FERC last week approved a partial settlement that resolves some city and state commissions’ longstanding allegations of overcharging at Entergy’s (NYSE:ETR) Grand Gulf Nuclear Station.
Under the agreement approved April 4, Entergy subsidiary System Energy Resources Inc. (SERI) will pay an $18 million refund and commit to rate reductions that go back to October 2022 (ER23-435).
SERI operates and owns 90% of the 1,400-MW Grand Gulf plant in Port Gibson, Miss. It sells the plant’s output under a unit power sales agreement (UPSA) to Entergy’s Arkansas, Louisiana, Mississippi and New Orleans affiliates.
The refund will be split among the Louisiana (26.86%), New Orleans (32.87%) and Arkansas (40.27%) subsidiaries. Mississippi regulators last year accepted a separate settlement offer from Entergy that resolves the state’s complaints about Grand Gulf’s performance and billing. (See Entergy Offers Regulators $588M to End Grand Gulf Complaints.)
The partial settlement also contains provisions that reduce the Entergy companies’ monthly UPSA bills’ base rate.
Louisiana, New Orleans, Arkansas and Mississippi regulators have for years accused Entergy and SERI of mismanaging the nuclear plant, massaging accumulated deferred income tax numbers to overcharge customers, overbilling ratepayers for Grand Gulf’s sale-leaseback arrangement, and recovering the costs of lobbying, image advertising and private airplane use in the sales agreements’ rates.
The UPSA bills will now exclude recovery of executive bonuses, restrict advertising cost collections to only safety-related advertising, and limit the recovery of employees’ air travel costs to those directly linked to SERI.
Revised SERI UPSA bills will also include a line item that reduces the base rate for the advanced collection of Grand Gulf’s semiannual lease payments. FERC trial staff argued that the management company should “return to its customers the monthly lease payments’ time value that is held until SERI makes the lease payment.”
As part of the deal, SERI will include money pool borrowings in its short-term debt, which is used to work out its cost-of-capital calculation used in the UPSA.
SERI has also committed to making additional refunds, with interest, in UPSA bill credits to the Entergy companies for a 15-month period dating back to September 2020. Those refunds will reflect UPSA formula rate reductions.
The partial settlement does not address city and state officials’ complaints over SERI tax maneuvers related to Grand Gulf. That dispute is ongoing. (See Regulators File Emergency Motion in Ongoing Grand Gulf Battle.)
