Entergy 2011 Annual Report Download - page 73

Entergy Corporation and Subsidiaries 2011
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
became effective, beginning with the first billing cycle of September
2010. Entergy Gulf States Louisiana and the LPSC staff subsequently
submitted a joint report on the 2009 test year filing consistent with
these terms and the LPSC approved the joint report in January 2011.
In May 2011, Entergy Gulf States Louisiana made a special formula
rate plan rate implementation filing with the LPSC that implements
effective with the May 2011 billing cycle a $5.1 million rate decrease to
reflect adjustments in accordance with a previous LPSC order relating
to the acquisition of Unit 2 of the Acadia Energy Center by Entergy
Louisiana. As a result of the closing of the acquisition and termination
of the pre-acquisition power purchase agreement with Acadia, Entergy
Gulf States Louisiana’s allocation of capacity related to this unit ended,
resulting in a reduction in the additional capacity revenue requirement.
In May 2011, Entergy Gulf States Louisiana made its formula rate plan
filing with the LPSC for the 2010 test year. The filing reflects an 11.11%
earned return on common equity, which is within the allowed earnings
bandwidth, indicating no cost of service rate change is necessary
under the formula rate plan. The filing also reflects a $22.8 million rate
decrease for incremental capacity costs. Entergy Gulf States Louisiana
and the LPSC Staff subsequently filed a joint report that also stated
that no cost of service rate change is necessary under the formula rate
plan, and the LPSC approved it in October 2011.
In November 2011 the LPSC approved a one-year extension of
Entergy Gulf States Louisiana’s formula rate plan. In addition, Entergy
Gulf States Louisiana is required to file a full rate case by January 2013,
if the LPSC has not acted to deny the requested transmission change-
of-control to the MISO RTO. If the LPSC has denied this request, then
the rate case must be filed by September 30, 2012.
(Entergy Louisiana)
In October 2009 the LPSC approved a settlement that resolved Entergy
Louisiana’s 2006 and 2007 test year filings and provided for a new
formula rate plan for the 2008, 2009, and 2010 test years. 10.25% is
the target midpoint return on equity for the formula rate plan, with an
earnings bandwidth of +/- 80 basis points (9.45% - 11.05%).
Entergy Louisiana was permitted, effective with the November 2009
billing cycle, to reset its rates to achieve a 10.25% return on equity for
the 2008 test year. The rate reset, a $2.5 million increase that included
a $16.3 million cost of service adjustment less a $13.8 million net
reduction for decreased capacity costs and a base rate reclassification,
was implemented for the November 2009 billing cycle, and the rate
reset was subject to refund pending review of the 2008 test year filing
that was made in October 2009. In April 2010, Entergy Louisiana and
the LPSC staff submitted a joint report on the 2008 test year filing and
requested that the LPSC accept the report, which resulted in a $0.1
million reduction in rates effective in the May 2010 billing cycle and a
$0.1 million refund. In addition, Entergy Louisiana moved the recovery
of approximately $12.5 million of capacity costs from fuel adjustment
clause recovery to base rate recovery. At its April 21, 2010 meeting, the
LPSC accepted the joint report.
In May 2010, Entergy Louisiana made its formula rate plan filing with
the LPSC for the 2009 test year. The filing reflected a 10.82% return
on common equity, which is within the allowed earnings bandwidth,
indicating no cost of service rate change is necessary under the formula
rate plan. The filing does reflect, however, a revenue requirement
increase to provide supplemental funding for the decommissioning
trust maintained for Waterford 3, in response to a NRC notification of
a projected shortfall of decommissioning funding assurance. The filing
also reflected a rate change for incremental capacity costs. In July
2010 the LPSC approved a $3.5 million increase in the retail revenue
requirement for decommissioning, effective September 2010. In
August 2010, Entergy Louisiana made a revised 2009 test year formula
rate plan filing. The revised filing reflected a 10.82% earned return
on common equity, which is within the allowed earnings bandwidth
resulting in no cost of service adjustment. The filing also reflected two
increases outside of the formula rate plan sharing mechanism: (1) the
previously approved decommissioning revenue requirement, and (2)
$2.2 million for capacity costs. The rates reflected in the revised filing
became effective beginning with the first billing cycle of September
2010. Entergy Louisiana and the LPSC staff subsequently submitted a
joint report on the 2009 test year filing consistent with these terms and
the LPSC approved the joint report in December 2010.
In May 2011, Entergy Louisiana made a special formula rate plan
rate implementation filing with the LPSC that implements effective
with the May 2011 billing cycle a $43.1 million net rate increase to
reflect adjustments in accordance with a previous LPSC order relating
to the acquisition of Unit 2 of the Acadia Energy Center. The net rate
increase represents the decrease in the additional capacity revenue
requirement resulting from the termination of the power purchase
agreement with Acadia and the increase in the revenue requirement
resulting from the ownership of the Acadia facility. In August 2011,
Entergy Louisiana made a filing to correct the May 2011 filing and
decrease the rate by $1.1 million.
In May 2011, Entergy Louisiana made its formula rate plan filing with
the LPSC for the 2010 test year. The filing reflects an 11.07% earned
return on common equity, which is just outside of the allowed earnings
bandwidth and results in no cost of service rate change under the
formula rate plan. The filing also reflects a very slight ($9 thousand) rate
increase for incremental capacity costs. Entergy Louisiana and the LPSC
Staff subsequently filed a joint report that reflects an 11.07% earned
return and results in no cost of service rate change under the formula
rate plan, and the LPSC approved the joint report in October 2011.
In November 2011 the LPSC approved a one-year extension of Entergy
Louisiana’s current formula rate plan. The next formula rate plan filing,
for the 2011 test year, will be made in May 2012 and will include a
separate identification of any operating and maintenance expense
savings that are expected to occur once the Waterford 3 steam generator
replacement project is complete. Pursuant to the LPSC decision, from
September 2012 through December 2012 earnings above an 11.05%
return on common equity (based on the 2011 test year) would be accrued
and used to offset the Waterford 3 replacement steam generator revenue
requirement for the first twelve months that the unit is in rates. If the
project is not in service by January 1, 2013, earnings above a 10.25%
return on common equity (based on the 2011 test year) for the period
January 1, 2013 through the date that the project is placed in service
will be accrued and used to offset the incremental revenue requirement
for the first twelve months that the unit is in rates. Upon the in-service
date of the replacement steam generators, rates will increase, subject to
refund following any prudence review, by the full revenue requirement
associated with the replacement steam generators, less (i) the previously
accrued excess earnings from September 2012 until the in-service date
and (ii) any earnings above a 10.25% return on common equity (based on
the 2011 test year) for the period following the in-service date, provided
that the excess earnings accrued prior to the in-service date shall only
offset the revenue requirement for the first year of operation of the
replacement steam generators. These rates are anticipated to remain in
effect until Entergy Louisiana’s next full rate case is resolved. Entergy
Louisiana is required to file a full rate case by January 2013, if the LPSC
has not acted to deny the requested transmission change-of-control to
the MISO RTO. If the LPSC has denied this request, then the rate case
must be filed by September 30, 2012.
Retail Rates – Gas (Entergy Gulf States Louisiana)
In January 2012, Entergy Gulf States Louisiana filed with the LPSC its
gas rate stabilization plan for the test year ended September 30, 2011.
The filing showed an earned return on common equity of 10.48%,
which is within the earnings bandwidth of 10.5%, plus or minus fifty
basis points. The sixty-day review and comment period for this filing
remains open.
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