Entergy 2008 Annual Report Download - page 78

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ENTERGY CORPORATION AND SUBSIDIARIES 2008
Notes to Consolidated Financial Statements continued
76
violation of Louisiana’s antitrust laws. Plaintiffs also seek to recover
interest and attorneys’ fees. Entergy filed exceptions to the plaintiffs’
allegations, asserting, among other things, that jurisdiction over
these issues rests with the City Council and the FERC. In March
2004, the plaintiffs supplemented and amended their petition.
If necessary, at the appropriate time, Entergy will also raise its
defenses to the antitrust claims. The suit in state court was stayed
by stipulation of the parties and order of the court pending review
of the decision by the City Council in the proceeding discussed in
the next paragraph. Subsequent to Entergy New Orleans’ filing of
a bankruptcy petition in September 2005 in the Eastern District of
Louisiana, Entergy New Orleans filed a notice removing the class
action lawsuit from the Civil District Court to the U.S. District Court
for the Eastern District of Louisiana.
Plaintiffs also filed a corresponding complaint with the City
Council in order to initiate a review by the City Council of the
plaintiffs’ allegations and to force restitution to ratepayers of all
costs they allege were improperly and imprudently included in the
fuel adjustment filings. Testimony was filed on behalf of the plaintiffs
in this proceeding asserting, among other things, that Entergy New
Orleans and other defendants have engaged in fuel procurement
and power purchasing practices and included costs in Entergy New
Orleans’ fuel adjustment that could have resulted in Entergy New
Orleans customers being overcharged by more than $100 million
over a period of years. Hearings were held in February and March
2002. In February 2004, the City Council approved a resolution
that resulted in a refund to customers of $11.3 million, including
interest, during the months of June through September 2004. In
May 2005 the Civil District Court for the Parish of Orleans affirmed
the City Council resolution, finding no support for the plaintiffs’
claim that the refund amount should be higher. In June 2005, the
plaintiffs appealed the Civil District Court decision to the Louisiana
Fourth Circuit Court of Appeal. On February 25, 2008, the Fourth
Circuit Court of Appeal issued a decision affirming in part, and
reversing in part, the Civil District Court’s decision. Although the
Fourth Circuit Court of Appeal did not reverse any of the substantive
findings and conclusions of the City Council or the Civil District
Court, the Fourth Circuit found that the amount of the refund was
arbitrary and capricious and increased the amount of the refund to
$34.3 million. Entergy New Orleans believes that the increase in the
refund ordered by the Fourth Circuit is not justified. Entergy New
Orleans, the City Council, and the plaintiffs requested rehearing,
and in April 2008, the Fourth Circuit granted the plaintiffs’ request
for rehearing. In addition to changing the basis for the court’s
decision in the manner requested by the plaintiffs, the court also
granted the plaintiffs’ request that it provide for interest on the
refund amount. The court denied the motions for rehearing
filed by the City Council and Entergy New Orleans. In May 2008,
Entergy New Orleans and the City Council filed with the Louisiana
Supreme Court applications for a writ of certiorari seeking, among
other things, reversal of the Fourth Circuit decision. The Louisiana
Supreme Court granted these writ applications in October 2008 and
will review the Fourth Circuit’s decision. Oral argument before the
Louisiana Supreme Court was held on January 22, 2009.
In the Entergy New Orleans bankruptcy proceeding, the named
plaintiffs in the Entergy New Orleans fuel clause lawsuit, together
with the named plaintiffs in the Entergy New Orleans rate of return
lawsuit, filed a Complaint for Declaratory Judgment asking the court
to declare that Entergy New Orleans, Entergy Corporation, and
Entergy Services are a single business enterprise, and, as such, are
liable in solido with Entergy New Orleans for any claims asserted
in the Entergy New Orleans fuel adjustment clause lawsuit and the
Entergy New Orleans rate of return lawsuit, and, alternatively, that
the automatic stay be lifted to permit the movants to pursue the same
relief in state court. The bankruptcy court dismissed the action on
April 26, 2006. The matter was appealed to the U.S. District Court
for the Eastern District of Louisiana, and the district court affirmed
the dismissal in October 2006, but on different grounds, concluding
that the lawsuit was premature. In Entergy New Orleans’ plan of
reorganization that was confirmed by the bankruptcy court in May
2007, the plaintiffs’ claims are treated as unimpaired “Litigation
Claims,” which will “ride through” the bankruptcy proceeding, with
any legal, equitable and contractual rights to which the plaintiffs’
Litigation Claim entitles the plaintiffs unaltered by the plan of
reorganization.
Upon confirmation in May 2007 of Entergy New Orleans’ plan
of reorganization, the automatic bankruptcy stay of the state court
class action lawsuit was lifted. The stay ordered by the state court
that was agreed upon by the parties (pending completion of the
review of the decision by the City Council), however, remains in
place. In September 2007 the plaintiffs moved to lift or modify that
stay so that the lawsuit could proceed in full or, alternatively, could
proceed against the defendants other than Entergy New Orleans.
The defendants opposed the motion, arguing that exhaustion of
review of the City Council decision is required before the class action
lawsuit could or should proceed. At the hearing on the plaintiffs’
motion to lift or modify the stay, the court inquired as to whether it
retained jurisdiction over the matter after confirmation of Entergy
New Orleans’ bankruptcy plan or whether it should equitably
remand the case to Civil District Court. The court ordered the
parties to brief this issue, which would be decided together with the
plaintiffs’ motion to lift or modify the stay. On February 13, 2008, the
federal court held that it would exercise its discretion to equitably
remand the matter to the Orleans Parish Civil District Court. It did
not rule on the motion to lift or modify the stay and deferred such
ruling to the state court.
EL E C T R I C IN D U S T R Y RE S T R U C T U R I N G (EN T E R G Y TE X A S )
In June 2005, a Texas law was enacted which provides that:
nEntergy Gulf States, Inc. was authorized by law to proceed with
a jurisdictional separation into two vertically integrated utilities,
one subject to the sole retail jurisdiction of the LPSC and one
subject to the sole retail jurisdiction of the PUCT;
nthe portions of all prior PUCT orders requiring Entergy Texas
to comply with any provisions of Texas law governing transition
to retail competition are void;
nEntergy Texas had to file a plan by January 1, 2006, identifying
the power region(s) to be considered for certification and
the steps and schedule to achieve certification (additional
discussion below);
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