Entergy Seeks To Recoup $167 million In New Rate Case; Will Add $13 To Ratepayer’s Monthly Bill

Entergy Arkansas on Friday filed its first general rate case with the state Public Service Commission (PSC) since 2013, calling the 137-page application a blueprint to improving electric reliability by modernizing the state’s largest utility’s power grid and helping to grow the state’s economy.

The PSC docket includes Entergy Arkansas’ rate application, 54 pages of testimony from company CEO Hugh McDonald, and hundreds of pages of supporting documents and testimony from other company officials. In the filing, the state’s largest utility makes the case to recover $167 million in new revenue that it said is largely driven by costs to upgrade the power grid and purchase the 495-megawatt power plant Union Power Station near El Dorado for $948 million in December, a deal which is expected to close later this year.

“Our employees have put a considerable amount of infrastructure in place over the last two years to enhance reliability and prepare Arkansas for future economic growth,” said Entergy Arkansas President and CEO Hugh McDonald said in a statement. “This new foundation will help deliver a bright future that includes more investment in Arkansas, more jobs and stronger communities.”

If approved, the adjustment would change the monthly bill of a typical residential customer using 1,000 kilowatts per hour (kWh) by nearly $13.00 or 45 cents a day, Entergy officials said. PSC Executive Director John Bethel said late Friday afternoon that he could not offer any comment on the filing at the time “because I’ve not had the opportunity to review it.”

However, Bethel said the commission will set a procedural schedule for the rate review, allowing all interested parties, stakeholders and consumers to make comment on Entergy’s second rate filing in two years. That review process, he said, will take several months.

“By statute, the Commission must enter an order within ten months following the date of the application,” said the longtime PSC executive director. “There will be several rounds of written, pre-filed testimony, an evidentiary hearing, and public comment hearings.”

In an interview with Talk Business & Politics, McDonald said if the rate plan is approved by the PSC, Arkansas’ current rates will be still be well below the regional and national average. Currently, the national average monthly residential rate per 1,000 kWh is $122.60, according to the U.S. Energy Information Administration.

“These investments will not only strengthen our grid but will allow us to leverage the industrialization that is happening in our region and maintain customer rates below the national and regional averages,” said McDonald.

In the backdrop of Entergy Arkansas’s current rate filing, the Arkansas utility giant is about 18 months removed from a PSC edict requiring it to maintain operational independence from its parent company, Entergy Corp., and sister operating companies in Louisiana, Mississippi and Texas.

On Dec. 19 2013, Entergy Arkansas exited the so-called “Entergy System Agreement,” which allocated generation costs among the Entergy’s operating subsidiaries in Arkansas, Mississippi, Louisiana, Texas and the City of New Orleans.

The historic pact had embroiled the PSC and Entergy in protracted litigation for over 30 years, resulting in significant “Grand Gulf payments” by Arkansas ratepayers in 1985 for a nuclear unit that PSC officials said Arkansas did not need.

Although the PSC’s litigation efforts successfully shielded Arkansas ratepayers from a substantial amount of payments in subsidies to the other states, Arkansas ratepayers still ended up subsidizing the ratepayers of Entergy Arkansas’ sister companies at a cost of more than $4.5 billion from 1985 to 2011, officials said.

In late 2013, Entergy Arkansas became independent as part of its agreement with the PSC, allowing the Arkansas utility to complete the integration of its transmission system into Midcontinent Independent System Operator’s following more than two years of planning and preparation with the New Orleans-based parent of Entergy Arkansas and numerous other stakeholders.

McDonald said the integration process went smoothly, and the initial projections of more than $1 billion in savings to Entergy utility customers over the next decade are ahead of schedule. In late March, Carmel, Ind.-based MISO christened its 50,000-square foot operations center in West Little Rock that will oversee the South region of the grid operator’s footprint that includes Entergy’s operating subsidiaries in Arkansas, Louisiana, Mississippi, Texas and the city of New Orleans.

“It has been a great decision,” McDonald told Talk Business & Politics in a recent podcast interview. “The estimates of customer savings that we had over the entire Entergy were like $1.4 billion over the first 10 years, and our share of that (Entergy Arkansas) was about $263 million for that same period. And after being with MISO for a year now — we are on track.”

On Friday, McDonald reiterated that Entergy Arkansas’ pact with MISO will not only improve reliability and give Arkansas consumer’s better access to cheaper energy mix, it will help attract more economic development prospects to the state.

He said Arkansas’ largest utility has also made capital investments of nearly $1.2 billion on transmission and generation projects to support the reliability and capacity of the electric grid system.

“Because we have additional capacity and greater reliability, we are also better positioned for economic development prospects coming to Arkansas in support of what the governor (Hutchinson) wants to do,” said the Arkansas utility chief.

Currently, Entergy Arkansas provides electricity to approximately 700,000 customers in 63 counties. The Arkansas’ utility’s parent company, New Orleans-based Entergy Corp., owns and operates power plants with nearly 30,000 megawatts of electric generating capacity, including nearly 10,000 megawatts of nuclear power, making it one of the nation’s leading nuclear generators. Entergy delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $12 billion and approximately 13,000 employees.