By Amanda Durish Cook

FERC on Thursday reversed one part of a previous decision on the long-disputed bandwidth calculation that Entergy last used more than five years ago to equalize production costs among its operating companies.

In response to the latest rehearing request in the ongoing proceeding — this time from the Louisiana Public Service Commission — FERC ruled that some tax gains from the Waterford 3 nuclear plant near New Orleans can be included in bandwidth formula accounts (EL10-65-006).

Before it joined MISO in 2015, Entergy’s operating companies functioned as one system, although each had different operating costs. FERC in 2005 determined that production costs across the multistate Entergy system were not as equal as the company promised and imposed a bandwidth payment remedy, spurring a dispute that has lasted several years. Under the arrangement, Entergy’s low-cost operating companies made payments to the highest-cost company in the system using a “bandwidth” remedy that ensured no operating company had production costs more than 11% above or below the system average.

Since then, the allocation of 2007-2015 production costs among Entergy’s half dozen operating companies under its multistate system agreement has been a source of disagreement for a decade.

In a March 2018 ruling, FERC made three findings regarding Entergy’s bandwidth equalization:

• that it properly accounted for the 9.3% interest sale and leaseback of Waterford 3 in its accumulated deferred income taxes (ADIT) when it characterized the sale as financing and excluded it from bandwidth formula payments;
• that Entergy could keep interruptible load in its system monthly coincident peaks used to develop the 2010 and 2011 bandwidth calculations, although all other years of Entergy’s bandwidth payments exclude interruptible load; and
• that it appropriately accounted for the costs of the allowance for funds used during construction for the River Bend nuclear plant north of Baton Rouge in bandwidth payment calculations. (See FERC Affirms Ruling Favoring Entergy Bandwidth Calculation.)

FERC last week said it is now persuaded by the Louisiana PSC’s argument that the tax gain portion found in Waterford 3’s financing of ADIT “is directly related to amounts included in bandwidth formula accounts.” The commission said the amount “is generally and properly includable for FERC cost-of-service purposes” and should be included in the bandwidth calculation.

However, FERC told the Louisiana PSC it wouldn’t budge on its earlier decision to allow interruptible load to factor into the 2010 and 2011 bandwidth calculations but not any other years’ calculations.

“We continue to find that the commission already resolved the interruptible load issue … and that no further relief is available in this separate proceeding,” the commission said.

Rehearing Denied on Entergy Control Centers Transfer

FERC also denied several rehearing requests over Entergy’s two recently constructed transmission control centers in in Jackson, Miss., and Little Rock, Ark.

In September, FERC authorized the ownership transfer of the control centers from Entergy Services to Entergy’s Arkansas, Louisiana, Mississippi, New Orleans and Texas operating companies. (See Entergy Control Center Ownership Changes OK’d.)

Multiple regulators in Southern states sought rehearing on the fairness of the transaction itself (EC19-18-001) and the joint ownership agreement (ER19-211-001).

The Louisiana PSC charged that FERC ignored the impacts to retail rates when it approved the transaction. The costs incurred to acquire the control centers will become an input into the Entergy operating companies’ respective rate formulas.

But FERC denied the PSC’s rehearing request, finding that while the transaction will increase rates, the rate impact isn’t adverse. The commission said the transfer of the control centers is in the public interest because they contribute to the “safe and reliable operation of the Entergy transmission system.” FERC also reminded parties that the reasonableness of the transaction’s price impacts wasn’t in question.

“The commission’s Section 203 analysis concerning rate impacts of a transaction does not extend to retail rate impacts unless a state commission lacks the authority to review such rate impacts and specifically asks the commission to do so. We note that, although the Louisiana commission and the Arkansas/Mississippi commissions have intervened in this proceeding, they have not asked us to scrutinize such effects here. We also note that our approval of the transaction in this proceeding does not preclude the Arkansas/Mississippi commissions or the Louisiana commission from examining the transaction’s effects on retail rates,” FERC said.

The commission also brushed aside Louisiana regulators’ concerns that the transaction would alter its jurisdiction over Entergy. FERC said the state commission will continue to have the same regulatory authority over Entergy operating companies “before and after the transaction.”

FERC rebuffed the Arkansas and Mississippi Public Service Commissions’ concerns that Entergy Services acted as a public utility “without satisfying the requirements of a public utility” by constructing the control centers in the first place. FERC simply said the concerns were out of scope of the current docket.

“With regard to the claim that Entergy Services improperly transferred the facilities, we note that Entergy Services appropriately sought the commission’s approval of the transfer in this proceeding,” FERC added.

As to the transaction agreement, the Louisiana PSC said it was unfair that the ownership interests of the two facilities would be divvied up according to the Entergy operating companies’ coincident peak loads, claiming that Louisiana ratepayers were set to take on more costs stemming from the control centers. The state commission also claimed that an Entergy coincident peak is now meaningless because the Entergy companies “no longer operate as a system but are instead separate members of MISO, which has a different coincident peak.”

FERC was not persuaded by either argument.

“The coincident peak load allocation method is the traditionally approved method for allocating the costs of transmission facilities, and the historical and consistent use of this allocation method renders its choice presumptively reasonable,” the commission said.

Finally, FERC also said the Louisiana PSC’s concerns over the costs incurred to acquire the control centers is also outside the scope of the proceeding.

“As the commission explained in the agreement order, the costs incurred to acquire the control centers instead serve as an input to the operating companies’ respective formulas, and the reasonableness of such costs for inclusion as an input to those formulas is not before us,” FERC said.