Entergy 2008 Annual Report Download - page 77

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
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Notes to Consolidated Financial Statements continued
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deficiency of $4.1 million based on an ROE mid-point of 10.5%.
In May 2006, Entergy Gulf States Louisiana implemented a
$3.5 million rate increase pursuant to an uncontested agreement
with the LPSC Staff.
In June 2005, the LPSC unanimously approved Entergy Gulf States
Louisiana’s proposed settlement 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%.
Filings with the MPSC (Entergy Mississippi)
Formula Rate Plan Filings
In March 2008, Entergy Mississippi made its annual scheduled
formula rate plan filing for the 2007 test year with the MPSC.
The filing showed that a $10.1 million increase in annual electric
revenues is warranted. In June 2008, Entergy Mississippi reached a
settlement with the Mississippi Public Utilities Staff that would result
in a $3.8 million rate increase. In January 2009 the MPSC rejected
the settlement and left the current rates in effect. Entergy Mississippi
appealed the MPSC’s decision to the Mississippi Supreme Court.
In March 2007, Entergy Mississippi made its annual scheduled
formula rate plan filing for the 2006 test year with the MPSC. The
filing showed that an increase of $12.9 million in annual electric
revenues is warranted. In June 2007 the MPSC approved a joint
stipulation between Entergy Mississippi and the Mississippi Public
Utilities staff that provides for a $10.5 million rate increase, which
was effective beginning with July 2007 billings.
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
approved a settlement providing for a $1.8 million rate increase,
which was implemented in August 2006.
Filings with the City Council (Entergy New Orleans)
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
alternatives 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
restoration 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
agreement that resolved 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 provided for a
0% increase in electric base rates through December 2007, with
a $3.9 million increase implemented in January 2008. Recovery
of all Grand Gulf costs through the fuel adjustment clause was
continued. Gas base rates increased by $4.75 million in November
2006 and increased by additional $1.5 million in March 2007 and
an additional $4.75 million in November 2007. The settlement
called for Entergy New Orleans to file a base rate case by July
31, 2008, which it has done as discussed below. The settlement
agreement discontinued the formula 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 authorized 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.
In January 2008, Entergy New Orleans voluntarily implemented a
6.15% base rate credit (the recovery credit) for electric customers,
which returned approximately $11.3 million to electric customers
in 2008. Entergy New Orleans was able to implement this credit
because during 2007 the recovery of New Orleans after Hurricane
Katrina was occurring faster than expected in 2006 projections.
In addition, Entergy New Orleans committed to set aside $2.5
million for an energy efficiency program focused on community
education and outreach and weatherization of homes.
On July 31, 2008, Entergy New Orleans filed an electric and gas
base rate case with the City Council. The filing requests an 11.75%
return on common equity. On November 13, 2008, Entergy New
Orleans amended its rate filing to incorporate storm reserve
treatment inadvertently omitted from the pro forma test year. The
amended filing calls for an $18.2 million electric rate reduction,
which includes keeping the recovery credit in effect, as well as
realigning approximately $12.3 million of capacity costs from
recovery through the fuel adjustment clause to electric base rates.
The amended filing also calls for an $8.4 million increase in gas
base rates to fund ongoing operations. This request is unrelated to
the ongoing rebuild of Entergy New Orleans’ natural gas system.
On January 16, 2009, the City Council Advisors filed rebuttal
testimony calling for rate reductions of approximately $31 million
for electric operations and $4.8 million for gas operations. The
procedural schedule calls for a hearing on the filing to commence
in April 2009, with a decision by the City Council on or before
May 15, 2009.
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 or energy 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