PSC Hears Entergy Rate Case, Leans Toward $43 Million Cut In Request

The state Public Service Commission on Tuesday heard hours of testimony offering near-unanimous support for a proposed deal to lower Entergy Arkansas Inc.’s pending rate request by some $43 million.

One by one, a long list of witnesses testified and entered thousands of pages of documents and exhibits into the public docket to support the proposed deal first announced in April 2015.

N.M. Norton, who served as legal counsel for Entergy Arkansas, initiated the proceedings by telling Commissioners Ted Thomas, Elana Wills and Lamar Davis that the proposed settlement agreement was a “significant achievement” that represented the cooperation of various parties with competing aims.”

“That is a remarkable thing, and a lot of work went into it,” said Norton, a partner at Little Rock law firm Wright Lindsey Jennings. “The resulting revenue requirement embodies a moderate rate increase as our settlement testimony points out.”

In closing his argument for the settlement, Norton appealed to the Commission to accept the negotiated deal and allow Entergy to implement the new rate hike. He said the rate design and cost allocation in the deal is a product mitigated by the collective wisdom of the parties “that is not slavish to the strictest application of any formula or mandated by any statutes.”

“This type of results (is) consistent with previous EAI rate cases of recent memory and with other rate cases that have been settled before this commission – the sincere good faith that the parties demonstrated in negotiating and reaching an outcome acceptable to all the settling parties,” he said. “The result is practical and the impact of it are just and reasonable and it positions this company to do what it needs to do to provide safe and reliable service at a reasonable cost to its customers for the next several years.”

Originally, Entergy Arkansas’s rate request filing in April 2015 would have raised a typical monthly bill of a residential customer using 1,000 kilowatts per hour (kWh) by nearly $13, or 45 cents a day. At the time, Entergy Arkansas officials said the rate adjustment would allow the utility giant to cover expenses to upgrade the power grid and purchase the 495-megawatt power plant Union Power Station near El Dorado for $948 million in December 2014.

According to testimony from Norton and a long list of intervenors in the docket, the joint settlement deal would now increase a monthly bill for a typical residential customer using 1,000 kWhs of electricity by 8.3%, or about 27 cents a day. It would also allow Entergy Arkansas to recoup $225.1 million of its $1.28 billion non-fuel revenue requirement, nearly $43.3 million or 16% less than the original rate request.

Beside Entergy Arkansas’ own argument for a quick settlement, several of the intervenors unanimously echoed Norton’s opening statements and requested that the Commission approved the compromise deal. Little Rock Attorney Jordon Tinsley, speaking on behalf of the Arkansas Electric Energy Consumers (AEEC), said the rate case was important to large industrial energy users across the state seeking to grow the state’s manufacturing base. He said the compromise deal involved a lot of give and take between Entergy Arkansas and the other parties.

“This certainly was the product of a lot of hard work and elbow grease over the last several months,” he said.

Tinsley also said AEEC intervened in the rate case to make sure the costs of Entergy’s rate filing were allocated across all classes of customers, from residential and small business owners to large manufacturing companies. He said AEEC also requested that Entergy reduce the size of the original rate request in April, and put in place a formula rate plan that would allow the Commission and other parties to properly regulate the state largest utility in future rate case filings.

“I believe that this settlement proposal addresses all three of AEEC priorities in a manner in which (we) are comfortable,” he said.

Representatives from the Arkansas Attorney General’s office, the PSC staff, and the Hospitals and Higher Education Group also spoke in support of the proposed settlement deal.

Still, there was lone opposition in the public comment period, where three Hot Spring Village officials told the Commission that any agreement on the utility’s rate request should include a promise from Entergy Arkansas to improve electric service in the gated, retirement community straddling Saline and Garland counties.

Harvey Shelton, president of the Hot Springs Village board of directors, told the Commission he had several concerns about Entergy’s proposed rate increase. Shelton openly complained about the frequency of power outages and other service reliability issues experienced by the nearly 6,000 residents in the gated community served by Entergy.

“During the past few years, I don’t believe Entergy meets any customary and reasonable standards for reliable service,” Shelton said. “These customers have endured frequent outages lasting from two hours to several days.”

Michael Dollar, executive director of the Hot Springs Village Chamber of Commerce, and Bob Hebert, a Garland County business owner and resident of the retirement community, also told the Commission that service issues in the area needed to be addressed before a rate hike is considered. Dollar told the commission that the local chamber represented more than 350 businesses and 22,000 residents in the retirement community.

“Reliability requirements are heightened when introducing the bigger picture plans for economic development and attracting commerce,” he said. “The slightest hint of infrastructure instability can devastate revitalization for this promising region of the Natural State for a very long time.”

Dollar and Hebert applauded Entergy’s recent efforts to address electric outages and improve reliability issues in the Hot Springs Village corridor, but called on the utility to make additional investments into upgrading the electric transmission system in the region.

Following the public comment period, Hugh McDonald and Rick Riley, Entergy’s outgoing and incoming chief executives, huddled with the Hot Spring Village officials to hear their concerns. Riley told the group that the state’s largest utility is already working on upgrades to improve the distribution and transmission systems in the gated community.

Later in testimony before the regulatory panel, McDonald told Commissioner Wills the company will address the reliability concerns for Entergy customers in the village.

“It certainly pains me to hear what they had to say here today. It is unacceptable,” he said. “It is evident that our Southwest region is not where it needs to be. We need to fix the problem, but we are not there yet.”

According to Entergy officials, the company is investing more than $850,000 on four improvement projects in the community that began in September. Riley, who is expected to take over as Entergy CEO later this year, promised to meet later this year with Hot Springs Village residents and make additional investments in the community in the future.

Meanwhile, PSC Executive Director John Bethel said the Commission will render a decision on the proposed deal by late February as mandated by regulatory rules. State utility regulators will also begin conducting public comment hearings on the Entergy rate case in El Dorado and Batesville on Jan. 26 and Jan. 28, respectively.

Entergy Arkansas officials have said if the proposed settlement deal is approved, the new base rates would be reflected on customer bills beginning in April 2016. The increase is expected to be further offset by decreases to the Energy Cost Recovery (ECR) rider and the Production Cost Allocation rider (PCA).

Due to declining fuel prices, including historically low natural gas costs, Entergy is expected to file for a decrease in its ECR rider effective April 2016, about at the same time that base rates will increase. McDonald told the PSC commissioners that he expects the riders to have a “significant impact” on the proposed rate hike before the Commission, although he would not confirm if they would fully offset the 8.3% increase.

Link here to view the Entergy Arkansas rate case docket 15-105-U.