By Chris O’Malley
Saying the “time is ripe,” the Federal Energy Regulatory Commission has consolidated four years of Entergy Corp.’s disputed annual cost allocation cases for hearing and settlement.
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 have different operating costs.
Each year payments are made by low-cost operating companies to the highest-cost company in the system, using a “bandwidth” remedy that ensures that no operating company has production costs more than 11% above or below the Entergy system average.
Under the 2014 bandwidth implementation — its eighth —Entergy Texas would pay $15.3 million to Entergy New Orleans.
Regulators in each state where Entergy operates have regularly challenged the annual bandwidth filings. FERC agreed Dec. 18 to review not only the 2014 filing but also Entergy’s fifth, sixth and seventh bandwidth formulas (ER14-2085).
The commission said the filings raise factual issues that it could not resolve based on the existing record. It set a refund effective date of June 1, 2014.
In Entergy’s 2014 filing, the New Orleans City Council sought a hearing to determine if Entergy’s rate calculations and accounting practices are in agreement with the bandwidth formula and previous FERC orders.
The council also raised an issue with the 2013 bandwidth filing, noting that it includes the cancellation costs of the Little Gypsy Repowering Project that a FERC judge in an initial decision (ER12-1384) excluded from the bandwidth calculation.
The Louisiana Public Service Commission, meanwhile, said it wanted a hearing to determine whether Entergy’s inputs are unjust and unreasonable due to incorrect calculations, “misapplications of the formula or imprudence.”
The Public Utility Commission of Texas also sought a hearing on the 2014 filing but asked that it be delayed until the accounting for the previous years are resolved.
“Our preliminary analysis indicates that Entergy’s proposed rates have not been shown to be just and reasonable and may be unjust, unreasonable, unduly discriminatory or preferential, or otherwise unlawful,” FERC said.