Entergy offered a $588M settlement to end allegations at Grand Gulf. Should Louisiana agree? By Sam Karlin
If the regulators from the other jurisdictions Entergy serves – including the public services commissions for Louisiana and Arkansas, plus the New Orleans City Council – also agree to the settlement, Entergy could pay north of half a billion dollars all told to settle a litany of allegations. Some of that money could flow back to customers who paid for electricity during the time the company allegedly overcharged them through a combination of arcane tax maneuvers, incentive pay for executives and poor operation of the power plant, among other things.
The proposed settlement, in which Entergy doesn't admit wrongdoing, would send $95 million to the Louisiana Public Service Commission, which regulates Entergy Louisiana, and $116 million to the City Council, which regulates Entergy New Orleans, according to documents filed with the Federal Energy Regulatory Commission, or FERC. According to the settlement, $142 million would go to Arkansas.
The settlement document said Mississippi gets $235 million, but Entergy announced the state would get $300 million in benefits, with the remainder coming from “lower bills than they otherwise would see” in coming years.
If Louisiana regulators accepted the deal, it’s unclear how much of that would flow to customers, or whether it would even make a dent in customers’ bills, especially with rising natural gas prices driving up the cost of electricity in Louisiana.
And it’s possible customers could get more money – and other concessions from Entergy – if the regulators plod ahead with their ongoing battles at FERC over the plant. Regulators have already won early recommendations that say Entergy should pay back more than the settlement would require, but FERC hasn’t yet made a decision on many of the rulings. FERC is the ultimate authority in settling disputes over plants like Grand Gulf, which is a wholesale power provider, selling its power to multiple states.
The Louisiana Public Service Commission, which is leading some of the battles at FERC, said it was aware of the proposed settlement but declined further comment.
Public Service Commissioner Craig Greene said in a statement that the commission is vetting the offer and will take it up at a meeting later this month, saying comments on the specifics would be “premature.”
“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.
Greene also quoted former President John F. Kennedy, who once said: “We cannot negotiate with people who say what’s mine is mine and what’s yours is negotiable.” Greene said Entergy is not in a position to take that stance with its regulators.
“And while financial settlements could benefit customers in the short term, the reason we take on these legal battles at FERC is to ensure that the practices of utilities we regulate are aligned with what is best for their customers long term,” he said. “I personally want to ensure any settlement, or decision not to settle, focuses on that principle.”
Entergy didn’t respond to questions. But the company continues to deny wrongdoing, saying in a statement announcing the Mississippi deal that it has “long maintained that the disputed positions regarding the taxing, financing, accounting and operating of Grand Gulf before FERC are proper, well-reasoned and in the best interest of its customers and the company. Entergy also believes Grand Gulf has provided consistent value for its customers through its operations over the years.”
The company said the uncertainty and costs related to the FERC disputes led it to seek a settlement.
Commissioner Foster Campbell, a frequent Entergy critic, said he hadn’t looked closely at the proposal, but said he’s skeptical of any deal advanced by Entergy.
“I don’t have a lot of faith in their generosity,” he said.
City Councilmember JP Morrell, in a recent statement, called the proposal a “ridiculous attempt by Entergy to sandbag the City Council and mislead the other regulatory agencies in Louisiana and Arkansas into a bad settlement,
“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,” he said.
Morrell’s chief of staff Keith Lampkin said all refunds won from the litigation would go to ratepayers.
The Mississippi Public Service Commission called the settlement the largest in its history and said it’ll give $80 back to each ratepayer. The state’s PSC is also using much of the money to offset rising natural gas prices.
FERC is handling the dispute because Grand Gulf, which is mostly owned by an Entergy subsidiary, operates as a wholesale power supplier. That means it sells its electricity to Entergy subsidiaries in Louisiana, Mississippi and Arkansas, giving the federal commission jurisdiction over its operations.
Regulators first took to FERC to complain that a series of arcane tax and accounting measures Entergy used meant ratepayers were overcharged. But as the litigation moved forward, it morphed into a larger battle about whether the billions of dollars Entergy sunk into the power plant hadn’t produced the promised results.
Until Mississippi announced it was accepting the settlement, Entergy customers across the three states were looking at potential refunds in excess of $1 billion if FERC had sided with the regulators. In one of the cases, regulators had already won a favorable recommendation from a judge, who advised FERC to make Entergy pay back $422 million plus interest to customers to settle one of the allegations. That would likely bring the tab for that case alone to over $600 million, according to an SEC filing Entergy made late last year.
It’s unclear exactly how much Louisiana might stand to gain if regulators choose to continue the fight at FERC. But the best estimates available in FERC filings suggest Entergy Louisiana and New Orleans customers would get roughly 14% and 17%, respectively, of the total amount refunded.
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.
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.
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