Entergy Pares Rate Increase Tied to Natural Gas Costs

Entergy Pares Rate Increase Tied to Natural Gas Costs

Weeks after seeking an average 7.5% increase in electric rates to offset the rising cost of natural gas used to generate power, Entergy Arkansas has acceded to regulators and shaved this year’s fuel-charge recovery down to require an average 6.4% increase.

The average monthly bill for the investor-owned utility’s 720,000 residential and business customers will go up by about $6.80 rather than rising by $8.27 as it would have under plans Entergy filed with the Arkansas Public Service Commission last month.

The company cited higher natural gas prices in seeking the increase. At about $4.50 per million British Thermal Units, the cost is about double what it was in September 2019, though still a fraction of the heights it hit between 2000 and 2008, when it peaked above $17 three different times. In September 2005 the price hit $21.18 before a boom in hydraulic fracturing unleashed a torrent of new gas supplies, glutting the market. In April 2020, as the pandemic took its huge economic toll, natural gas was at $1.80 per million BTU.

The new percentage, a compromise suggested by the Public Service Commission, which regulates utilities in Arkansas, reflects the Energy Cost Recovery Rate, or ECR, which amounts for about 9% of the average bill. The bill is adjusted each spring in coordination with the PSC, fluctuating with the cost of fuels the utility uses to generate power, as well as wholesale prices for additional energy generated elsewhere.

“The PSC requested we decrease the amount for this rider,” Entergy communications specialist Brandi Hinkle told Arkansas Business on Tuesday. “The average residential customer will pay on average $6.80 more per month.” The reduction adds up to about $32 million off the amount of the original rate request. The new rate will be reflected on bills starting this month.

The rate is the same for commercial and industrial customers, Hinkle said, “but actual charges are based on their usage - so numbers range wildly.” Entergy said average usage is 1,000 kilowatt hours a month, for a bill of $110.76. The increase will take that up above $117 a month.

Fuel commodity prices over the last two years meant that Entergy customers actually enjoyed a lower cost recovery rate over that period, and last year’s rate was at a 10-year low, officials said. But prices for natural gas, historically a lower-cost fuel since the hydraulic fracturing revolution, were 93% higher in 2021 than in 2020, the utility pointed out.

And the company could raise rates again between now and next March if fuel recovery costs fall short. “There is an option to provide an interim adjustment within the 12-month period or add the additional under recovered amount to the rider for '23,” Hinkle said Tuesday.

As first reported in the Arkansas Democrat-Gazette, the change in the rate-increase request was outlined in a letter March 25 from David Palmer, Entergy’s director of regulatory affairs, to the PSC staff. The commission staff had asked the company to delay collecting about $32 million of its unrecovered costs.

Palmer’s letter said the primary reason for the rate request was “a large under-recovery balance as a result of higher natural gas prices in 2021, particularly in the fourth quarter."

Entergy Arkansas has about 722,000 customers in 63 counties and is a subsidiary of Entergy Corp. of New Orleans. The parent company has annual revenue of $10 billion and 12,500 employees.

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