Arkansas utility regulators are reviewing a $142 million offer from electric power giant Entergy Corp. to settle allegations that it charged ratepayers for inflated costs of its Grand Gulf nuclear power plant in Mississippi.
Entergy reached a settlement on similar allegations with Mississippi’s Public Service Commission on June 23, agreeing to refund the state $300 million.
But the public service commissions of Arkansas and Louisiana are weighing whether their part of a total half-billion-dollar-plus from Entergy will be fair to their constituents. Another regulatory body involved is the New Orleans City Council.
Entergy Corp., with more than 3 million homes and businesses in Louisiana, Arkansas and Mississippi, is the parent company of Entergy Arkansas. Some of the settlement money is earmarked for customers, repayment for overcharges attributed to poor plant operations, incentive pay to company executives and questionable tax strategies, among other allegations. Entergy, however, admits no wrongdoing in the deal.
The offer before regulators includes $142 million for Arkansas, $95 million for the Louisiana Public Service Commission and $116 million for the City Council, which serves as utility regulator in New Orleans.
‘Carefully Studying the Offer’
“We are carefully studying the offer,” Arkansas PSC Chairman Ted Thomas told Arkansas Business, “to determine whether it fairly compensates Arkansas ratepayers for performance and other ratemaking issues.” Those issues, he noted, were raised in proceedings of the Federal Energy Regulatory Commission dealing with Grand Gulf, the Port Gibson, Mississippi facility that was so troubled with cost overruns from its completion in 1985 that it became known as “Grand Goof.”
The original cost estimate was $1.2 billion, but building in an age of inflation and high interest rates ballooned the eventual total to $5 billion. By the time it started producing power, Grand Gulf was deeply in debt and its owner, Middle South Utilities, now Entergy, relied on electric bills in Mississippi, Arkansas and Louisiana to carry the load.
Between 1985 and 2012, customers of AP&L and Entergy Arkansas had to pay $4.5 billion to operate the Mississippi plant and subsidize Louisiana ratepayers under the terms of old agreements, according to the Encyclopedia of Arkansas. That was about $6,500 per Arkansas customer.
All of that is history, though it’s history well known to regulators.
All accounting, financing and operating records under FERC’s Grand Gulf review were “proper, well-reasoned and in the best interest of Entergy customers,” the investor-owned utility said in a June 23 statement. The company said it was offering to settle because of the ongoing costs of the FERC case and the uncertainty it was causing for customers, employees and stockholders.
Each regulatory entity has autonomy in the settlement, and Louisiana regulators have registered reluctance to the deal. Thomas, the chief Arkansas regulator, said “all options are on the table in terms of working with our neighboring states.”
Mississippi’s Largest Deal
According to documents filed with the FERC, the deal gives $235 million to the Mississippi Public Service Commission, which regulates Entergy Mississippi, but it also cushions ratepayers from a $15-a-month rate increase, making the state’s benefit about $300 million. Regulators called it the largest settlement in Mississippi history and pledged to return $80 to each ratepayer. Other proceeds are earmarked to offset potential natural gas price spikes.
Arkansas and Louisiana regulators have the option of keeping the battle going at the FERC, which could potentially force Entergy to pay far more than they have offered in the settlement. The agency has jurisdiction because Grand Gulf sells wholesale power to several states.
Louisiana Public Service Commissioner Craig Greene said in a statement that the offer will be addressed at a meeting this month. “It is important to note, though, that this was a unilateral, take-it-or-leave-it offer from Entergy and they have not engaged our legal counsel, or any regulatory body actively involved in the litigation, to afford them the opportunity to negotiate a more fair compromise,” he said.
A New Orleans council member, JP Morrell, said in a statement that the deal offer is a “ridiculous attempt by Entergy to sandbag the City Council and mislead the other regulatory agencies in Louisiana and Arkansas. … As utility bills continue to spiral out of control in New Orleans, for Entergy and Entergy New Orleans to try to manipulate us into taking less than ratepayers are entitled to is beyond offensive.”
Sam Carlin of The Advocate of Baton Rouge wrote Thursday that before Mississippi accepted the deal, Entergy had faced the possibility of refunds topping $1 billion if the FERC ruled against it completely.
“In addition to the bigger-ticket allegations — involving performance issues that turned Grand Gulf into the least-reliable nuclear plant in the nation for a stretch — regulators have charged that Entergy improperly assessed ratepayers for various expenses, including $1.6 million of private airplane travel, lobbying expenses, advertisements promoting Entergy and industry association dues,” Carlin wrote. “As part of the settlement, Entergy has agreed starting July 1 to exclude incentive pay for executives from the costs it passes on to buyers. The company didn’t mention that part of the agreement in its press release.”