louisiana rate case faqs

FREQUENTLY ASKED QUESTIONS

Entergy Louisiana, LLC and Entergy Gulf States Louisiana, L.L.C.

Rate Case 2013

How are Entergy’s rates set?

The rates of Entergy Louisiana, LLC and Entergy Gulf States Louisiana, L.L.C. are approved by the Louisiana Public Service Commission.

Therefore, we go through a detailed public process when requesting a change in the cost we charge for electric service to Louisiana

consumers.

As a regulated utility, we must go through a formal process with the LPSC any time we propose a change in our rates. We are required to

demonstrate that our expenses are reasonable and necessary to ensure safe and reliable electric service to our customers, and we also

must establish that we are planning appropriately for the future and that the rate request otherwise is in the public interest. The LPSC’s

role is to ensure fair and reasonable rates for customers as well as fair and reasonable rates of return for the investment made by utilities

in the infrastructure needed to provide electric service. The LPSC reviews all information and takes comments from the public before

making a decision regarding rate changes.

In general, when the companies file to set new rates, such as with the current rate cases, the following steps are followed:

Calculate revenues collected from current rates.

Calculate the additional revenues that are needed.

Calculate the difference of what is in current rates and what is needed to be collected in rates to determine the rate increase.

Allocate, or distribute, the needed increase among the different customer classes based on the costs used to serve those

different rate classes.

How have we operated in the past and why are we filing rate cases?

Before these rate cases, Entergy Louisiana and Entergy Gulf States Louisiana have adjusted rates through a Formula Rate Plan, otherwise

known as an FRP. Rates were adjusted every September (subject to refund) and then they were adjusted a second time in the year to

reflect any changes that the LPSC may have ordered. An FRP is a ratemaking method that allows utilities to adjust base rates annually

outside a general rate case. FRPs provide an opportunity for the timely recovery of costs, as well as timely decreases in rates when costs

decline. FRPs have a target midpoint return on equity (ROE) and include a bandwidth of various allowed ROE levels (+/-) that are

designed to protect against either over- or underearning.

Entergy Louisiana and Entergy Gulf States Louisiana FRPs have expired. The LPSC ordered the companies to file full rate cases in early

2013 in order to set new rates. These full rate cases are different from the previous FRP filings for various reasons. For example, the

following requests are included in the rate case filings: (1) implementation of the rate mechanisms necessary to accommodate the

restructured transmission function, the final form of which has not been determined (MISO & ITC); (2) establishment of an ROE, which will

affect the level of revenue that is allowed to be collected from customers through rates set in this proceeding; and (3) establish future

FRPs with initial three-year terms.

What is a rate case?

A rate case is one of the formal processes a utility engages in with the Louisiana Public Service Commission to evaluate and make a change

in electric rates. The role of the LPSC is to ensure fair and reasonable rates for customers as well as to establish a reasonable rate of return

for utilities to compensate them for the investment in electric infrastructure needed to serve customers. During the rate case, we are

required to demonstrate that our expenses are reasonable and necessary to ensure reliable electric service for our customers, and we also

must demonstrate that we are planning appropriately for the future. The LPSC thoroughly reviews our request and holds hearings to allow

customer groups and other stakeholders to comment, then makes a decision. This is quite different from most other companies that are

not regulated – such as local grocery stores or gas stations – and can change prices any time they determine to be appropriate.

Why are Entergy Louisiana and Entergy Gulf States Louisiana filing rate cases?

Since 2004, the companies’ base rates have, under an order of the Louisiana Public Service Commission, been set using a Formula Rate

Plan approved by the LPSC. The companies’ FRPs expired in 2012, and the LPSC has required that each company file a rate case.

RATE CASE FREQUENTLY ASKED QUESTIONS

RATE CASE FREQUENTLY ASKED QUESTIONS 2

Why are Entergy Louisiana and Entergy Gulf States Louisiana proposing rate increases?

Ensuring we can affordably provide safe, clean, reliable power to customers into the future requires changes to the base rate structure

today.

The companies have made capital investments in the electrical system to cut fuel costs, improve reliability and meet statewide power

demand with clean, efficient and affordable electricity. These investments are reflected in the rate cases.

Part of the rate increase also will pay for repairs and restoration of the electrical infrastructure in case of a future emergency.

Most importantly, the demands being placed on the electric grid today are vastly different and greater than those for which it was

designed and built. The next two decades will require significant investments in the U.S. electric infrastructure. To ensure that we are able

to maintain healthy companies that can continue to affordably provide safe, clean, reliable power to our customers into the future,

Entergy is pursuing smart solutions today: joining the Midwest Independent Transmission System Operator, Inc. (MISO), and the

proposed spin-off and merger of Entergy’s transmission business with ITC Holdings Corp. Making these critical changes will require some

adjustments to the way that Entergy Louisiana and Entergy Gulf States Louisiana recover costs.

Why are two “scenarios” proposed in the rate cases?

Entergy Louisiana and Entergy Gulf States Louisiana each have filed with the LPSC two possible scenarios for rate increases. The first

scenario plans for Entergy to join MISO and spin off then merge its transmission business with ITC Holdings. The second scenario assumes

Entergy only joins MISO. The impact to base rates and customer bills are different depending on the scenario. The two scenarios are

needed because the LPSC has not yet determined whether to approve the transaction with ITC Holdings, and it is uncertain whether this

approval will be received before rates change through the rate cases.

Is the fuel-adjustment charge part of the rate cases?

No. The rate cases affect base rates only. A customer’s electric bill is made up of two primary components: the base rate and the fuel-

adjustment charge. The base rate covers the company’s cost to operate and maintain the electric system and includes customer service

functions, distribution of electricity and reliability improvements by way of capital investments. It also includes the opportunity for the

company to earn a fair rate of return for investors. The fuel component, which increases or decreases monthly, covers the company’s costs

for fuel – such as natural gas, coal or uranium – used to generate electricity at our power plants, as well as the cost of any power we

purchase from third-party power producers used to serve our customers. The fuel-adjustment charge is passed on directly to customers

dollar-for-dollar without any profit to Entergy. The fuel-adjustment charge is not part of the rate case.

What are Entergy Louisiana and Entergy Gulf States Louisiana asking for in these rate cases?

We are asking the LPSC to implement certain rate mechanisms necessary to accommodate the restructuring of Entergy’s transmission

function, the final form of which has not been determined. There are two different restructuring scenarios the LPSC will consider: one

assumes Entergy will join MISO and that Entergy will spin off then merge its transmission business with ITC Holdings Corp.; the second

assumes Entergy only will join MISO.

The rate cases also ask the LPSC to establish a fair return on equity, otherwise known as ROE, which will affect the level of revenue that is

allowed to be collected from customers through rates set in this proceeding. The ROE is the return that utilities are permitted to earn on

the investment they make in electric infrastructure needed to serve customers.

The rate cases also ask that the LPSC establish the rates necessary to permit the companies to recover their out-of-pocket expenses for

items such as operation and maintenance expense incurred to provide service. Examples of such expenses are the cost of trimming trees

and reading meters.


Finally, the rate cases ask that the LPSC establish a future Formula Rate Plan with an initial three-year term. FRPs are ratemaking

methods that allow utilities to adjust base rates annually outside a general rate case. It provides an opportunity for the timely recovery of

costs, as well as timely decreases in rates when costs decline.

Didn’t my rates just change in January? Was that part of these rate cases?

The LPSC approved two transactions and resulting FRP adjustments that were reflected in net Entergy Louisiana and Entergy Gulf States

Louisiana retail rate increases beginning with January 2013 bills. January and February 2013 bills also reflected a temporary increase in

the fuel-adjustment charge, due to the cost of replacement power for the Waterford 3 power plant while it was in a planned outage for

refueling and steam generator replacement.

These bill increases, including the FRP adjustments that resulted in the January 2013 rate changes, were not part of the rate case filings

that Entergy Louisiana and Entergy Gulf States Louisiana made with the LPSC on Feb. 15, 2013. Rate changes associated with the current

rate cases are not expected until February 2014.

How will the rate cases impact my bill?

Entergy Louisiana and Entergy Gulf States Louisiana each have filed with the LPSC two possible scenarios for rate increases. The first

scenario plans for Entergy to join MISO and spin off then merge its transmission business with ITC Holdings. The second scenario assumes

Entergy only joins MISO. The impact to base rates and customer bills are different depending on the scenario.

SCENARIO 1: MISO and ITC

Entergy Louisiana, LLC

Residential Customer

(using 1,000 kWh/month)

$7.56 increase/month 7.7% increase/month

Small General Service Customer



Large General Service Customer


$1,918.13 increase/month 5.1% increase/month

Entergy Gulf States Louisiana, L.L.C.






($13.27) decrease/month (2.5%) decrease/month




SCENARIO 2: MISO Only

Entergy Louisiana, LLC









$2,028.25 increase/month 5.4% increase/month


Entergy Gulf States Louisiana, L.L.C.










These tables show the average impact proposed for each customer class. The specific increase or

decrease to individual customers will vary depending on the rates they pay and other factors.

Why does Entergy need to make these business model changes, and how will they benefit customers?

Louisiana’s population and economic opportunities are growing year by year and are driven by dependable, affordable electric power.

Electricity powers the necessities and conveniences of our customers’ lives – everything from televisions to smart phones, air

conditioners to cooktops, grocery stores to manufacturing plants. But as demand for power grows, weather, maintenance schedules,

generating costs and other factors create a complex daily interplay between electricity supply and demand. To best manage that supply

and demand, Entergy has received approval from the LPSC to join the Midwest Independent Transmission System Operator, Inc. Better

known as MISO, the regional transmission organization has a footprint from Canada to the Gulf of Mexico, and will drive efficiency and

reliability and provide a projected $430 million to $575 million in savings for Louisiana customers.

To build on MISO membership and provide the benefits of expertise, financial strength and enhanced reliability, Entergy also is seeking

to spin off then merge its transmission business with ITC Holdings Corp., a leading independent, transmission-only company. Upgrading

and modernizing the U.S. electric grid will require significant capital expenditures – industry infrastructure investment, driven by

replacement of existing assets, environmental regulations and other compliance requirements, that could range from $1.5 trillion to $2

trillion between 2012 and 2030. The capital investments required over the next decade will drive costs higher for customers, but Entergy

is pursuing the ITC transaction to create a separate, independent transmission company that will deliver focused expertise, enhance

reliability and enable greater financial strength and flexibility to make the necessary investments into the future as affordably as

possible.

I thought joining MISO and spinning off then merging Entergy’s transmission business with ITC Holdings Corp. would save me

money. Why is Entergy asking for the cost of my electricity to increase?

While joining MISO and spinning off the transmission assets will save customers money and help realize efficiencies, there also are costs

associated with pursuing these activities. While these costs are part of the rate cases, they are expected to be offset, primarily in the form

of reduced energy costs, which customers will see through lower fuel-adjustment charges—a change that occurs outside of the rate cases.

It also is important to understand that other rate-change drivers – including depreciation, plant transfers, limited storm reserves and other

costs – make up 80 percent of the requested rate increases. Restructuring of the transmission business is only a portion – about 20 percent.

Further, a significant portion of these increases represent a difference in the transmission revenue requirement associated with moving to

what is known as a “forward test year.” A forward test year allows the utility to set rates based upon its expected costs. In the companies’

cases, this amount would be trued up to actual costs, with refunds and with interest, made to customers if there were an over-collection.

While the moving to a forward test year initially increases rates, over time the companies will recover only their actual investment costs

because customers will complete compensating the utility for this investment one year sooner than under the historic test year approach.

The net cost, however, is the same.

For transmission investment, the forward test year is very important. The transmission business function requires a larger need for cash to

invest than it generates through the depreciation expense received to recover the cost of prior investment. In other words, the pace and


magnitude of new transmission investment is exceeding the time it takes for the companies to recover the cost of past transmission

investment, and this places a financial strain on the companies given the high level of transmission investment needed going forward.

How do our rates compare with other states?

During 2012, average electricity costs for Louisiana residential customers were 8.35 cents per kilowatt-hour, well below the national

average of 11.91 cents. As a result, our customers averaged about $3.50 a day to power their homes.

What is the timing of the rate cases?

If LPSC does not make a decision within 12 months of the rate case filings (February 2014), then the Louisiana State Constitution allows

Entergy Louisiana and Entergy Gulf States Louisiana to implement rates subject to any refund that are ultimately decided by the LPSC.

Any refunds will be given back to customers at the time the decision is made.

Do the current rate cases include Hurricane Isaac-related costs?

No. Entergy Louisiana and Entergy Gulf States Louisiana will file separately for recovery of Hurricane Isaac-related costs.

Will I still have to pay hurricane charges for hurricanes Katrina/Rita and Gustav/Ike as part of these rate case proposals?

As approved by the LPSC, the line items associated with hurricanes Katrina and Rita (a credit labeled as “2005 Hurricane Offset Charge” and

a charge labeled as “LURC 2005 Hurricane Charge”) appeared on Entergy Louisiana customers’ bills beginning with the first billing cycle of

August 2008 and appeared on Entergy Gulf States Louisiana customers’ bills beginning with the first billing cycle of September 2008. These

line items will remain on customers’ bills until August 2018.

The line items associated with hurricanes Gustav and Ike (a credit labeled as “2008 Hurricane Offset Charge” and a charge labeled as “LURC

2008 Hurricane Charge”) appeared on both Entergy Louisiana and Entergy Gulf States Louisiana customers’ bills beginning with the first

billing cycle of August 2010 and will remain on customers’ bills until August 2022.

In the 36-month period between 2005 and 2008, Entergy’s Louisiana utilities incurred more than $1.6 billion in hurricane damage to the

electric grid serving over 1 million customers throughout Louisiana. Due to the severity of the damage to the electrical generation and

transmission systems and the importance of maintaining a reliable and reasonably priced source of electricity for the state's economic

recovery, the Louisiana Legislature was prompted to assist electric utilities by creating a new financing structure to provide them with low-

cost capital. In 2007, the Louisiana Legislature passed Act 55, known as the Restoration Law, which authorized the formation of Louisiana

Utilities Restoration Corporation (LURC) for the purpose of making capital contributions and financing through the issuance of "system-

restoration bonds." The LPSC was responsible for determining the amount of the storm-damage costs and the size of any incremental

storm-damage reserves that could be financed under the Restoration Law. The commissioners’ approval of the subsequent financing orders

was unanimous.

Financing pursuant to Act 55 of the 2007 Louisiana legislative session is being used to pay for hurricanes Katrina, Rita, Gustav and Ike

system-restoration costs and replenish the storm reserves used to fund future storm-restoration costs. These costs were deemed prudent

and approved by the LPSC. Act 55 financing is providing substantial savings to customers over the life of the prime-rated bonds.

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