By Amanda Durish Cook

FERC last week affirmed an initial decision approving how Entergy has equalized production costs among its operating companies, batting away several grievances raised by Louisiana regulators.

The commission affirmed three findings from an administrative law judge’s 2016 ruling on the company’s bandwidth payments (EL10-65-005), determining that Entergy:

• Properly accounted for the 9.3% interest sale and leaseback of the Waterford 3 nuclear plant near New Orleans in its accumulated deferred income taxes when it characterized the sale as financing and excluded it from bandwidth formula payments;
• Can 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
• Appropriately accounted for the costs of the allowance for funds used during construction (AFUDC) for the River Bend nuclear plant north of Baton Rouge in bandwidth payment calculations.

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. Before 2015, the companies functioned as one system, although each had different operating costs. 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.

In a 2010 filing with FERC, the Louisiana Public Service Commission contended that Entergy’s bandwidth payment calculation suffered from several inconsistencies. Among its complaints: 1) The formula needed to include the company’s Waterford 3 sale and leaseback account as production costs, and 2) the demand responsibility factor for allocating fixed costs and the reserve equalization cost credit for interruptible load used to calculate 2010-2011 bandwidth payments was incorrect and warranted refunds. The PSC also said the bandwidth formula should include certain River Bend plant-related costs excluded from Entergy’s total production costs, arguing that the company should not have treated the plant’s AFUDC as a regulatory asset and liability, even though it was apparently ordered to do so in a 1991 order (U-17282).

However, FERC said accumulated deferred income taxes associated with Waterford 3 are not “properly includable for commission cost-of-service purposes.” The commission also determined that Entergy in 1991 did not have the requisite data to make accounting changes for the River Bend AFUDC, and that the company had correctly accounted for AFUDC in regulatory asset and liability accounts by recording it in plant-in-service accounts.

“We are in no position to speculate on the Louisiana commission’s intentions,” FERC said of whether the Louisiana PSC actually meant for Entergy to create the regulatory asset and liability nearly 30 years ago.

FERC also said it already resolved the interruptible load issue in a 2012 order that required Entergy to remove all of it from its cost allocation in response to the Louisiana commission’s 2007 complaint (EL07-52-001). “No further relief is available in this separate proceeding,” FERC said.

The commission also agreed with the judge’s position that it had “already ruled on the interruptible load issue and provided relief to the maximum extent possible when it prescribed refunds for the refund effective period from April 3, 2007, through July 3, 2008, and prospectively from May 7, 2012.” The administrative law judge in 2016 said the appropriate time for the Louisiana PSC to “have asked for extraordinary relief beyond the 15-month refund period” would have been in 2012.