PSC Turns Down Entergy's 'Low-Ball' Settlement Offer


PSC Turns Down Entergy's 'Low-Ball' Settlement Offer
Entergy Corp. headquarters in New Orleans (Shutterstock)

The Arkansas Public Service Commission on Monday turned down a $142 million offer from Entergy Corp. to settle allegations that it charged ratepayers for inflated costs of its Grand Gulf nuclear power plant in Mississippi.

In a filing with the Federal Energy Regulatory Commission, the Arkansas utility regulatory body said Entergy's "low-ball" offer did not mention a cash refund for customers of Entergy Arkansas, a subsidiary of the investor-owned New Orleans power company. The commission added that the offer, similar but smaller than one accepted by Mississippi regulators weeks ago, offered no protection to ratepayers for the "continued imprudent management of the Grand Gulf plant."

The regulatory body said it would keep negotiating with Entergy, trying to extract a better deal for Arkansas ratepayers. Commission Chairman Ted Thomas said in a statement that the filing "speaks for itself" and that "we will continue to explore the possibility of a negotiated settlement."

Grand Gulf, on the Mississippi River at Port Gibson, was plagued with cost overruns even as it was built and was so deeply in debt at its commissioning in 1985 that it was known as "Grand Goof." But far more recent allegations of mismanagement are at the heart of the complaint before the FERC, which has jurisdiction in the dispute because Grand Gulf sells wholesale power to several states.

The settlement offer represent an attempt to repay Arkansas customers for overcharges attributed to poor plant operations, incentive pay to company executives and questionable tax strategies, among other allegations of improper dealings involving Grand Gulf. Entergy, however, would admit no wrongdoing in the deal.

Under Entergy's proposal, it would have been released from any future claims over Grand Gulf-related issues that arose before the settlement, a stipulation the three-member Arkansas commission rejected as too broad. 

More: Read the PSC's full response here.

The settlement with Mississippi’s Public Service Commission on June 23 means Entergy Corp., which serves more than 3 million homes and businesses in Louisiana, Arkansas and Mississippi, will make a $300 million payment to Mississippi. The settlement came in coordination with the $142 million offer to the Arkansas PSC and two payments to two Louisiana regulatory bodies, the Louisiana PSC and the New Orleans City Council, totaling about $211 million.

Entergy Corp. released a statement Monday saying it would "very much like to come to an ageement with the Arkansa Public Service Commission" and took note of the deal in Mississippi, saying it is "fair and reasonable and allows the return of considerable sums to Entergy Mississippi customers at a time when bills are high." The deal earmarks about $80 each for Mississippi ratepayers in the form of checks or credits to accounts. The utility also committed to spending meant to offset any potential spikes in the price of natural gas, when Entergy uses to generate a portion of its electricity.

Before Mississippi accepted the deal, Entergy had faced the possibility of refunds topping $1 billion if the FERC ruled against it completely.

The allegations of inflated costs in Grand Gulf's operations are just the most recent troubles in the nuclear plant's turbulent history. The original construction budget 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 Entergy Arkansas and its predecessor, Arkansas Power & Light, 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. Over the years, that amounted to about $6,500 per Arkansas customer.

Entergy has defended its practices despite offering the settlement, insisting in June that 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 company said it was offering to settle simply because of the ongoing costs of the FERC case and the uncertainty it was causing for customers, employees and stockholders.


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