Entergy 2009 Annual Report Download - page 90

Entergy Corporation and Subsidiaries
Notes to Financial Statements
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costs associated with the loss of customers due to Hurricane Katrina. In August 2008, Entergy Louisiana
implemented a $43.9 million formula rate plan decrease to remove interim storm cost recovery and to reduce the
storm damage accrual. Entergy Louisiana then implemented a $16.9 million formula rate plan increase, subject to
refund, effective the first billing cycle in September 2008, comprised of $12.6 million of recovery of incremental and
deferred capacity costs and $4.3 million based on a cost of service deficiency.
In May 2007, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2006 test year,
indicating a 7.6% earned return on common equity. In September 2007, Entergy Louisiana modified its formula rate
plan filing to reflect its implementation of certain adjustments proposed by the LPSC Staff in its review of Entergy
Louisiana's original filing with which Entergy Louisiana agreed, and to reflect its implementation of an $18.4 million
annual formula rate plan increase comprised of (1) a $23.8 million increase representing 60% of Entergy Louisiana's
revenue deficiency, and (2) a $5.4 million decrease for reduced incremental and deferred capacity costs. In October
2007, Entergy Louisiana implemented a $7.1 million formula rate plan decrease that was due primarily to the
reclassification of certain franchise fees from base rates to collection via a line item on customer bills pursuant to an
LPSC Order.
In May 2006, Entergy Louisiana made its formula rate plan filing with the LPSC for the 2005 test year.
Entergy Louisiana modified the filing in August 2006 to reflect a 9.45% return on equity which is within the allowed
bandwidth. The modified filing includes an increase of $24.2 million for interim recovery of storm costs from
Hurricanes Katrina and Rita and a $119.2 million rate increase to recover LPSC-approved incremental deferred and
ongoing capacity costs. The filing requested recovery of approximately $50 million for the amortization of capacity
deferrals over a three-year period, including carrying charges, and approximately $70 million for ongoing capacity
costs. The increase was implemented, subject to refund, with the first billing cycle of September 2006. Entergy
Louisiana subsequently updated its formula rate plan rider to reflect adjustments proposed by the LPSC Staff with
which it agrees. The adjusted return on equity of 9.56% remains within the allowed bandwidth. Ongoing and
deferred incremental capacity costs were reduced to $118.7 million. The updated formula rate plan rider was
implemented, subject to refund, with the first billing cycle of October 2006. An uncontested stipulated settlement
was filed in February 2008 that left the current base rates in place, and the LPSC approved the settlement in March
2008. In the settlement Entergy Louisiana agreed to credit customers $7.2 million, plus $0.7 million of interest, for
customer contributions to the Central States Compact in Nebraska that was never completed and agreed to a one-time
$2.6 million deduction from the deferred capacity cost balance. The credit, for which Entergy Louisiana had
previously recorded a provision, was made in May 2008.
(Entergy Gulf States Louisiana)
In October 2009 the LPSC approved a settlement that resolves Entergy Gulf States Louisiana's 2007 test
year filing. The settlement provides for a new formula rate plan for the 2008, 2009, and 2010 test years. Entergy
Gulf States Louisiana is permitted, effective with the November 2009 billing cycle, to reset its rates to achieve a
10.65% return on equity for the 2008 test year. 10.65% is the target midpoint return on equity for the new formula
rate plan, with an earnings bandwidth of +/- 75 basis points (9.90% - 11.40%). The rate reset, a $44.3 million
increase that includes a $36.9 million cost of service adjustment, plus $7.4 million net for increased capacity costs
and a base rate reclassification, was implemented for the November 2009 billing cycle, and the rate reset will be
subject to refund pending review of the 2008 test year filing that was made on October 21, 2009. The settlement
does not allow recovery through the formula rate plan of most of Entergy Gulf States Louisiana's costs associated
with Entergy's stock option plan. Pursuant to the settlement Entergy Gulf States Louisiana refunded to its customers
$3.7 million, which includes interest, in the November 2009 billing cycle. In January 2010, Entergy Gulf States
Louisiana implemented an additional $23.9 million rate increase pursuant to a special rate implementation filing
made in December 2009, primarily for incremental capacity costs approved by the LPSC. The discovery and
comment period for the 2008 test year filing is currently open, and Entergy Gulf States Louisiana will implement any
agreed changes by March 15, 2010. A procedural schedule to address any contested issues would be set after March
15, 2010.
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