By Tom Kleckner
FERC last week set Entergy Corp.’s ninth annual allocation of its operating companies’ 2014 production costs for hearing and settlement procedures (ER15-1826).
As it has in years past, FERC said Entergy had not proven its proposed rates were just and reasonable. It accepted the proposed rates and made them effective June 1, 2015, subject to refund pending the hearing and settlement procedures.
The commission also issued three orders in long-running disputes regarding Entergy cost allocations for a portion of 2005, setting one issue for hearing and settlement procedures and rejecting two rehearing requests.
Bandwidth Remedy
At issue is how Entergy allocates production costs among its half dozen operating companies under its system agreement. The companies essentially operate as one system, although each has different operating costs.
Payments are made annually by low-cost operating companies to the highest-cost company in the system, using a “bandwidth” remedy that ensures no operating company has production costs more than 11% above or below the Entergy system average.
Regulators in Entergy’s states have regularly challenged the annual bandwidth filings. Entergy’s proposed rates for 2014 drew protests from the New Orleans City Council and the Louisiana and Texas commissions.
FERC gave the administrative law judge overseeing the case discretion to combine the proceeding with the previous four years of disputed annual cost-allocation cases, which were consolidated in December. (See FERC Bundles Entergy ‘Bandwidth’ Disputes for Hearing.)
2005 Calculations
The three other orders concern Entergy’s first cost-allocation calculations, for a seven-month period in 2005.
It denied a request from the Arkansas commission to exclude Entergy Arkansas from making payments and an Entergy compliance filing for hearing and settlement procedures (EL01-88-013).
FERC had rejected a 2011 compliance filing because it used six months of data to recalculate the seven-month period. The company responded with a more comprehensive recalculation report it said were based on the actual books and records of each operating company.
The New Orleans City Council and the Arkansas and Louisiana commissions all protested. The Arkansas Public Service Commission argued the compliance filing should be rejected because it assumed Entergy Arkansas would make further bandwidth payments, even though the company had withdrawn from Entergy Corp.’s system agreement in December 2013.
FERC said that it had never indicated that Entergy Arkansas should be exempt from the bandwidth calculations for that period.
Interest Payments Required
The commission also rejected the Arkansas commission’s argument that the bandwidth payments — $167.3 million, plus $56.5 million in compounded interest — amounted to “exit fees,” saying the payments were “obligations specifically required by the system agreement and are for a period when Entergy Arkansas was subject to the system agreement.”
(FERC Commissioner Colette Honorable, a former member of the Arkansas PSC, did not participate in the order.)
The commission also denied Entergy’s request for rehearing of an earlier order rejecting a compliance filing (EL01-88-012) and one issued in response to a ruling by the D.C. Circuit Court of Appeals (EL01-88-011), ordering Entergy to include interest on recalculated bandwidth payment amounts from the seven-month period.
FERC disagreed with Entergy’s contention in the compliance-filing request that the commission had failed to adequately explain its decision to require interest. Interest, the commission said, ensures that “the recipient receives payment in inflation-adjusted dollars.”
