Orleans’ fuel adjustment clause (a
significant portion of Grand Gulf costs was previously recovered
through base rates), and continued that authorization in approving
the October 2006 formula rate plan filing settlement.
Entergy New Orleans’ gas rate schedules include an adjustment
to reflect estimated gas costs for the billing month, adjusted by
a surcharge or credit similar to that included in the electric fuel
adjustment clause, including carrying charges. In October 2005,
the City Council approved modification of the gas cost collection
mechanism effective November 2005 in order to address concerns
regarding its fluctuations, particularly during the winter heating
season. The modifications are intended to minimize fluctuations
in gas rates during the winter months.
Entergy Texas
Entergy Texas’ 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 formula 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 Texas will likely continue to use
this methodology until the start of retail open access, which has been
delayed. The amounts collected under Entergy Texas’ fixed fuel
factor and any interim surcharge or refund implemented until the
date retail open access commences are subject to fuel reconciliation
proceedings before the PUCT.
Entergy Texas filed with the PUCT in July 2005 a request for
implementation of an incremental purchased capacity recovery rider.
Through this rider Entergy Texas sought to recover incremental
revenues that represent 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 effective December 1, 2005. In December
2005, the PUCT approved the settlement and entered an order
consistent with this approval in February 2006. The amounts
collected through the rider are subject to reconciliation.
In September 2007, Entergy Texas filed with the PUCT a
request to increase its incremental purchased capacity recovery
rider to collect approximately $25 million on an annual basis.
This filing also included 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 filed with the PUCT a stipulation
and settlement agreement among the parties that agreed to
implementation of the interim surcharge over a two-month
period and agreed that the incremental capacity recovery rider
would be set to collect $21 million on an annual basis effective
February 2008. The PUCT approved the agreement in February
2008. Amounts collected through the rider and interim surcharge
are subject to final reconciliation. Under the rate case settlement
discussed below, this rider ceased on January 28, 2009, with the
implementation of stipulated base rates.
In October 2007, Entergy Texas filed a request with the PUCT to
refund $45.6 million, including interest, of fuel cost recovery over-
collections through September 2007. In January 2008, Entergy
Texas filed with the PUCT a stipulation and settlement agreement
among the parties that updated the over-collection balance through
November 2007 and established a refund amount, including
interest, of $71 million. The PUCT approved the agreement in
February 2008. The refund was made over a two-month period
beginning February 2008, but was reduced by $10.3 million of
under-recovered incremental purchased capacity costs. Amounts
refunded through the interim fuel refund are subject to final
reconciliation in a future fuel reconciliation proceeding.
In March 2007, Entergy Texas filed a request with the PUCT
to refund $78.5 million, including interest, of fuel cost recovery
over-collections through January 2007. In June 2007 the PUCT
approved a unanimous stipulation and settlement agreement
that updated the over-collection balance through April 2007 and
established a refund amount, including interest, of $109.4 million.
The refund was made over a two-month period beginning with
the first billing cycle in July 2007. Amounts refunded through the
interim fuel refund are subject to final reconciliation in a future
fuel reconciliation proceeding.
In May 2006, Entergy Texas filed with the PUCT a fuel and
purchased power reconciliation case covering the period September
2003 through December 2005 for costs recoverable through the
fixed fuel factor rate and the incremental purchased capacity
recovery rider. Entergy Texas sought reconciliation of $1.6 billion
of fuel and purchased power costs on a Texas retail basis. A hearing
was conducted before the ALJs in April 2007. In July 2007, the ALJs
issued a proposal for decision recommending that Entergy Texas be
authorized to reconcile all of its requested fixed fuel factor expenses
and recommending a minor exception to the incremental purchased
capacity recovery calculation. The ALJs also recommended granting
an exception to the PUCT rules to allow for recovery of an additional
$11.4 million in purchased power capacity costs. In September 2007,
the PUCT issued an order, which affirmed the ultimate result of the
ALJs’ proposal for decision. Upon motions for rehearing, the PUCT
added additional language in its order on rehearing to further