Entergy 2011 Annual Report Download - page 70

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
financial statements. The table below shows the amount of deferred
fuel costs as of December 31, 2011 and 2010, that Entergy expects to
recover (or return to customers) through fuel mechanisms, subject
to subsequent regulatory review (in millions):
2011 2010
Entergy Arkansas $209.8 $ 61.5
Entergy Gulf States Louisiana(a) $ 2.9 $ 77.8
Entergy Louisiana(a) $ 1.5 $ 8.8
Entergy Mississippi $ (15.8) $ 3.2
Entergy New Orleans(a) $ (7.5) $ (2.8)
Entergy Texas $ (64.7) $(77.4)
(a) 2011 and 2010 include $100.1 million for Entergy Gulf States Louisiana,
$68 million for Entergy Louisiana, and $4.1 million for Entergy New
Orleans of fuel, purchased power, and capacity costs, which do not
currently earn a return on investment and whose recovery periods are
indeterminate but are expected to be over a period greater than twelve
months.
Entergy Arkansas
Production Cost Allocation Rider
The APSC approved a production cost allocation rider for recovery from
customers of the retail portion of the costs allocated to Entergy Arkansas
as a result of the System Agreement proceedings, which are discussed in
the “System Agreement Cost Equalization Proceedings” section below.
These costs cause an increase in Entergy Arkansas’s deferred fuel cost
balance because Entergy Arkansas pays the costs over seven months
but collects them from customers over twelve months.
Energy Cost Recovery Rider
Entergy Arkansas’s retail rates include an energy cost recovery rider
to recover fuel and purchased energy costs in monthly bills. The
rider utilizes prior calendar year energy costs and projected energy
sales for the twelve-month period commencing on April 1 of each
year to develop an energy cost rate, which is redetermined annually
and includes a true-up adjustment reflecting the over-recovery or
under-recovery, including carrying charges, of the energy cost for the
prior calendar year. The energy cost recovery rider tariff also allows
an interim rate request depending upon the level of over- or under-
recovery of fuel and purchased energy costs.
In early October 2005, the APSC initiated an investigation into
Entergy Arkansas’s interim energy cost recovery rate. The investigation
focused on Entergy Arkansas’s 1) gas contracting, portfolio, and
hedging practices; 2) wholesale purchases during the period; 3)
management of the coal inventory at its coal generation plants; and
4) response to the contractual failure of the railroads to provide coal
deliveries. In March 2006, the APSC extended its investigation to
cover the costs included in Entergy Arkansas’s March 2006 annual
energy cost rate filing, and a hearing was held in the APSC energy cost
recovery investigation in October 2006.
In January 2007 the APSC issued an order in its review of the energy
cost rate. The APSC found that Entergy Arkansas failed to maintain an
adequate coal inventory level going into the summer of 2005 and that
Entergy Arkansas should be responsible for any incremental energy
costs resulting from two outages caused by employee and contractor
error. The coal plant generation curtailments were caused by railroad
delivery problems and Entergy Arkansas has since resolved litigation
with the railroad regarding the delivery problems. The APSC staff was
directed to perform an analysis with Entergy Arkansas’s assistance to
determine the additional fuel and purchased energy costs associated
with these findings and file the analysis within 60 days of the order.
After a final determination of the costs is made by the APSC, Entergy
Arkansas would be directed to refund that amount with interest to
its customers as a credit on the energy cost recovery rider. Entergy
Arkansas requested rehearing of the order. In March 2007, in order to
allow further consideration by the APSC, the APSC granted Entergy
Arkansas’s petition for rehearing and for stay of the APSC order.
In October 2008 Entergy Arkansas filed a motion to lift the stay and
to rescind the APSC’s January 2007 order in light of the arguments
advanced in Entergy Arkansas’s rehearing petition and because the
value for Entergy Arkansas’s customers obtained through the resolved
railroad litigation is significantly greater than the incremental cost
of actions identified by the APSC as imprudent. In December 2008,
the APSC denied the motion to lift the stay pending resolution of
Entergy Arkansas’s rehearing request and the unresolved issues in the
proceeding. The APSC ordered the parties to submit their unresolved
issues list in the pending proceeding, which the parties did. In February
2010 the APSC denied Entergy Arkansas’s request for rehearing, and
held a hearing in September 2010 to determine the amount of damages,
if any, that should be assessed against Entergy Arkansas. A decision
is pending. Entergy Arkansas expects the amount of damages, if any,
to have an immaterial effect on its results of operations, financial
position, or cash flows.
The APSC also established a separate docket to consider the resolved
railroad litigation, and in February 2010 it established a procedural
schedule that concluded with testimony through September 2010.
Testimony has been filed and the APSC will decide the case based on
the record in the proceeding, including the prefiled testimony.
Entergy Gulf States Louisiana and Entergy Louisiana
Entergy Gulf States Louisiana and Entergy Louisiana recover electric
fuel and purchased power costs for the billing month based upon the
level of such costs incurred two months prior to the billing month.
Entergy Gulf States Louisiana’s purchased gas adjustments include
estimates for the billing month adjusted by a surcharge or credit that
arises from an annual reconciliation of fuel costs incurred with fuel
cost revenues billed to customers, including carrying charges.
In January 2003 the LPSC authorized its staff to initiate a
proceeding to audit the fuel adjustment clause filings of Entergy
Gulf States Louisiana and its affiliates. The audit included a review
of the reasonableness of charges flowed by Entergy Gulf States
Louisiana through its fuel adjustment clause for the period 1995
through 2004. Entergy Gulf States Louisiana and the LPSC Staff
reached a settlement to resolve the audit that requires Entergy Gulf
States Louisiana to refund $18 million to customers, including the
realignment to base rates of $2 million of SO2 costs. The ALJ held a
stipulation hearing and in November 2011 the LPSC issued an order
approving the settlement. The refund was made in the November
2011 billing cycle. Entergy Gulf States Louisiana had previously
recorded provisions for the estimated outcome of this proceeding.
In December 2011 the LPSC authorized its staff to initiate another
proceeding to audit the fuel adjustment clause filings of Entergy Gulf
States Louisiana and its affiliates. The audit includes a review of the
reasonableness of charges flowed by Entergy Gulf States Louisiana
through its fuel adjustment clause for the period 2005 through 2009.
In April 2010 the LPSC authorized its staff to initiate an audit of
Entergy Louisiana’s fuel adjustment clause filings. The audit includes
a review of the reasonableness of charges flowed through the fuel
adjustment clause by Entergy Louisiana for the period from 2005
through 2009. Discovery is in progress, but a procedural schedule
has not been established.
Entergy Mississippi
Entergy Mississippi’s rate schedules include an energy cost recovery
rider that is adjusted quarterly to reflect accumulated over- or under-
recoveries from the second prior quarter. Entergy Mississippi’s fuel
cost recoveries are subject to annual audits conducted pursuant to
the authority of the MPSC.
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