FERC last week approved portions of a Louisiana Public Service Commission complaint against Entergy subsidiaries System Energy Resources Inc. (SERI) and Entergy Services, denied and dismissed other portions, and set the remainder for settlement proceedings (EL18-142).

The PSC filed the Section 206 complaint in April, contending that the return on equity in the unit power sales agreement (UPSA) formula rate for calculating the costs of the Grand Gulf Nuclear Station billed to Entergy’s operating companies is unjust and unreasonable. The state regulator contested SERI’s capital structure and the depreciation rates currently incorporated into its rates, and it asked FERC to set the complaint for hearing and reset SERI’s ROE, equity ratio and depreciation rates to a just and reasonable level.

The commission’s Aug. 24 order granted the PSC’s complaint about the ROE element, establishing hearing and settlement judge procedures and setting a refund effective date of April 27. It denied the capital structure elements and dismissed the depreciation rate elements.

Louisiana regulators charged that SERI’s ROE of 10.94% was calculated based on a record “developed in the mid-1990s,” saying that conditions have changed significantly since then, as investor return requirements, interest rates and inflation have decreased. They argued that SERI’s equity investor and shareholders faced almost no risk because the company sells Grand Gulf’s entire output to four utilities that are wholly owned by Entergy and are obligated by the UPSA to buy the power regardless of the amount delivered.

FERC found the Louisiana commission raised issues of material fact that it couldn’t resolve, and it set the complaint for investigation and a Section 206 trial-type evidentiary hearing. It encouraged the parties to make every effort to settle their disputes before hearing procedures begin.

Commission Approves Settlement Between Entergy, Parties

The commission last week also approved a settlement among SERI, the Arkansas, Louisiana and Mississippi commissions, Cooperative Energy, and New Orleans City Council, addressing issues regarding the depreciation rates to be applied under SERI’s UPSA (ER17-2219).

SERI amended the agreement between itself and its operating companies in 2017 to revise the depreciation rates used to calculate Grand Gulf’s depreciation and amortization expenses and update the depreciation rates for use in calculating the plant’s annual revenue requirement for decommissioning costs.