Entergy 2010 Annual Report Download - page 81

ENTERGY CORPORATION AND SUBSIDIARIES 2010
Notes to Consolidated Financial Statements continued
The APSC and the Utility operating companies appealed the FERC
decisions to the D.C. Circuit. Because of its refund obligation to
its customers as a result of this proceeding and a related LPSC
proceeding, Entergy Louisiana recorded provisions during 2008
of approximately $16 million, including interest, for rate refunds.
The refunds were made in the fourth quarter 2009.
Following the filing of petitioners’ initial briefs, the FERC filed a
motion requesting the D.C. Circuit hold the appeal of the FERC’s
decisions ordering refunds in the interruptible load proceeding
in abeyance and remand the record to the FERC. The D.C.
Circuit granted the FERC’s unopposed motion on June 24, 2009,
and directed the FERC to file status reports at 60-day intervals
beginning August 24, 2009. The D.C. Circuit also directed the
parties to file motions to govern future proceedings in the case
within 30 days of the completion of the FERC proceedings.
In December 2009 the FERC established a paper hearing to
determine whether the FERC had the authority and, if so, whether
it would be appropriate to order refunds resulting from changes
in the treatment of interruptible load in the allocation of capacity
costs by the Utility operating companies. In August 2010 the
FERC issued an order stating that it has the authority and refunds
are appropriate. The APSC, MPSC, and Entergy have requested
rehearing of the FERC’s decision. In September 2010, the FERC set
for hearing and settlement judge procedures the Utility operating
companies’ calculation of the refunds for the 15-month refund
period of May 14, 1995 through August 13, 1996, as contained in
the November 2007 refund report. The purpose of the hearing
is to determine whether the refund amounts for such period
were calculated in a just and reasonable manner. The settlement
proceedings are ongoing.
Entergy Arkansas filed a request with the APSC for recovery
of the refund paid to its customers and the APSC staff has filed
a motion to dismiss the request. A procedural schedule has not
been set in the proceeding.
Entergy Arkansas Opportunity Sales Proceeding
In June 2009, the LPSC filed a complaint requesting that the FERC
determine that certain of Entergy Arkansas’s sales of electric
energy to third parties: (a) violated the provisions of the System
Agreement that allocate the energy generated by Entergy System
resources, (b) imprudently denied the Entergy System and its
ultimate consumers the benefits of low-cost Entergy System
generating capacity, and (c) violated the provision of the System
Agreement that prohibits sales to third parties by individual
companies absent an offer of a right-of-first-refusal to other Utility
operating companies. The LPSC’s complaint challenges sales
made beginning in 2002 and requests refunds. On July 20, 2009,
the Utility operating companies filed a response to the complaint
requesting that the FERC dismiss the complaint on the merits
without hearing because the LPSC has failed to meet its burden
of showing any violation of the System Agreement and failed to
produce any evidence of imprudent action by the Entergy System.
In their response, the Utility operating companies explained
that the System Agreement clearly contemplates that the Utility
operating companies may make sales to third parties for their own
account, subject to the requirement that those sales be included
in the load (or load shape) for the applicable Utility operating
company. The response further explains that the FERC already has
determined that Entergy Arkansas’s short-term wholesale sales
did not trigger the “right-of-first-refusal” provision of the System
Agreement. While the D.C. Circuit recently determined that the
“right-of-first-refusal” issue was not properly before the FERC at
the time of its earlier decision on the issue, the LPSC has raised no
additional claims or facts that would warrant the FERC reaching
a different conclusion. On December 7, 2009, the FERC issued an
order setting the matter for hearing and settlement procedures.
The LPSC filed direct testimony in the proceeding alleging, among
other things, (1) that Entergy violated the System Agreement by
permitting Entergy Arkansas to make non-requirements sales
to non-affiliated third parties rather than making such energy
available to the other Utility operating companies’ customers;
and (2) that over the period 2000 - 2009, these non-requirements
sales caused harm to the Utility operating companies’ customers
of $144 million and these customers should be compensated for
this harm by Entergy. In subsequent testimony, the LPSC modified
its original damages claim in favor of quantifying damages by re-
running intra-system bills, which has not occurred. The Utility
operating companies believe the LPSC’s allegations are without
merit. A hearing in the matter was held in August 2010.
In December 2010 the ALJ issued an initial decision. The ALJ
found that the System Agreement allowed for Entergy Arkansas
to make the sales to third parties but concluded that the sales
should be accounted for in the same manner as joint account sales.
The ALJ concluded that “shareholders” should make refunds of
the damages to the Utility operating companies, along with interest.
Entergy Corporation, or an Entergy Corporation subsidiary, is the
shareholder of each of the Utility operating companies. Entergy
disagrees with several aspects of the ALJ’s initial decision and
in January 2011 filed with the FERC exceptions to the decision.
FERC consideration of the initial decision is pending. Entergy is
unable to estimate the potential damages in this matter because
certain aspects of how the refunds would be calculated require
clarification by the FERC.
LPSC Interruptible Load Proceeding (Entergy Louisiana)
As discussed above, the FERC issued orders in September 2005
and 2007 in which it directed Entergy to remove all interruptible
load from certain computations of peak load responsibility
commencing April 1, 2004 and to issue any necessary refunds
to reflect this change. In addition, in September 2008 the FERC
directed the Utility operating companies to make refunds for the
period May 1995 through July 1996. In October 2009 the LPSC
issued an order approving the flow through to retail rates of the
LPSC-jurisdictional portion of the payments and credits resulting
from the FERC’s orders that had not yet been flowed through to
retail rates, which required a net refund to Entergy Louisiana retail
customers of $17.6 million, including interest. The refunds were
made in the fourth quarter 2009. Of this amount, $5.4 million was
refunded subject to adjustment in the event that future action by
the FERC or the D.C. Circuit Court of Appeals results in a reversal
or change in the amount of the refunds ordered by the FERC in
September 2008.
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