HomeMy WebLinkAboutPO 5951: ENTERGY, TX RATESP. O..No. 5951
11/13/08 is
ORDINANCE NO.
AN ORDINANCE AS IT PERTAINS TO THS RATES OF
ENTERGY, TEXAS
WHEREAS, per Ordinance No. 08-105,^on October 7, 2008, the
City Council approved the rates established in ETI's Non-Unanimous
Stipulation filed in PUC Docket 34800, attached hereto as Exhibit
"A", with an effective date of October 24,:2008 or when the Public
Utilities Commission approves the rates in PUC. Docket Number 34800
consistent with the ETI's Non-Unanimous Stipulation, whichever is
later; and
WHEREAS, the PUC has not approved the ETI's Non-Unanimous
Stipulation, per their Order on Remand, attached hereto as Exhibit
.,B„
NOW THEREFORE, BE IT ORDAINED BY THS CITY COUNCIL OF THE CITY
OF PORT ARTHUR:
Section 1. That the facts and opinions. in the preamble
are true and=correct.
Section 2. That the City Council herein takes such
actions as denoted in Exhibit "C" pertaining to the rates and the
effective date of implementation.
Section 3. That .a copy of the caption of this Ordinance
be spread upon the Minutes of the City Council.
Section 4. That this being an Ordinance which does not
carry a penalty and does not require publication, it shall take
effect immediately from and after its passage.
z.pos951
READ, ADOPTED AND APPROVED on this day of
A.D., 2008, at a Council Meeting of the City Council of the City
of Port Arthur, Texas,, by the following vote:
AYES: Mayor
City Council
NOES:
MAYOR
ATTEST:
ACTING CITY SECRETARY
APPROVED AS TO FORM:
SEE CONFIDENTIAL MEMO
CITY ATTORNEY.
APPROVED FOR ADMINISTRATION:
CITY MANAGER
z.po9951
EXHIBIT "A"
SOAH DUCICET N0.473-08-0334
P.U.C. DOCKET N0.348110
APPLICATION OF ENTLRGY GULF § BEFORE THE
STATES, INC, b'OR AUTHORITY TO § S1'A'fE OFFICEOF
CHANGF. RATES AND TO RECONCILE § ADMINISTRATIVE HEARINGS
FUEL COSTS §
NON-ONANIMOUS STIPULATION
This Stipulation is enterrd into between and among the Community Associations of the
Woodlands, Texas ("CAI W ~, Entergy Texas, Inc ("ETI" or "the Compan}~'), as successor in
interest to Entergy Gulf States, Inc.; the Entergy Texas, Ina Service Area Cities' Steering
Committee ("Cities"), the Kroger Co ("Kroger'7, Uffice of Public Utility Counsel ("OI'C"),
1"exas Legal Service Center ("TLSC"), 'texas Ratepayers Organization to Save Energy ("Texas
ROSE"), and Wal-Mart 'Texas Stares, LP ("Wal-Marl") (collectively, "Signatories"), and any
othcrparty that chooses to sign the Stipulation. The Signatories stipulate and agree au follows:
I. BACKGROUND
1. On September 26, 2007, EII film an applicatimr with Qte Public Utility
Commission of Texas ("Commission") requesiiug that the Cornnrission approve: (1) base rate
taziffs and riders designed to collect a Wtal non-fuel revenue requirement, for the Texas retail
jurisdiction, of $605 million; (2) a set of proposed tariff schntfules presented in the Company's
Electric Utility Rate Filing Package for Generating Utilities ("Rate Filing Pukage" or "RP'I"')
accompanying ETI's Application; (3) ptusuant to P:U.C. Stn3sr. R. 25.236 and the Public Utility
Regulatory Actz {"PURA'~ Section 39.455, a request for fmal reconciliation of ETI's fuel and
purchased power costs and fuel factor revenues for the Reconciliation Period from January 1,
'Effective December 31,.2001, Entergy Texas, Inc succeeded to EGSI's rights and tespoosibilifies pursuant to
Section 39.452(e) of-rho Public Utility Regrilatory Act For continuity and ease of reference, the Company has
.continued to make reference to EGSl for purposes of pleadings bt tltis uue. -
r IEX UIIL. CODE Arrtr. Title2
l r
200G to Match 31, 2007, as well as fuel costs deferred from prior' proceedings; and (4) certain
waivers to the Rate Filing Package instructions presented in RI'P Schedule V. accompanying
E'1'T's Application.
2. In addition to the UhecfTestinrony fled with its Application, ETI t11ed Rebuttal
Testimony on May 2, 2008. Cities, UPC, CAI W, TLSC and-Texas ROSE, Kroger, and Wal-
Matt filed Direct Testimony on April 11, 2008. OPC also filed Cross-Rebuttal Testimony on
April I8, 2008-
3_ The Signatories believe that a resolution of this proceeding pursuant to the terms
set ont below is desirable and in the-public interest because the result is reasonable under the
c¢cumsLwces and is based on evidence in the tec;ord Settlement will also conserve the
resournes of the public and the Signatories and will eliminate controversy.
TL A(;12EEMENT
1. Uverali Base Irate Iucrcase for ETI. the Signatories agree to an overall base
rate increase fbr ETI of $42.5 million over the present base rate revenues stated in Attachment A
commencing with bills tendered fur the first billing cycle of October 2008 and a base rate
iucrease of $17 million commencing with bills rendered For the fast billing cycle of October
2009. Coincident with the $42.5 million base rate increase, the Signatories agree ETI shall
unplement tariffs designed to retain, on a usage basis, amounts of Rough Production Cost
Equalization ("RPCE") payments to be made to LTI by Entergy Aritansas, Inc., so that the
Company retains such payments and antortizcs fhe regulatory liability, at a rate of $25 million
annrraUy until -the rates fiom the. rate case identified in Paragraph 7 of this Section aze
implemented. the Signatories further agree that this $25 million amount will serve as a credit
2 s
(or offset) to the $42.3 million base rate increase. Attachment A to this Stipulation provides the
method of implementation for the RPCE credit.
2. Rough Production Cost Rqualization Payments. Lt addition ro the provisions of
Paragraph 1 of this Section, F,TI will retain RYCE Paymments in the following manner: beginning
with the first billing cycle of January 2009, E'fT will implement a taiiff designed, on a usage
basis, for the Company to retain an additional $17 million annually unto the October 2009 rate
increase goes info effect. This $42 million retention will revert back to the $25 million retention
upon the implementation of rates in October 2009.
3 2008 RPCF, Payments. The 2005 RPCE payments will be used, if attd as
necessary, [o amotfize future rcteutions described in Pazagraphs 1 and 2. Any 2003 RPCE
payments not needed to ensure the proper level oCRPCE-related offsets will be credited in the
mazmner in which they would have been credited absent this Stipulation.
4. 2009 Iucrease_ The base rate increase of $17 million commencing with bills
rendered for the first billing cycle of October 2009 will be implemented using an abbreviated
filing method on July 1, 2009. The Stipulating Patties agree to work in good faith with each
other and with other inletrsted par ties, including any non-settling parties, to develop the form of
an abbreviated fling to be made by the Company with all regulatory authorities with jurisdiction
over retail rates in'I exas, that is reasonable and that effectuates the proposes of the scttlcntent to
implement the second step base rate increase commencing with bills rendered for the first billing
cycle of October 2009. Those Signatories that can waive tights to challenge the October- 2009
increase do so, except as to accuracy of calculations and conformance of tariffs with this
Stipulation. OPC and Cities agree to be bound by the Stipulation, and therefore the 2009 base
rate increase, to the extent allowed by law. Regardless of the foregoing,. the expectation of the
3 g
Signatories is that OPC and Cities will not challenge the amount of the 2009 increase and that
any oversight by those entities is limited to the accuracy of calculations and conformance of
tariffs with this Stipulation.
5. Pumhasr:d Power Capacity costs associated with power pwchased'from Ihird
pazties will be treated as eligible fuel expense or PCRF expense and such purchased power,
whe4Set treated as eligible fuel or PCRP, wiU be subject to the standazds set out n~ P.U.C. Suesr.
R § 25 236 or § 25.238, as applicable, in future fuel reconciliation cases, until the
implemenlaton date of rates contemplated in Paragraph 7 of this Section. Each Signatory shall
have the right to contest, in such future rcconci]iation cases, the reasonableness ofsuch purchase
power expenses. The Signatories further reserve Ore right to assert al] tactual and legal
atgumetrts they asserted in this docket as ttte basis far purchase power adjustments in these
reconciliation cases.
6 Trxnsmissiou and Aistribution Operation and Maintenance Project Expense.
An annual amount of $5 million of transmissiott and distribution operation and maintenance
expense will be deferred by project to a regulatory asset account beginning with the
implementation date of dre rates described in Pazagraph 1 of this Section azrd ending with the
implementation date of rates described in paragraph 7. Recovery of the regulatory asset will be
included specifically in the rates described in Pazagraph 7 irrunediately upon implementation of
those rates.
7. Future Rate Case. The Company will file a rate case by Dccember.31, 2009
based upon a test year ending June 30, 2009. SeghuLng with the date of implementation of rates
nesniting hom the 2009 mte case provided for in this paragraph, all jurisdictional sepazafion
related MSS-4 purchases will be recovered through a contemporaneous surchazge and will °
4 ro
become recauciiable purchased power expenses under P.II.C. Slr$Sr. R. § 25.2.36_ The
Signatories, however, make no commitment concerning the treatment of jurisdictional separation '
related MSS-4 purchases in any subsequent rate cases. the Signatories agree to: (a) further
addl'e55 a Competitive Generation Services tariff in the 200) rate case; (b) to work, in ~a
collabm afive manner, towazd a mutually acceptable solution prior to the 2009 rate case; and (c)
that ETl will be made whole for any costs umccovered due directly to implementation of the
Competitive Generation tazi[i.
8. DepreciaNou. A River Bend life extension adjustment is adopted consistent with
the regulatory treatrnent of ttre Louisiana Public Service Commission, subject to FERC approval_
Should such approval not be obtained byFeb[uazy 1, 2009, a regulatory asset wit] be created that
represents a 20-year extension of the life of River Bend. The creation of the regulatory asset, if
required, is intended to maintain the economic impact to all Signatories. The regrdatoty asset
will be included specifically in the rates described in Paragraph 7 inunediately upon
irnplemenlaGon of those; rates. Additionally, the Signatories agree that the depreciation
adjustment of $'2.7 million will be allowed, as identified in the rebuttal testimony of Company
Witness Brian Caldwell at Exhibit BWC-R-3 on Page 27 of`28.
9. Riders. The Signatories support the following Riders:
a Bath the incremental city franchise fees crurently being recovered through
a Rider and any prospective incremental city hanchise fees will be recovered through a Rider.
Existing non-incremental city franchise fees will be rolled into base rates-and will not be stated
separately on a bill or chazged separately to customers;
b. An Energy Efficiency Rider, as proposed in the Company's Rebuttal
Testimony;
5 11
c A Rate Case Expcnsc Rider of $5 million wilt be amortized Duct [}tree {3)
years (i e. $1.67 million per year); and
d. All revenue ftom Riders is in addition to (i) the base-rate increases
provided for in Paragraph 1 of this Section and (ii) the amount retained by the Company pursuant
to Pazagraphs 1, 2 and 3 of this Section.
10.. Lorv-Income Programs.
a. The Miscellaneous Electric Service Chazge for reconnection will remain at
$12.00 for low-income customers;
b ETPs Public Benefit Fund will be funded at an amount not to exceed $2
million annually and such amount will be tnlied into base rates. In oidcr to include a greater
portion of the eligible population in the progatn, the Company will use its best efforts to
contract for and implement an automatic enrollment program. '1 he. Company's automatic
etuollment program will be modeled upon the matching procedwes used by other Texas utilities
to identify eligible customers and will be implemented within 30 days of the Commission's
issuance of the final order in this case. EII will provide quarterly reports to intetrs'ted patties;
and
c. With regard to the Company's Energy Efficiency Rider, the Company's
low-income energy efficiency programs will be amended so as to ensure that funding is
mainl:7ined for the targeted energy efficiency program initiated in 2001 in Docket No. 24469
The Company will reinstate the Entergy Assist Program at a funding level of $1.9 mi[lion, based
upon 0.12% of Iexas gross revenues. The Company will use its best efforts to contract with the
Iexas Association of Community Action Agencies by October 1, 2008 for the administration of
~ 1Z
the Energy Assist Program with an annual funding level of $1.9 million effective .Januazy i,
2009_
11. Storm Cost Accruals. Storm Cost Accruals will be increased by $2 million
annually (lo a total umoal accrual of $3.65 million) beginniug 7annary 1, 2009- Ihis amount
will be subsumed in revenues recovered through base rates.
12. Class Allocation. The rate increase described in Paragraph 1 of this Section will
be allocated to all classes on an equal percentage basis Each lamp type and wattage identified iu
the lighting class will receive the same equal pen;enLrge increase. Attachment A to this
Stipulation shows the manner in which the rare increase will be allocated to all classes.
13 No Tuel or IPCR Disallowances. The approximately $858 million in fuel and $25
million in IPCR requested by the Company, exclusive of interest on airy over or under recovery
batazrce, is reconciled tluough March 31, 2007 and there will be no fuel or II'CR disallowances-
The ovedunder recovery balances at the end of the reconciliation period will be the beginning
balrmces For the next reconciliation period for both fuel and IPCR.
14 Texas Jurisdictional Numbers. The Sigrratoiies agree that all numbers referenced
in this Stipulalion aze Tcxas.jurisdictional
III. IMPLEMENTATION ON AGREEMENT
Obligation to Support this Stipulation. The. Signatories will support this
Stipulation before the Commission and will take reasonable steps to support Commission entry
of an order consistent with this Stipulation. The Signatories contemplate submission of an
agreed proposed order for the Commission's consideration.
~ 13
2' EfTbct of Stipulation.
a_ Agrcement as to the resolution of any specific issne in this Stipulation
does not mean .that atry Si~ratory or the Commission approves of any pazticular Veatmerrt of
costs or the wtderlying assumptions associated with such costs.. Ttre failure to litigate any
specific issue in this docket does not waive any Signatory's rights to contest that issue in any
other ewrent or finure docket of project The failure to litigate an issue cannot be asserted as a
defense of estoppel, or any similar argument, by or against any Sigrratory in any other
proceeding. The Signatories attived at this Stipulation ltuough extensive and heated negotiation
and compronuse .
b- The Signatories wge the Conunission to adopt au appropriate order
consistent with the terms of this Stipulation Other than with regard to provisions pertaining to
fii[ure required actions or tiitwe rate treatment, the terms of this Sfipulation may not he used
either as an adutissiou or concession of any sort or as evidence in any proceeding- Oral or
written statements made during the course of the settlement negotiations may not be used for any
purposes other than as necessary to support Ure entry by the Commission of an brdcr
implementing this Stipulation and other than to support the enhy of such an order, all oral or
written statements made during the course of the settlement negotiations ate governed by TEX.
R EVID. 408 and azc inadmissible in this or any other administrative agency or judicial
proceeding. The obligations set forth hr this subsection 2.6. shall continue and be enforceable,
even it this Stipulation is terminated as provided below.
c. This Stipulation tellecis a compromise, settlement and accommodation
among the Signatories, and the Signatories agree that the tetrns and. conditions herein are
interdependent Ali actions by the Signatories contemplated or required by this Stipulation are
8 is
conditioned upon entry by the Commission of a 6na1 and appealable order fully consistent with
this Stipulation. If the Commission dots not accept this Stipulation as presented or enters an
order inconsistent with any term of this Stipulation, any Signatory shall be released from all
commitments and obligations, and shall have the tight fo seek heating on all issnes, present
evidence, and advance any positions it desires, as if it had not been a Signatory..
d. Phis Stipulatiot is binding on each of the Signatories only for the purpose
of settling the issues as set forth herein and for no other purposes.
3. Execution. The Signatories agree that this document maybe executed in multiple
counterparts and filed with facsimile siarratures
9 15
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Fatecuted as shown below:
Dated this ~. day of Max 2008.
THE CO Y ASSOCIATIONS OPkTCE OF ` PCJBLIC UTILITY
OF THE DL COUNSEL
_---~
By: ~~~ Br•
een £. M er Sara J. Fcnis
B wa McCatroll, LLP
I I11 Bagby, Suite 4700 Title: Assistant Public Counsel
Houston, TX 77002
Date: May ~ 2008
Title: Its Counsel
TK?IAS x,EG.AL SERVICES CENTER
Date: Mayes 2008
ENT YTEXAS,INC`.~ ~~//~I o
John Williams
Title: Its Attorney
Date: May?U 2008
ENTERGY TEXAS, INC. SERVICE
AREA C'ITIES' STEERING
COMMITTEE
>3y:
Daniel J. Lawton
Title: Its Attorney
Date: May __, 2008
THE KROGEZt Co.
By:
Michael L. Kurtz
Title: Its Attorney
Date: May _~ 2008
By:
Randall Chapman
Title: Executive Director
Date: May _, 2008
TEXA5 RATEPAYERS' .
ORGANJ.T.A.TION TO SAVE Ei~'ERC:Y
By:
Carol Biedrzycki
Title: Execurive Director
Date: May,_, 2008
W AIrMART TEXAS STORES, LP
By.
F,ric.J. K,tat}twohl
Rich May, aProfessional Corporation
176 Federal Street, 6th Floor
BOSt:011, MA 02110-2123
Title: Its Counsel
Date: May;, 2008
10
16
Executed as shown below:
Dated this day of May, 2008
THE COMMUNITY ASSOCIATIONS UFFICE OF PUBLIC' .UTILITY
O.F TFIF. WUODLANUS COUNSEL
By - ---------
ICathlaen E. Magnrder
Brown McCauoll,.LLP
l 111 Bagby, Suite 4700
Houston, TX 77002 ,
sy:
1 Ferris
Title: Its Counsel ,
Date: May_ _, 2008
ENTERGYTEXAS, INC.
By.
` lobn Williams
Title: Its Attomcy
Date: May _, 2003
ENIERGY IEXAS, INC. SERVICE
AREA CiTIES' STEERING
COMhIITTEE
BY:
Danie] J Iawton
Title: Tts Attorney
Da[c: May 2008
TAE KItOGER CO.
BY~ -.--
Michael LKurtz
Title: Its Attorney
Date: May __, 2008
'I itIe: Assistant Public Counsel
Date: May _, 2008
TEXAS LEGAL SER'VTCES CENTER
Br ------------
Randall Chapman
Iitle: Executive Director
Date: May_, 2008
TF,XAS RATEPAYERS'
ORGANIZATION TO SAVE ENERGY
Br ---- --
Carol Bicdrzycki
IiUc: Executive Director
llate:. May _, 2008
WAL-MART TEXAS S'T'ORES, LP
By:
Eric I. Kralhwoh] -
Ricb May, a Professional Corporation
176 Federal Steet, 6's Floor
Boston, MA 02110-2223
Ti[Ie: Its Counsel
Date: May , 2008
10
17
Executed as shown below:
Dated this ___ day of May, 2008_
TIIE COMMUNITY ASSOCIATIONS
OFTI~ WOODLANDS
By: -
Kathleen E_ Magruder
Btnwn McCazroll, LLP
11 I I Bagby, Suite 4700
Haustort, TX 77002
Title: Its Counsel
Date: May_-, 2008
ENTERGY TEXAS, INC.
By' ----
Iohn Williams
Title: Its Attorney
Date: May _ ~ 2008
ENTERGY TEXAS, ING SERVICE,
AREA CITIES' STEERING
COMMITTEE
Ay --
llaniel J. Iavrton
Title: its Attotney
Date: May._, 2008
IHE 1{ROGER CO.
By: _
Michael L. Kurtz
Title: Its Attorney
Date: May _, 2 W 8
OFFICE OF PUBLIC UTILITY
COUN~ _ _
Sara 1 erns
Title: Assistant Public Covnscl
Date: May~1', 2008
TEXAS LEGAL SERVICES CENTER
By' ----- ._~__~
Randall Chapman
Title: Executive Director
Date: May _, 2008
TEXA5RATEPAYERS'
ORGANT'LA'CION IO SAV E ENERGY
. Caro(Bicdaycki
iitle: Executive Director
Date: May._., 2008
WAL-MART TEXAS STORES, LP
ay -- ---
Eric J Krathwohl
Rich May; a Ptnfessional Corporation
176 Federal Street; 6's Floor
Boston, MA 021IO-2223
Title: Its Counsel
Date: May _, 2008
10
lti
Executed as shown below:
Dated this day of May, 2UD8
THE COMMUNITY ASSOCIATIONS
OF THE WOODLANDS
Dy:
Kathleen E. Magruder
Broom McCaztoll, LLP "
1111 Bagby, Suite 4700
Ilouston, TX 770D2
Title: Its Counsel '
Date: May `, 2008
ENTERGY TEXAS, INC.
By: _ ___
Iuhn ~Iliams
Iitle: Its Attorney
Date: May._, 2008
EN"TERGY- TEXAS, INC. SERVICE
AREA CITIES' STEERLNG
CO]VLIVIITTEE
By' - -.~
Daniel i Lawton
Title: Its Attorney
Date: May_, 2008
THE K120GER CO.
By. _ _
Michael L Kunz
Title: Its Attorney
:Date: May _, 2008
OFFICE OF PTfBLIC UTILITY
COUNSEL,
u,,.
.,, . _
Saca J. Ferris
IitIe: Assistant Public Counsel
Date: 2vlay_ , 2UD8
TEXA5 LEGAL SERVICES CENTER
~y,
Randall Chapman
'T'itle: Executive Director
Date: May . ,, 2008
TEXAS RATEPAYERS'
ORGANIZATION TO SAVE ENERGY
Dr• _..
Carol Biedrzycki
Title: Executive Director
Date: May _, 2008
WAL- ART TE STO LP
Dy:
&ic J. Kr o
Rich May, a Professional Corporation
176 Federal Sweet, 6s' Floor
Roston, MA D2170-2223
Iitle: Its Counsel
Date: May/~~1008
10
19
EXHIBIT "B"
~.~
0
- t
PUC DOCKET N0.34800 t~~ --t
SOAR DOCKET N0.473-08-0334 ~ -a
r
APPLICATION OF ENTERGY § PUBLIC UTILITY COMMISSION N
GULF STATES, INC. FOR §
AUTHORITY TO CHANGE RATES § OF TEXAS
AND RECONCILE FUEL COSTS. §
ORDER ON REMAND
This.Order addresses the application of Entergy Gulf States, Inc. to establish new
f
rates and reconcile fuel expenses. Prior to hearing, anon-unanimous settlement (NUS)
was entered into by Entergy and other parties, and a hearing was held on the NUS. The
administrative law judges (ALJs) subsequently issued a proposal for decision (PFD) in
which they recommended adoption of the NUS. -For the reasons discussed in this Order,
the Commission fords that the NUS cannot be adopted and, therefore, rejects the PFD and
remands this matter to the State Office of Administrative Hearings (SOAR) for a hearing
on the merits of Entergy's original application. 'The Commission notes that Entergy has
agreed to extend the suspension of proposed rates until March 2, 2009. Further, the
Commission requests that the AL7s move in an expedited manner to hearing and return a
PFD to the Commission to allow final action in this matter before Mazch 2, 2009.
The Commission finds that the NUS as presented in the PFD violates PURAZ and
Commission rules, does not establish a reasonable revenue requirement for base rates, is
not in the public interest, is not supported by a preponderance of the evidence, is
inconsistent with Commission policy, .and improperly attempts to stipulate Commission
~ The signatories to the EGSI-NUS include: the Cities, the Community Association of the
Woodlands, Texas (CATW), the Kroger Company (Kroger), the Oftice of Public Utility Counsel (OPUC),
Texas Legal Services Center (TLSC), Texas Ratepayers Organization to Save Energy (Texas Rose), and
Wal-Mart Stores, LP (Wal-Mart) (collectively, EGSI signatories).
Z Public Utility Regulatory Act, TEx. tJTIL. Cont: ANrI. §§ LI.001-66.017 (Vernon 200'7 & Supp.
2008) (PURA).
`~~~
PUC Docket No. 34800 Order on Remand Page 2 of 12
SOAH Docket No. 473-OS-0334
policy. Accordingly, under the standards set forth by the Texas Supreme Court in City of
El Paso,3 the NUS cannot be adopted and the PFD must be rejected.
I. Scheduling of Rehearing.
The Commission is awaze of the parties' needs to have this matter adjudicated in
an expeditious manner and the importance of having the final rates, terms, and conditions
resulting from this proceeding implemented in a timely manner. Entergy agreed at the
November 5, 2008 open meeting to extend the suspension period for its proposed rates
until Mazch 2, 2009. Given the circumstances of Entergy and other financial
considerations, the Commission requests the ALJs make all efforts to return a PFD to the
Commission so that final action can be taken before March 2. To facilitate this objective,
the parties, with one exception, indicated in open meeting that they are prepared to go to
hearing by the first week in December. In light of the parties' readiness for hearing, the
Commission would request that the ALJs set a hearing to begin in early December:
II. Discussion
The standazd of review for a NUS was set out by the Supreme Court of Texas in
City of El Paso as follows:
a) The parties opposing the stipulation have notice that the stipulation
may be considered by the Commission and an opportunity to be heazd
on the reasons for opposing the stipulation;
b) The matters contained in the stipulation are supported by a
preponderance of the credible evidence in the case;
c) Tlie stipulation is in accordance with applicable law;
d) The stipulation results injust and reasonable rates; and
~ City ojEt Paso v. Pub. Uril. Comm'n ojTexas, 883 S.W2d 179 (Tex. 1994).
!d at 183.
PUC Docket No. 34800 Order oa Remand Page 3 of 12
SOAH Docket No. 473-08-0334
e) The results of the stipulation aze in the public interest, including the
interest of those customers represented by parties opposing the
stipulation.
In addition, the Commission notes that wntested NUSs are inherently fraught
with peril resulting in the need for heightened scrutiny. In such cases, the trier of fact
should provide detailed findings of fact because under City of El Paso the trier of fact
must determine that the settlement is in the public interest, including the interest of those
opposing the settlement.. By requiring detailed findings of fact,-the Commission does
not intend to discourage settlement, but instead encourages parties to bring either
stipulations or NUSs that have a fully developed factual record and evidence that the
agreement meets applicable law, including the standazds articulated in City of EI Paso, by
a preponderance of the credible evidence.
A. Revenue Requirement
The ALJs found that the proposed rate increase of $59.5 million in the NUS was
"just and reflect[ed] reasonable expenses in providing electric service:'S The ALJs noted
that the revenue requirement in the NUS was approximately halfway between Entetgy's
original filing ($106 million increase) and the revenue requirement advocated by
Commission Staff ($6.7 million decrease), resulted in rate increases of less than 10%
over atwo-yeaz period, provided adequate resources to attract new capital, and noted that
a subsequent rate case would be promptly filed.b The ALJs concluded that. the revenue
requirement was reasonable and in the public interest ~
While the Commission has found numbers (such as revenue requirements and
rates of return) that fall within a range of reasonable alternatives to be reasonable and
appropriate, it has never simply accepted a number that falls between two extremes. The
ALJs did not analyze either Entergy's original filing or Commission Staff's proposal for
reasonableness; thus, there is no basis to conclude that the settlement number is
s Proposal for Decision at 14 (Sept. 25, 2006) (PFD).
!d at 1415.
'ld.atl5.
PUC Docket No. 34800 Order on Remand Page.4 of 12
SOAH Docket No. 473-08-0334
reasonable simply because it falls between the two numbers. Further, a rate increase is
not shown to be reasonable simply because it is less than 10%. As the ALJs correctly
pointed out, a utility is entitled to a reasonable opportunity to earn a reasonable return on
its used and useful invested capital in excess of its reasonable and necessary operating -
expenses. The bases laid out in the PFD are insufficient, however, to conclude that the
revenue requirement proposed in the NUS meets this standazd. The Commission further
concludes that the approach taken in the PFD could be an incentive for parties in future
proceedings to "bid-up" their proposed revenue requirement
B. Purchased Capacity
An electric utility may not recover demand or capacity costs as part of eligible
-fuel expensess absent a fmding of special ciroumstances.9 The criteria the Commission
must consider to determine whether special circumstances exist include "whether the fuel
expense oi• .transaction giving rise to the ineligible fuel expense .resulted in, or is
reasonably expected to result in, increased reliability of supply or lower fuel expenses
than would otherwise be the case, and that such benefits received or expected to be
received .by ratepayers exceed the costs that ratepayers otherwise would have paid or
otherwise would reasonably expect to pay:'10
In the NUS, the signatories agreed that capacity costs associated with power
purchased from third- parties would be treated as eligible fuel expense under P.U.C.
SuasT. R. 25.236 or as Power Cost Recovery Factor under P.UC. SussT. R. 25.238 until
the implementation date of the •rates contemplated in the 2009 rate case. The NUS also
determined that all jurisdictional-sepazation-related MSS-4 purchases would be recovered
through a contemporaneous surehazge and become reconcilable purchased power
expenses under P.U.C. Sussr. R. 25.236 beginning with the date of implementation of
rates resulting from the 2009 rate case.[[
" P.U.C. Sunsr. R 25.236(ax4).
P.U.C. Suasr. R 25.236(ax~.
io Id
~~ Motion for Implementation o£ Non-Unanimous Stipulation, Exhibit A, Non-Unanimous
Stipulation at 4-5 (May 20, 2008).
PUC Docket No. 34800 Order on Remand Page 5 of 12
SOAH Docket No. 473-08-0334
In the PFD, the ALJs recommended that the third-party capacity costs be treated
as eligible fuel expense and found the NUS's treatment of the jurisdictional-sepazation-
related MSS-4 purchases appropriate. The ALJs also found that "given that [Entergy]
continues to transition to retail open access, allowing it to recover purchased power costs
outside of base rates is reasonable and in the public interest ....."~Z The ALJs noted that
"in granting a special exception, the Commission considers the benefits received by the
ratepayers. In this case, if [Entergy] can purchase power and potentially lower its costs to
customers, this would be a direct benefit to customers. Under the riders, a clear price
signal would be sent to ratepayers because they would be paying the true cost of power
and should realize cost savings through purchased power."13
P.U.C. SuaST. R. 25.236 does not condition recovery of capacity costs as eligible
fuel expense generally on "benefits that would be received." Neither the benefits nor the
costs that would result if purchased capacity costs were treated as eligible fuel expense
were quantified in the PFD. In addition, there were no findings of fact that there would
be increased reliability, lower fuel costs, or specific benefits as a result of such treatment
as required by the fuel rule.14 That Entergy's ability to purchase powec has the potential
to lower costs is insufficient. -The Commission finds that the treatment of third-parry
purchase capacity costs and jurisdictional-separation related MSS-4 ptrchases in the
NUS violates P.U.C. SuasT. R. 25.236 because special circumstances have not been
shown to exist in order to grant an exception to that rule.
C. Payment to Affiliates
PURR § 36.058(b) allows the treatment of a payment to an affiliate as a capital
cost or as an expense only to the exten! the Commission finds the payment "is reasonable
and necessary for each item or class of items as determined by the commission." Such a
determination by the Commission must include a specific finding of the reasonableness
~~ PFD at 37.
"!d at 38.
'~ P.U.C. Suesr. R. 25.236(ax6).
PUC Docket No.34800 Order on Remand Page 6 of 12
SOAH Docket No. 473-08-0334
and necessity of each item or class of items.15 There must also be a Commission fording
Utat the price to the utility is not higher than the prices chazged to the supplying affiliate's
other affiliates or divisions, or to non-affiliated persons within the setae market area or
having the same mazket conditions.tb If the Commission detemtines that an affiliate
expense is unseasonable, it must determine the reasonable level of the expense and
include that reasonable level of the expense when determining the utiliry's cost of
service.t~
Entergy's original application in this docket included testimony that the utility's
adjusted affiliate expenses in Texas for the test yeaz totaled approximately.
$88.3 million.tg While the NUS does not stipulate to any discrete amount of recoverable
affiliate expenses, a review of the agreed-upon reductions from Entergy's original
application leads to the conclusion that at least $34 million of affiliate expenses must
remain in the NUS's "black box" revenue requirement.
In spite of the inclusion of affiliate expenses'in the NUS, the PFD does not
include any of the findings mandated in PURR § 36.058(6)-(c). Furthermore, the
evidentiary record, as presented in the PFD, is not sufficient for the Commission to make
its own determination of what were reasonable levels of affiliate expenses pursuant to
~i PURA § 36.058(f). Consequently, no amount of affiliate expenses may be included in
~ the NUS and, because the Commission concludes that some minimal amount must be
included in the NUS, the Commission concludes that the NUS violates PURR and that it
cannot adopt the PFD.
D. Competitive Service Generation Tariff
PURR § 39.452(6) requires Entergy to propose a competitive generation (CGS)
-tariff to allow eligible customers the ability to contract for competitive generation and
further requires that the Commission must either approve, reject, or modify the proposed
16 PURR § 36.058(c)(1).
is ld § 36.058(cx2).
's Direct Testimony of Donald W: Peters, EGS[ Ex. 62 at DWP-5 at 9.
PUC Docket No. 34800 ~ Order on Remand Page 7 of 12
SOAH Docket No. 473-08-0334
CGS tariff: Entergy proposed a CGS tariff as part of its original rate-change filing. In
the NUS, the signatories agreed to address the CGS tariff in the 2009 rate case and
withdrew the proposed tariff: The ALJs found that Entergy did not violate PURR
§ 39.452(b) when it withdrew its proposed CGS tariff and they imply that the lack of a
CGS tariff is inconsequential because Entergy "will not be transitioning to competition as
part ofthis proceeding.s19
The Commission disagrees with the ALJs and concludes that the withdrawal of
the CGS tariff violates PURA § 39.452: The CGS taziff is not an optional feature of
Entergy's chapter 36 rate filing grid the withdrawal prevents the Commission from
meeting its statutory obligation. Further, the requirement to file a CGS tariff is not
conditioned upon Entergy transitioning to competition.
E. Municipal Franchise Fee Rider
,PURR § 39.456 allows franchise-fee riders for incremental franchise fees paid to
a municipality only upon the adoption of a new franchise agreement. The NUS proposes
to collect franchise fees cuaently collected in a rider and prospective franchise fees
through a municipal franchise-fee rider. Reasoning that Commission Staff also proposed
the recovery of municipal franchise fees in the same manner, the ALJs approved this
rider for current and prospective franchise fees. The Commission rejects this fmding, and
determines that current franchise fees aze not incremerua! and should be recovered
through base rates. Further, there is no present need to recover prospective franchise
fees, as they are properly recovered through a future rider application. Therefore, the
franchise fee rider proposed in the NUS violates PURR § 39.456.
F. Energy Efficiency Cost Recovery Factor
The NUS includes anenergy-efficiency cost-recovery-factor rider (EECRF) to
recover energy-efficiency costs in accordance with PURA. The rates in the EECRF
would become effective with base rates resulting from this proceeding and are based on
projected energy-efficiency costs for the 2008 calendaz yeaz. The NUS also calls for
19 PFD at 7.
PUC Docket No. 34800 Order an Remand Page 8 of 12
SOAH Docket No. 473-08-0334
recovering uncollected expenses associated with revenues billed under the EEC1tF by
increasing base rates. The ALJs held that the proposed EECRF is in accordance with
P.U.C. SussT. R..25.181, and that there were no other differences among the parties
related to the EECRF. The Commission finds that recovering uncollected expenses
associated with revenues billed under the EECRF by increasing base rates is in conflict
with P.U.C. SuesT. R. 25.181(fx2), which prohibits setting base rates to recover energy-
efficiency costs. Such recovery also disregards P.U.C. SUBST. R 25.181(f)(4), which
provides for an annual adjustment of the EECRF to "minimize any over or under
collectioti of energy efficiency wst resulting from the use of the EECRF."20
G. Public Interest
When considering whether a NUS is in the public interest, the Commission is
required to consider the interest of those customers represented by parties opposed to the
stipulation.Zt There are no detailed findings of fact on this point and the Commission
therefore finds that the NUS fails the public-interest criterion identified in City of El
Paso. A prominent example is provided by the revenue-requirement allocations assigned
to various customer classes under the NUS. These allocations appeaz to violate, without
sufficient justification, the general principle that rates should reflect cost causation. They
also appear to have resulted from an attempt by Entergy to entice certain customer groups
to join in supporting the NUS by disadvantaging other customer groups that were
excluded From negotiations at a critical time preceding the announcement of the NUS.
Specifically, Commission Staff submitted calculations showing that Entergy's
originally proposed revenue-requirement allocation was considerably more favorable to
the Lazge Industrial Power Service (LIPS) class than was the allocation under the NUS,
and that EGSI's originally proposed allocation was less favorable to the residential class
than was the NUS allocation.ZZ Importantly, whereas Entergy's original proposal
established customer-class revenue requirements {and hence rates) based on a 2007 cost-
m P.U.C. Suassr. R. 25.181(f)(4).
Z~ 883 S.W.2d at 183.
~ Staff Ex. 14B, Attachment A, "Attachment RVM 2-I-Revised" at 6.
PUC Docket No. 34800 Order an Remand Page 9 of 12
SOAH Docket No. 473-08-0334
of-service study, the NUS set such revenue requirements lazgely on the basis of Entergy's
current class allocations, which aze based on a 1995 cost-of-service study. In light of
these considerations, this shift in class revenue assignments supports the view that the
NUS was structured so as to appeal to representatives of small-load customers at the
expense of lazge industrial customers. The process underlying the NUS and its resulting
revenue-requirement allocations are incompatible with the even handedness required to
serve the public interest. Tn particular, the interests of non-signing parties appear to have
been given insufficient regazd. Accordingly, the Commission is unable to conclude that
the NUS is in the public interest, including the interests of those opposed to the
stipulation, as required by City of El Paso.
III. Commission Poficy.and Precedent
The Commission finds agreements embedded in the NUS that improperly set
Commission policy or conflict with Commission precedent. These matters are discussed
with more specificity below. Generally, such matters were.posited in the NUS so that the
Commission did not have the discretion to address them on an individual basis as these
issues were part of the overall NUS. Commission policy should not be established and
Commission precedent should not be disregarded in such a mammer.
A. Financial Based Incentives
The PFD is silent on the issue of financial-based incentive compensation. The
Commission has a well established policy of disallowing recovery of such compensation
from rate payers.24 Commission Staff identified $34,445,100 in incentive-compensation
vests that they azgued should be disallowed. Without findings of fact indicating that
financial-based incentive compensation was not included in the NUS revenue
requirement, the Commission finds that it could be interpreted as the Commission's tacit
'' Staff Ex. 14A, Revised Direct Testimony of Robert V. Manning-NUS Phase at 3 and 5.
Z~ See Application oJAEP Texas Central Company jor Authority to Change Rates, PUC Docket
No. 28840, Final lhder at 35 (Aug. I5, 2005); Application ojAEP Texas Central Comparry for Authortry to
Change Rares, PUC Docket No. 33309, Order on Rehearing at 12 (Mar. 4, 2008).
PUC Docket No. 34800 Order on Remand Page t0 of 12
SOAH Docket No. 473-OS-0334
approval of such casts in conflict with the Commission's long-standing policy of
disallowing them.
B. Jurisdictional Allocation
As part of its originally filed case in this docket, Entergy proposed that
transmission costs be allocated using a sites-based method rather than based on load
shaze as it has historically done. The ALJs found that Entergy's sites-based proposal for
transmission cost allocation was reasonable given Entergy's unique situation of moving
towazd retail operi access, including certifying a qualified power region, and that the
sites-based allocation method has been implemented. by the other Entergy operating
companies.ZS TIEC and the State of Texas claim that the silos-based allocation results in
a shift of $17.2 million in revenue requirement to Texas retail customers.26
A change in the way EGSI's transmission costs aze allocated is a policy decision
that should be-made by the Commission upon reasoned consideration of the facts and
circumstances that necessitate such a change. Because the NUS sets a "black box"
revenue requirement for Texas, the jurisdictional allocation of Entergy's transmission
costs is irrelevant to the agreed-upon revenue requirement. In addition, Entergy's
jurisdictional separation occurred on December 31; 2007, outside of the test yeaz for this
docket. There has been no showing why this single aspect of the jurisdictional separation
should be decided at -this. time. Without detailed analysis and findings of fact, the
Commission finds it is inappropriate.to. change Entergy's transmission cost allocation
method as part of this case.
C. Creation of a Regulatory Asset for Carreot O&M expenses
The Commission finds that the NUS provision creating a regulatory asset, through
which Entergy would defer annually $5 million of transmission and distribution operating
and maintenance (O&M) expense until EGSI's 2009 rate case,'is inconsistent with sound
public policy. The Commission acknowledges that there maybe facts and circumstances
ss PFD az 10.
zs TlEC and State's Initial Brief on the Merits at 21 (July 25, 2008).
PUC Docket No. 34800 Order on Remand Page l l of 12
SOAH Docket No. 473-OS-0334
that would justify such an action. The NUS signatories have not, however, offered a
valid reason for collecting current O&M expenses via a regulatory asset, the return on
which would be captured from future ratepayers. Creating such a temporal shift in cost
responsibility simply to create a NUS is not an .acceptable reason for violating the
principle of reflecting cost causation in rates. A closely related objection is that allowing
the recovery of current vests from future ratepayers is inequitable. Accordingly, the
Commission finds this provision to be contrary to the public interest.
D. Use of Roagh Production Cost_Egnalization Credits
The NUS uses rough production cost equalization credits (RPCEs) to offset base-
rate increases over atwo-yeaz period. However, the Commission has never explicitly
addressed the proper treatment of 1tPCEs, the primary nexus of which aze fuel costs
within the Entergy system. While the 2007 12PCEs were applied to Entergy's fuel
balance, this occurred as a result of a settled case in which no Commission precedent was
set concerning this question.27_ It is cleaz that the treatment of the RPCEs in the case was
primarily to advantage certain customer classes that signed on to the NUS to the
disadvantage of others that did not. The Commission concludes that this NUS is not the
appropriate procedural vehicle to set policy regarding the proper treatment of 1tPCEs.
E. Additional Rate Case
The NUS provides that Entergy Texas, Inc. will file another rate case by the end
of 2009. For Entetgy Texas to have a successor rate case so soon will oblige parties to
this process to incur additional expense and expend additional resources in a compressed
time frame without adequate justification.. Further, it would unnecessarily impose
additional rate-case expenses upon rate payers.
nApplication of Entergy culj States, lnc. to'JmpJement an Interim Fue! Refund, Docket
No. 34953 (Feb: 28, 2008). -.
PUC Docket No. 34800
SOAR Docket No. 473.08-0334
Order on Remand
IV. Conclusion
Page 12 0[ 12
For the reasons discussed in this Order,-the Commission concludes that the NUS
does not comport with the standards applicable to an NUS and cannot, therefore be
approved. Accordingly, the Commission rejects the PFD and remands this matter to the
State Office of Administrative Hearings far a hearing on Entergy's original filing. As
detailed above, the Commission requests that the ALJs set this matter for hearing, with
the objective of returning a PFD for final action by the Commission before Mazch 2,
2009.
SIGNED AT AUSTIIV, TEXAS the / ~ day of November 20Q 8
PUBLIC UTILTTY COMbIISSION OF TEXAS
B T. SMITHERMAN, CHAIRMAN
~~
~yL~~= /'
COMMISSIONER
TH W. ANDERSON SSIONER
Q:/CADM/ORDERS/INTERIM/34000/34800Remand.docx
EXHIBIT "C"
WILL BE DISCUSSED
AT THE COUNCIL MEETING