Entergy 2010 Annual Report Download - page 46

Management’s Financial Discussion and Analysis continued
FEDERAL REGULATION
System Agreement
The FERC regulates wholesale rates (including Entergy Utility
intrasystem energy exchanges pursuant to the System Agreement)
and interstate transmission of electricity, as well as rates for
System Energy’s sales of capacity and energy from Grand Gulf to
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and
Entergy New Orleans pursuant to the Unit Power Sales Agreement.
The Utility operating companies historically have engaged in the
coordinated planning, construction, and operation of generating
and bulk transmission facilities under the terms of the System
Agreement, which is a rate schedule that has been approved
by the FERC. Certain of the Utility operating companies’ retail
regulators and other parties are pursuing litigation involving
the System Agreement at the FERC. The proceedings include
challenges to the allocation of costs as defined by the System
Agreement and allegations of imprudence by the Utility operating
companies in their execution of their obligations under the
System Agreement. See Note 2 to the financial statements for
discussions of this litigation.
Entergy Arkansas and Entergy Mississippi Notices of
Termination of System Agreement Participation and
Related APSC Investigation
Citing its concerns that the benefits of its continued participation
in the current form of the System Agreement have been seriously
eroded, in December 2005, Entergy Arkansas submitted its notice
that it will terminate its participation in the current System
Agreement effective ninety-six (96) months from the date of the
notice or such earlier date as authorized by the FERC.
In October 2007 the MPSC issued a letter confirming its belief
that Entergy Mississippi should exit the System Agreement in
light of the recent developments involving the System Agreement.
The MPSC letter also requested that Entergy Mississippi advise
the MPSC regarding the status of the Utility operating companies’
effort to develop successor arrangements to the System
Agreement and advise the MPSC regarding Entergy Mississippi’s
position with respect to withdrawal from the System Agreement.
In November 2007, pursuant to the provisions of the System
Agreement, Entergy Mississippi provided its written notice to
terminate its participation in the System Agreement effective
ninety-six (96) months from the date of the notice or such earlier
date as authorized by the FERC.
On February 2, 2009, Entergy Arkansas and Entergy Mississippi
filed with the FERC their notices of cancellation to effectuate
the termination of their participation in the Entergy System
Agreement, effective December 18, 2013 and November 7, 2015,
respectively. While the FERC had indicated previously that the
notices should be filed 18 months prior to Entergy Arkansas’s
termination (approximately mid-2012), the filing explains that
resolving this issue now, rather than later, is important to ensure
that informed long-term resource planning decisions can be made
during the years leading up to Entergy Arkansas’s withdrawal and
that all of the Utility operating companies are properly positioned
to continue to operate reliably following Entergy Arkansas’s and,
eventually, Entergy Mississippi’s, departure from the System
Agreement. Entergy Arkansas and Entergy Mississippi requested
that the FERC accept the proposed notices of cancellation without
further proceedings. Various parties intervened or filed protests
in the proceeding, including the APSC, the LPSC, the MPSC, and
the City Council.
In November 2009 the FERC accepted the notices of cancellation
and determined that Entergy Arkansas and Entergy Mississippi
are permitted to withdraw from the System Agreement following
the 96 month notice period without payment of a fee or the
requirement to otherwise compensate the remaining Utility
operating companies as a result of withdrawal. The FERC stated
that it expected Entergy and all interested parties to move forward
and develop details of all needed successor arrangements and
encouraged Entergy to file its Section 205 filing for post 2013
arrangements as soon as possible. In February 2011 the FERC
denied the LPSC’s and the City Council’s rehearing requests.
Authorized
Company Return on Common Equity Pending Proceedings/Events
Entergy Arkansas 10.2% n Current retail base rates implemented in the July 2010 billing
cycle pursuant to a settlement approved by the APSC.
Entergy Gulf States Louisiana 9.9% - 11.4% Electric; n Current retail electric base rates implemented in the
10.0% - 11.0% Gas September 2010 billing cycle based on Entergy Gulf States
Louisiana’s revised 2009 test year formula rate plan filing
approved by the LPSC.
n Current retail gas base rates reflect the rate stabilization plan
filing for the 2009 test year ended September 2009.
Entergy Louisiana 9.45% - 11.05% n Current retail base rates implemented in the September 2010
billing cycle based on Entergy Louisiana’s revised 2009 test
year formula rate plan filing approved by the LPSC.
Entergy Mississippi 10.79% - 13.05% n Current retail base rates reflect Entergy Mississippi’s latest
formula rate plan filing, based on the 2009 test year, and a
settlement approved by the MPSC.
Entergy New Orleans 10.7% - 11.5% Electric; n Current retail base rates implemented in the October
10.25% - 11.25% Gas 2010 billing cycle pursuant to Entergy New Orleans’s 2009 test
year formula rate plan filing and a settlement approved by the
City Council.
Entergy Texas 10.125% n Current retail base rates implemented for usage beginning
August 15, 2010, pursuant to a settlement of Entergy Texas’s
base rate case approved by the PUCT.
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