Monday, February 18, 2019

Hearing Set for Louisiana’s Entergy Grand Gulf Complaint

By Tom Kleckner

FERC on Thursday established hearing and settlement procedures for a Louisiana Public Service Commission complaint against two Entergy subsidiaries (EL18-152).

The PSC alleged in a Section 206 complaint filed in May that System Energy Resources Inc. (SERI) and Entergy Services violated the filed-rate doctrine and FERC’s ratemaking and accounting requirements by billing ratepayers for the costs of the Grand Gulf Nuclear Power Station’s sale-leaseback renewals under a unit-power sales agreement between SERI and Entergy’s Arkansas, Louisiana, Mississippi and New Orleans operating companies.

Grand Gulf Nuclear Station | Entergy

FERC found the PSC’s complaint “raises issues of material fact that cannot be resolved based upon the record before us” and would be more appropriately addressed in settlement procedures. The commission set a refund date of May 18, 2018.

Louisiana’s regulators requested the hearing and asked that unjust and unreasonable costs be removed from billings.

The PSC’s complaint stemmed from SERI’s renewal of two sale-leaseback agreements in 2015 that dated back to 1988. The regulators said SERI originally sold to private-equity investors an 11.5% interest in Grand Gulf for $500 million and leased it back for 26.5 years. They said the original cost of the lease was $435 million with a net book value of $398 million, claiming SERI included the costs in its formula rate as rents for ratemaking purposes.

Galvez Building housing the Louisiana Public Service Commission |

The PSC said SERI paid off the $500 million principal balance over the leaseback terms, which ended July 15, 2015, but ratepayers paid all of the costs except for an $11 million net-of-tax gain credited in rates pursuant to a 1991 settlement. SERI recovered $489 million plus interest paid to the lessor through its formula rate expense, more than the $398 million book value, the regulators said.

The PSC further argued that SERI double recovered the sale-leaseback costs by making capital additions to the 11.5% interest and separately charged ratepayers a return. SERI’s fair market value lease renewal cost of $17.2 million/year, which SERI has included in rates as rents since 1995, “constitutes double collection of the capital addition costs,” the PSC said. It asked FERC to exclude the lease payments from rates and to order refunds from the time of the sale-leaseback renewal or order another ratemaking adjustment.

The Louisiana regulators also asked the commission to investigate and ensure that consumers receive the entire benefit of a litigation payment SERI received for the Department of Energy’s failure to dispose of Grand Gulf’s spent nuclear fuel.

SERI, a wholly owned subsidiary of New Orleans-based Entergy, generates and sells nuclear power, primarily through its 90% ownership and leasehold interest in Grand Gulf. Entergy Services is a service subsidiary that provides accounting, legal, regulatory and other services to Entergy’s operating companies.