Petition for Writ of Certiorari — Louisiana Public Service Commission, Petitioner v. Federal Energy Regulatory Commission

Supreme Court briefJan 27, 2022

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App. 1

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

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Argued December 10, 2020

Decided August 20, 2021

No. 20-1024

LOUISIANA PUBLIC SERVICE COMMISSION,

PETITIONER

FEDERAL ENERGY REGULATORY COMMISSION,

RESPONDENT

ENTERGY SERVICES, LLC AND

ARKANSAS PUBLIC SERVICE COMMISSION,

INTERVENORS

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On Petition for Review of Orders of the

Federal Energy Regulatory Commission

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Michael R. Fontham argued the cause for petitioner. With him on the briefs were Dana M. Shelton

and Justin A. Swaim.

Lona T. Perry, Deputy Solicitor, Federal Energy

Regulatory Commission, argued the cause for respondent. With her on the brief were David L. Morenoff,

Acting General Counsel, and Robert H. Solomon, Solicitor.

Glen Ortman, Dennis Lane, Gregory W. Camet,

Mark Strain, and Marnie A. McCormick were on the

App. 2

brief for intervenors Entergy Services, LLC and Arkansas Public Service Commission in support of respondent. Jennifer S. Amerkhail and Marie Denyse

Zosa entered appearances.

Before: HENDERSON, PILLARD, and KATSAS, Circuit

Judges.

Opinion of the Court filed by Circuit Judge

KATSAS.

KATSAS, Circuit Judge: The Federal Energy Regulatory Commission required Entergy Corporation’s

five operating companies to roughly equalize their

electricity production costs. In determining which costs

must be equalized, FERC excluded purchased-power

costs that a Louisiana affiliate incurred in 2005 and

amortized in 2008 and 2009. The agency reasoned that

the governing tariff excluded the disputed amortization expenses. The Louisiana Public Service Commission (LPSC) challenges this exclusion.

Entergy, a public-utility holding company, owns

five operating companies that sell electricity in four

states, including Louisiana. The companies have been

governed by a system agreement requiring them to act

as a “single economic unit.” LPSC v. FERC, 184 F.3d

892, 894 (D.C. Cir. 1999) (LPSC I). The agreement provided for the companies to operate power facilities

jointly, and it required a “rough equalization” of their

App. 3

production costs. LPSC v. FERC, 522 F.3d 378, 383–84

(D.C. Cir. 2008) (LPSC II) (cleaned up).1

FERC has long reviewed the operating companies’

allocation of production costs, which affect electricity

rates. See LPSC II, 522 F.3d at 389–90. In 2005, FERC

determined that the production costs were not roughly

equal and imposed a “bandwidth remedy” to achieve

rough equalization after the fact: Whenever the yearly

production costs of an individual operating company

deviated from the average by more than 11%, companies with lower costs were required to pay companies

with higher costs as necessary to bring all five companies within that range. LPSC, 111 FERC ¶ 61,311,

PP 28, 145 (2005). Although FERC initially made the

bandwidth remedy effective in 2006, we set aside that

effective date in 2008. See LPSC II, 522 F.3d at 400. In

2011, on remand from this Court, FERC extended the

bandwidth remedy to production costs incurred on or

after June 1, 2005. See LPSC, 137 FERC ¶ 61,047, P 34

(2011).

In the meantime, Entergy filed a tariff establishing a formula to calculate production costs subject to

the bandwidth remedy, which FERC largely accepted.

LPSC, 117 FERC ¶ 61,203, P 75 (2006). The formula

incorporated cost data from the operating companies’

annual Form 1 reports, which classify assets and expenses according to FERC’s Uniform System of Accounts. See 18 C.F.R. pt. 101. The bandwidth formula

The agreement terminated in August 2016, after the events

underlying this petition.

App. 4

was keyed mostly to these FERC accounts. The formula included a variable for purchased-power expenses (PURP), which utilities incur when buying

power on wholesale markets. PURP incorporated expenses recorded in FERC Account 555, which covers

purchased-power expenses. See id. pt. 101, acct. 555.

The bandwidth remedy led to annual compliance

proceedings. In April of each year, the operating companies would report production-cost data for the preceding year on Form 1. Using that data, Entergy would

determine whether any of its operating companies fell

outside the 11% bandwidth and report the results to

FERC.

This petition concerns how the bandwidth formula

accounts for deferred production costs. Utilities often

must spread over many years their recovery of large,

non-recurring costs. To do this, a company offsets

those costs by creating a regulatory asset—a type of

credit. The company then amortizes the asset in later

years, creating debits chargeable to customers. Over

time, FERC and Entergy have taken different positions on whether the bandwidth formula should recognize these production costs when an operating

company incurs them or in later years as it amortizes

the associated regulatory asset.

Historically, the Entergy companies recorded regulatory assets and their related amortization expenses

in two FERC accounts not referenced in the bandwidth

formula—Account 407.3 (Regulatory Debits) and Account 407.4 (Regulatory Credits). Entergy continued

App. 5

this practice in its first bandwidth filing, the 2007 filing concerning 2006 production data. In excluding

regulatory assets and their amortization from the

bandwidth calculation, Entergy effectively accounted

for deferred production costs when they were incurred,

rather than when the related amortization expenses

were recorded. But FERC rejected this approach. It

prohibited the companies from recording regulatory

assets and amortization expenses in Accounts 407.3

and 407.4 when the assets and expenses could be

traced to another account. See Entergy Servs., Inc., 130

FERC ¶ 61,023, PP 261–65 (2010). And when the assets and expenses could be traced to accounts incorporated into the bandwidth formula, it ordered Entergy

to treat amortization expenses as production costs

for purposes of the formula. See LPSC, 132 FERC

¶ 61,253, P 34 (2010).

Perhaps anticipating these rulings, Entergy revised its accounting for deferred purchased-power

costs during the 2008 bandwidth proceedings for 2007

cost data. Because the regulatory assets and related

amortization expenses could be traced to Account 555,

Entergy began recording them there, rather than in

Accounts 407.3 and 407.4. And because the bandwidth

formula defined purchased-power expenses by reference to Account 555, this approach included amortization expenses in the bandwidth calculation. Entergy

thus counted deferred purchased-power costs when the

associated regulatory assets were amortized, rather

than when the underlying costs actually were incurred.

App. 6

LPSC challenged this approach, and the parties

reached a settlement. See Entergy Servs., Inc., 128

FERC ¶ 61,181 (2009). It required Entergy to amend

the bandwidth formula “starting with the 2009 Bandwidth Calculation (i.e., effective May 31, 2009) to provide that all purchased power costs will be included in

the Bandwidth Calculation in the year the costs are

incurred, regardless of whether they are deferred on

the individual Operating Company’s books.” J.A. 1298.

Pursuant to the settlement, Entergy proposed

amending the definition of PURP. Under the amendment, PURP still would include most purchased-power

expenses recorded in Account 555, but it would “exclud[e] the effects, debits and credits, resulting from a

regulatory decision that causes the deferral of the recovery of current year costs or the amortization of previously deferred costs.” J.A. 1327. FERC accepted the

proposal and made the amendment effective May 31,

2009, before the 2009 bandwidth proceedings. See

Entergy Servs., Inc., 128 FERC ¶ 61,069, P 11 (2009).

Under the amendment, the bandwidth formula again

considered deferred purchased-power costs when the

operating companies incurred them, not when the companies amortized the relevant regulatory assets.

This petition concerns application of the amendment to the 2009 and 2010 bandwidth proceedings,

which involve production costs for 2008 and 2009.

FERC reopened these proceedings after it discovered

accounting errors in the delayed bandwidth proceeding

for 2005 production costs. There, an administrative

law judge ruled that the operating companies had

App. 7

erroneously recorded certain regulatory assets and

their associated amortization expenses in Accounts

407.3 and 407.4. LPSC, 157 FERC ¶ 63,018, P 101

(2016). One of these deferrals is at issue—a $56.3 million purchased-power cost that Entergy Louisiana, one

of the operating companies, incurred in 2005. To blunt

its impact on ratepayers, LPSC had ordered the company to establish a regulatory asset and amortize it

over four years. Id. The ALJ ruled that Entergy Louisiana should have recorded the asset and its amortization in Account 555, and that Entergy had to

revise the bandwidth calculation accordingly. Id.

PP 113–14. FERC agreed, but stressed that any corrections “should be limited to accounting adjustments

that have been shown to have a bandwidth implication.” LPSC, 163 FERC ¶ 61,116, PP 119–20 (2018)

(Recalculation Order). Recognizing that the error implicated the bandwidth calculations for later years,

FERC ordered Entergy Louisiana to refile its Form 1

report and ordered Entergy to adjust bandwidth payments for subsequent years “to ensure that legitimate

production costs are properly accounted for on the

FERC Form 1 reports and reflected in rates under the

filed formula.” Id. P 121.

Entergy corrected the accounting and bandwidth

calculations for the $56.3 million regulatory credit that

Entergy Louisiana received in 2005 and the associated

amortization expenses that it recorded in 2006 and

2007. But Entergy did not change its calculations for

the amortization expenses recorded in 2008 and 2009.

It reasoned that those expenses would not affect the

App. 8

bandwidth remedy under the 2009 amendment, which

expressly excluded amortization expenses from the

calculation of purchased-power costs.

Entergy’s calculation locked a portion of Entergy

Louisiana’s $56.3 million production cost out of the

bandwidth remedy. When Entergy Louisiana incurred

that cost in 2005, the bandwidth formula recognized

deferred purchased-power costs only upon amortization, so the bandwidth calculation for 2005 did not account for the costs. But for amortization expenses

realized in 2008 and 2009, Entergy read the amended

bandwidth formula to recognize deferred purchasedpower costs only when they were actually incurred, so

its revised calculations excluded those amortization

expenses. As a result, Entergy Louisiana never received bandwidth credit for portions of the 2005 production cost that it amortized in 2008 and 2009.

FERC agreed with Entergy that the 2009 amendment excluded these amortization expenses. LPSC,

167 FERC ¶ 61,186, PP 23–25 (2019) (Compliance Order). It reasoned that because the amended bandwidth

formula was part of the filed rate, FERC could not include the amortization expenses in the bandwidth calculation. Id. P 29. On rehearing, FERC rejected LPSC’s

proposed interpretation of the 2009 amendment and

its fallback arguments for departing from the amendment. See LPSC, 169 FERC ¶ 61,247 (2019) (Rehearing Order).

App. 9

LPSC now seeks review of FERC’s ruling. We have

jurisdiction to consider its petition under 16 U.S.C.

§ 825l(b).

We review FERC orders under the Administrative

Procedure Act, which requires us to set aside decisions

that are “arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with law.” 5 U.S.C.

§ 706(2)(A); see Verso Corp. v. FERC, 898 F.3d 1, 7 (D.C.

Cir. 2018). In a “technical area like electricity rate design,” we give FERC a significant degree of deference.

FERC v. Elec. Power Supply Ass’n, 577 U.S. 260, 292

(2016). We must accept FERC’s factual findings if

they are “supported by substantial evidence.” 16 U.S.C.

§ 825l(b). We must also defer to FERC’s reasonable interpretation of tariffs, PSEG Energy Res. & Trade LLC

v. FERC, 665 F.3d 203, 208 (D.C. Cir. 2011), and of its

own prior orders, NSTAR Elec. & Gas. Corp. v. FERC,

481 F.3d 794, 799 (D.C. Cir. 2007).

The Federal Power Act requires electric utilities to

charge “just and reasonable” rates. 16 U.S.C. § 824d(a).

If FERC finds that a rate is unreasonable, it may establish a just and reasonable rate. Id. § 824e(a). Under

this authority, FERC may reallocate production costs

under the Entergy system agreement, including by ensuring compliance with the bandwidth remedy. LPSC

II, 522 F.3d at 390–91. But because the bandwidth formula is part of a filed rate, FERC’s discretion is significantly limited. See LPSC v. FERC, 771 F.3d 903, 910

App. 10

(5th Cir. 2014) (LPSC III); LPSC v. FERC, 606 F. App’x

1, 4 (D.C. Cir. 2015) (LPSC IV). Under the filed-rate

doctrine, a utility “may not charge, or be forced by

[FERC] to charge, a rate different from the one on file.”

SFPP, L.P. v. FERC, 967 F.3d 788, 801–02 (D.C. Cir.

2020) (cleaned up); see also 16 U.S.C. § 824d(c), (d) (requiring regulated utilities to prospectively file rates

with FERC). As a corollary, FERC may adjust rates

only prospectively. See id. § 824e(a). It cannot alter

rates to retroactively correct for a past under-collection. Verso Corp., 898 F.3d at 10.

Because this case turns on the effect of the 2009

amendment, we first decide what it means. We review

FERC’s tariff interpretations with a “Chevron-like

analysis.” PSEG, 665 F.3d at 208 (cleaned up). Under

that framework, we must enforce unambiguous tariff

language, but we defer to FERC’s reasonable interpretation of ambiguous text. Id.

The 2009 amendment added the emphasized language to the definition of the PURP variable in the

bandwidth formula:

PURP = Purchased Power Expense recorded

in FERC Account 555, but excluding payments made pursuant to Section 30.09(d) of

this Service Schedule and excluding the effects, debits and credits, resulting from a regulatory decision that causes the deferral of the

recovery of current year costs or the amortization of previously deferred costs.

App. 11

J.A. 1327 (emphasis added). The parties dispute

whether the amendment applies to costs that are

amortized after its adoption but rest on deferral decisions that predate it. FERC and Entergy contend that

the amendment does so apply, while LPSC contends

that it does not.

We agree with FERC, for nothing in the amendment turns on the timing of a deferral decision. The

amendment does not target deferral decisions as such,

but rather their “effects.” So long as a purchased-power

expense arises after the amendment’s effective date

and results from a deferral decision, the amendment

applies by its terms. And when a regulatory decision

orders a company to amortize a previously incurred

cost over several years, the ensuing amortizations

plainly qualify as such “effects.”

In response, LPSC highlights the phrase “debits

and credits.” It argues that the amendment applies

only if it would exclude both the debits and credits associated with a particular deferral decision. And so,

LPSC concludes, the amendment does not exclude the

“debits” of a preexisting deferral decision because the

related “credits” occurred at the time of the deferral—

before the amendment had become effective.

LPSC’s interpretation defies grammar. As nouns

set off by commas, “debits and credits” are “explanatory equivalent[s]” of “effects,” the immediately preceding noun. Appositives, The Chicago Manual of Style

§ 6.28 (17th ed. 2017); see R. Huddleston & G. Pullum,

The Cambridge Grammar of the English Language

App. 12

1357–58 (1st ed. 2002). In this context, “and” assumes

its “distributive sense”—i.e., it means “A and B, jointly

or severally.” Or and And, Garner’s Dictionary of Legal

Usage (3d ed. 2011) (emphasis added); see also Huddleston & Pullum, supra, at 1281 (distributive sense is the

“default”). The amendment treats debits and credits as

distinct classes of excluded “effects.” After all, an effect

is “[s]omething brought about by a cause or agent; a

result.” Effect, American Heritage Dictionary (5th ed.

2018). And no fair reading of that term requires both a

debit and a credit to constitute an effect resulting from

a deferral decision. Instead, debits that arise from a

deferral decision are “effects” of the decision regardless

of whether the amendment also happens to cover a related credit.

LPSC’s interpretation is also in tension with the

rest of the amendment, which contemplates decisions

that create only debits or only credits. Recall that the

amendment excludes the effects of regulatory decisions that cause “the deferral of the recovery of current

year costs or the amortization of previously deferred

costs.” J.A. 1327 (emphasis added). A decision that requires a company to defer cost recovery causes only a

credit, while a decision that permits the company to

amortize previously deferred costs causes only debits.

By listing these causes disjunctively, the amendment

confirms its extension to regulatory decisions that

cause only credits or only debits. In contrast, to apply

only to decisions that cause both a credit and a debit,

the amendment would have had to cover regulatory

App. 13

decisions that cause “the deferral of the recovery of

costs and the amortization of those costs.”

LPSC next argues that other evidence, such as

trial testimony and the settlement agreement that precipitated the amendment, show an intent to limit the

amendment to later deferral decisions. According to

LPSC, the settlement agreement is particularly important because it too is part of the filed rate. But because the amendment “unambiguously addresses the

matter at issue,” its language controls. PSEG, 665 F.3d

at 208 (cleaned up). As for the settlement agreement,

it simply required Entergy to amend the definition of

the PURP variable in the future; the agreement itself

did not alter the bandwidth formula, so it is not part of

the filed rate.2

In sum, the 2009 amendment is not limited to

deferral decisions that postdate it. So long as an

amortized purchased-power expense “result[s] from” a

deferral decision, the amendment applies.

Our construction of the 2009 amendment largely

resolves this appeal. As noted, the bandwidth formula

To the extent LPSC contends that the settlement agreement should control over the amendment, we cannot consider its

argument. The 60-day deadline to challenge FERC’s order approving the 2009 amendment has long expired. See 16 U.S.C.

§ 825l(b). Challenging the validity of that amendment would constitute an untimely collateral attack on the order approving it.

See Pac. Gas & Elec. Co. v. FERC, 533 F.3d 820, 825 (D.C. Cir.

2008).

App. 14

is part of the filed rate. See LPSC III, 771 F.3d at 910;

LPSC IV, 606 F. App’x at 4. In the proceedings below,

FERC found that the amendment was part of the

bandwidth formula—and thus the filed rate—for the

2009 and 2010 proceedings. See Rehearing Order, 169

FERC ¶ 61,247, P 29; Compliance Order, 167 FERC

¶ 61,186, P 25. This ruling, which no party disputed

below, is consistent with FERC’s order accepting the

amendment and ruling that it was effective for the

2009 bandwidth proceedings. Entergy Servs., Inc., 128

FERC ¶ 61,069, P 11.

This finding obligated Entergy to exclude the disputed expenses from the bandwidth calculation. Even

though the purchased-power expenses that Entergy

Louisiana amortized in 2008 and 2009 were recorded

in Account 555, they were also “effects” (or “debits”)

“resulting from a regulatory decision that causes the

deferral of the recovery of current year costs.” The 2009

amendment thus unambiguously excluded them from

the bandwidth calculation. And FERC was bound to

enforce the amendment as part of the filed rate, which

it could not waive or retroactively amend. See NSTAR,

481 F.3d at 800.

LPSC raises three fallback arguments to support

including the amortized expenses in the bandwidth

formula despite the 2009 amendment. They are unpersuasive.

App. 15

First, LPSC contends that FERC failed to follow

its Recalculation Order, which required Entergy to

adjust bandwidth payments after correcting the accounting errors uncovered in the 2005 bandwidth proceeding. 163 FERC ¶ 61,116, P 121. LPSC claims that

this required Entergy to include amortization expenses in its subsequent bandwidth calculations for

later years. But the Recalculation Order mandated corrections to ensure that Entergy Louisiana’s expense

was “reflected in rates under the filed formula.” Id. And

beginning with bandwidth calculations for 2008 expenses, the “filed formula” included the 2009 amendment, which FERC was bound to apply. See NSTAR,

481 F.3d at 800.

Second, LPSC contends that applying the amendment to expenses that stem from the 2005 deferral decision would violate the prohibition on retroactive

ratemaking. According to LPSC, the 2005 rate must

govern because it was effective when LPSC ordered

Entergy Louisiana to defer recovering the $56.3 million expense. By changing the applicable rate, LPSC

reasons, FERC retroactively removed a benefit that

Entergy Louisiana could reasonably expect to receive.

LPSC misunderstands the rule against retroactive ratemaking. As discussed, the bandwidth remedy

turns on production costs recorded in the preceding

year. At most, the rule prohibited FERC from changing

the rate for expenses that the companies had already

recorded. See NSTAR, 481 F.3d at 800. For example, as

the ALJ in these proceedings held, the rule prohibited

applying the 2009 amendment to 2005 production

App. 16

costs, which would have allowed Entergy Louisiana to

fully account for its costs. LPSC, 157 FERC ¶ 63,018,

P 111. Although LPSC’s 2005 deferral decision led to

the amortization expenses at issue, Entergy Louisiana

incurred those expenses in 2008 and 2009. And the

rule against retroactive ratemaking does not protect a

utility’s expectation that a rate will not change in the

future. By seeking to change the rate that would otherwise govern production expenses recorded in 2008

and 2009, LPSC itself asks for an improper retroactive

rate increase. As FERC correctly concluded, it cannot

adjust current rates to make up for “over- or undercollection in prior periods.” Old Dominion Elec. Coop. v.

FERC, 892 F.3d 1223, 1227 (D.C. Cir. 2018) (cleaned

up).

Alternatively, LPSC contends that the rule

against retroactive ratemaking at least prohibited

FERC from applying the 2009 amendment to expenses

that the operating companies had incurred before

FERC approved the amendment—that is, to production costs between January 2008 and May 2009. Because LPSC did not raise this argument before FERC,

we cannot consider it. See 16 U.S.C. § 825l(b). In its

rehearing motion, LPSC argued only that the rule required the 2005 rate to govern all amortization expenses related to the deferral. It did not seek to apply

the filed rate for the year in which expenses were

amortized. Indeed, LPSC asserted to the ALJ that

the amendment was “effective beginning with the

2009 Bandwidth filing for the 2008 test year.” J.A. 90.

And it told FERC that the settlement agreement

App. 17

“unambiguously applies to costs and deferrals going

forward, beginning in the 2008 test year used for the

2009 Bandwidth Calculation.” J.A. 1335. LPSC cannot

now pivot to new arguments that it previously conceded. See Cal. Dep’t of Water Res. v. FERC, 306 F.3d

1121, 1125 (D.C. Cir. 2002).3

Third, LPSC contends that FERC arbitrarily declined to account for the amortized expenses under 16

U.S.C. § 825h, which allows FERC to “perform any and

all acts . . . as it may find necessary or appropriate” to

enforce the Federal Power Act. But the filed-rate doctrine “restrict[s] the remedies that FERC may order”

under § 825h, Verso Corp., 898 F.3d at 10, by depriving

it of “discretion to waive the operation of a filed rate or

to retroactively change or adjust a rate for good cause

or for any other equitable considerations,” Old Dominion, 892 F.3d at 1230. And, to reiterate, the filed rate

required FERC to exclude the disputed expenses from

the bandwidth calculation.

LPSC objects that the filed-rate doctrine does not

apply “when judicial invalidation of Commission decisions has resulted in retroactive changes in rates.” W.

Deptford Energy, LLC v. FERC, 766 F.3d 10, 22 (D.C.

Cir. 2014). But the exception LPSC invokes is narrow:

FERC can retroactively correct for legal error only

where, among other requirements, the parties “were

Given our disposition, we need not consider FERC’s alternative ruling that LPSC consented to any retroactive rate. Rehearing Order, 169 FERC ¶ 61,247, P 30; see also NSTAR, 481

F.3d at 801 (parties can “agree[ ] to make a rate effective retroactively” (cleaned up)).

App. 18

aware in advance of the risk of litigation-induced

change.” Id. at 23. To create notice, there must be a

close link between the claimed error and the change

retroactively imposed on remand. Usually this means

that the rate itself is subject to challenge, though in

one case the challenge concerned the lawfulness of a

rate in a settlement agreement that a party had accepted “in reliance on an unlawful FERC order.” Pub.

Utils. Comm’n of Cal. v. FERC, 988 F.2d 154, 162–66

(D.C. Cir. 1993).

Here, there was no notice that the rate set by the

2009 amendment was subject to change. The validity

of the amendment itself has never been questioned. Instead, LPSC offers an attenuated chain of causation

between an unrelated legal error and approval of the

amendment: This Court invalidated FERC’s decision

to make the bandwidth remedy effective in 2006,

which led FERC to extend the remedy to some costs

incurred in 2005, which led an ALJ to discover that the

operating companies had mistakenly recorded amortization expenses in non-bandwidth accounts. Had the

arbitrary effective date not substantially delayed

bandwidth proceedings for the 2005 production costs,

LPSC continues, Entergy would have discovered the

error in time to propose a different 2009 amendment

permitting all deferred-production costs to be recognized in the bandwidth calculation. Even assuming

that LPSC’s inferences are true and that legal errors

unrelated to underlying rates can trigger the exception, more than bare, but-for causation is required to

overcome the “nearly impenetrable shield” against

App. 19

retroactive ratemaking. Old Dominion, 892 F.3d at

1230. The litigation over the bandwidth’s start date

could not have given notice that an ALJ would find accounting errors significant enough to affect settlement

negotiations over the 2009 amendment. The notice

exception to the filed-rate doctrine does not apply. And

because the filed-rate doctrine does apply, LPSC’s

§ 825h argument is without merit. See Verso Corp., 898

F.3d at 10.

III

For these reasons, we deny the petition for review.

So ordered.

App. 20

169 FERC ¶ 61,247

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners:

Neil Chatterjee, Chairman;

Richard Glick and Bernard

L. McNamee.

Louisiana Public

Service Commission

Docket No.

EL01-88-022

Entergy Services, Inc.

ORDER DENYING REHEARING

(Issued December 27, 2019)

1. On May 30, 2019, the Commission issued an order1

accepting Entergy Services, Inc.’s (Entergy) July 16,

2018 compliance filing required by Opinion No. 561.2

Opinion No. 561 addressed rates filed by Entergy

on behalf of the Entergy Operating Companies (Operating Companies),3 implementing the Commission’s

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 167 FERC

¶ 61,186 (2019) (Compliance Order).

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., Opinion No.

561, 163 FERC ¶ 61,116 (2018), reh’g denied, Opinion No. 561-A,

166 FERC ¶ 61,021 (2019).

The five Operating Companies involved in this proceeding

were, at the time of the Louisiana Public Service Commission’s

(Louisiana Commission) initial complaint: Entergy Arkansas,

Inc. (Entergy Arkansas); Entergy Louisiana, Inc. (Entergy Louisiana); Entergy Mississippi, Inc. (Entergy Mississippi); Entergy

New Orleans, Inc. (Entergy New Orleans); and Entergy Gulf

States, Inc. (Entergy Gulf States). At the end of 2007, Entergy

App. 21

bandwidth formula for a seven-month period from

June 1, 2005 through December 31, 2005, as required

by a prior order.4

2. On June 28, 2019, the Louisiana Commission filed

a request for rehearing of the Compliance Order.5 In

this order, we deny the rehearing request.

Background

3. This proceeding has a lengthy and complex history

which is summarized in the Compliance Order.6 As

relevant here, this proceeding arose from a complaint

filed by the Louisiana Commission against Entergy

and the Operating Companies concerning the Entergy

System Agreement’s requirement that production

costs be “roughly equal” among the Entergy Operating

Companies. Upon review of an initial decision,7 in

Gulf States was split into Entergy Texas, Inc. (Entergy Texas)

and Entergy Gulf States Louisiana, LLC (Entergy Gulf States

Louisiana).

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 137 FERC

¶ 61,047, at P 34 (2011). As explained below, Entergy bandwidth

calculation filings are annual filings to achieve rough production

cost equalization among the Operating Companies participating

in the Entergy System Agreement (System Agreement). The System Agreement terminated in 2016.

Louisiana Commission June 28, 2019 Rehearing Request

(Rehearing Request).

Compliance Order, 167 FERC ¶ 61,186 at PP 2-7.

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 106 FERC

¶ 63,012 (2004).

App. 22

Opinion Nos. 480 and 480-A,8 the Commission determined that rough production cost equalization on the

Entergy system had been disrupted, and that a numerical bandwidth of +/- 11 percent was an appropriate

remedy. This remedy, usually referred to as the bandwidth remedy or bandwidth formula, changes the allocation of production costs among the Operating

Companies on an annual basis to maintain rough production cost equalization. Following Opinion No. 480,

Entergy submitted a compliance filing to include its

proposed bandwidth formula as part of the System

Agreement. The Commission accepted the bandwidth

formula, to be applied prospectively for production

costs incurred during calendar year 2006 and all

calendar years thereafter.9 The bandwidth remedy

provided that Entergy would submit an annual bandwidth calculation of the production costs for each Operating Company for that calendar year using data

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., Opinion No.

480, 111 FERC ¶ 61,311, at P 136, order on reh’g, Opinion No.

480-A, 113 FERC ¶ 61,282 (2005), order on compliance, 117 FERC

¶ 61,203 (2006) (November 2006 Compliance Order), order on

reh’g and compliance, 119 FERC ¶ 61,095 (2007) (April 2007

Compliance Order), aff ’d in part and remanded in part sub nom.

La. Pub. Serv. Comm’n v. FERC, 522 F.3d 378 (D.C. Cir. 2008)

(Louisiana Remand), order on remand, 137 FERC ¶ 61,047 (2011)

(2011 Order on Remand), order dismissing reh’g, 137 FERC

¶ 61,048 (2011), order on reh’g, 146 FERC ¶ 61,152 (2014) (2014

Order on Rehearing), order denying reh’g, 153 FERC ¶ 61,034

(2015), remanded, La. Pub. Serv. Comm’n v. FERC, 866 F.3d 426

(D.C. Cir. 2017) (affirming 2011 Order on Remand and 2014 Order on Rehearing).

See November 2006 Compliance Order, 117 FERC ¶ 61,203;

April 2007 Compliance Order, 119 FERC ¶ 61,095.

App. 23

from the FERC Form 1, compared to the Entergy System average, to determine if the Operating Company’s

production costs deviated from the average by more

than 11 percent.10

4. In its remand of Opinion Nos. 480 and 480-A, the

United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) held that the Commission

had not provided a reasonable explanation for the

Commission’s decision to delay implementation of the

bandwidth remedy until a full year of data had become

available for the 2006 test year.11 In the subsequent

2011 Order on Remand, the Commission held that it

would implement the bandwidth remedy on June 1,

2005, the date the Commission issued Opinion No. 480,

determining that the rates were unjust and unreasonable. The Commission directed Entergy to submit a

compliance filing calculating the bandwidth payments

and receipts for the period June 1, 2005 through December 31, 2005 (2005 period).12

5. On April 29, 2014, as amended on May 7, 2014 and

May 23, 2014, Entergy submitted a compliance filing

calculating bandwidth payments and receipts for the

2005 bandwidth period. On October 15, 2015, the Commission issued an order stating that Entergy’s compliance filing raised issues of material fact and set the

See System Agreement, Service Schedule MSS-3, section

30.11.

Louisiana Remand, 522 F.3d at 400.

2011 Order on Remand, 137 FERC ¶ 61,047 at P 34.

App. 24

matter for hearing and settlement judge procedures.13

As relevant here, at hearing, Trial Staff conducted discovery into the accounting source of certain regulatory

asset amounts recorded in Accounts 407.3 (Regulatory

debits) and 407.4 (Regulatory credits) during calendar

year 2005. Trial Staff found that the Operating Companies incorrectly used Accounts 407.3 and 407.4 during calendar year 2005 to record the establishment

and/or amortization of certain regulatory assets where

the source of the regulatory asset is specifically identifiable. Trial Staff specifically identified three regulatory assets that were incorrectly accounted for using

Accounts 407.3 and 407.4, which are excluded from the

bandwidth calculation. Trial Staff determined that the

regulatory debits and credits related to these items

should be recorded in Account 555 (Purchased Power),

which is a bandwidth eligible account.14 Trial Staff explained that in Opinion No. 505, the Commission found

that when the source of a regulatory asset is identifiable, the Commission’s Uniform System of Accounts

(USofA) requires the entries establishing and amortizing a regulatory asset to be credited and charged to the

same account that would have been charged if the item

had been included in income when incurred.15 Following the hearing, on November 7, 2016, the Presiding

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 153 FERC

¶ 61,032 (2015), reh’g denied, 155 FERC ¶ 61,118 (2016), aff ’d,

Ark. Pub. Serv. Comm’n v. FERC, 712 F.App’x 3 (D.C. Cir. 2018).

Opinion No. 561, 163 FERC ¶ 61,116 at P 97.

Id. P 98 (citing Opinion No. 505, 130 FERC ¶ 61,023, at PP

261-63 (2010)).

App. 25

Judge issued his initial decision adopting Trial Staff ’s

recommendation.16

A. Opinion No. 561

6. On May 17, 2018, the Commission issued Opinion

No. 561, affirming the Initial Decision, including the

determination to change the accounting for the three

regulatory asset deferrals at issue to a bandwidth eligible account. The Commission based its decision on

the Commission’s holding in Opinion No. 505.17 The

Commission agreed with the Louisiana Commission

that once accounting errors are shown to be relevant

to the 2005 bandwidth calculation, the Operating Companies should be required to correct their FERC Form

1 reports for the three regulatory assets at issue for

subsequent bandwidth test years, and make corresponding corrections to the bandwidth payments and

receipts for those test years, to ensure that legitimate

production costs are properly accounted for on the

FERC Form 1s.18 The Commission also affirmed the

Presiding Judge’s determination that accounting corrections should be limited to accounting adjustments

that have been shown to have a bandwidth implication.19 The Commission directed Entergy to revise

and refile the Operating Companies’ FERC Form 1s to

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 157 FERC

¶ 63,018 (2016) (Initial Decision).

Opinion No. 561, 163 FERC ¶ 61,116 at P 119 (citing Opinion No. 505, 130 FERC ¶ 61,023 at PP 262-63).

Id. P 121.

Id. P 120.

App. 26

correct the accounting for the regulatory assets for

subsequent years, to “revise and refile” the bandwidth

filings in accordance with the refiled FERC Form 1s,

and to “calculate the revised tariff payments and receipts among the Operating Companies for the test

years affected.”20

B. Compliance Filing and Protest

7. On July 16, 2018, Entergy filed its compliance filing containing the comprehensive bandwidth recalculation report showing the payment/receipt amounts

based on the 2005 period (June 1 through December

31, 2005) data, including workpapers (Entergy Compliance Filing). The Entergy Compliance Filing also

contained the recalculation report showing revised

payment/receipt amounts based on 2006 and 2007 data

following accounting corrections directed by the Commission in Opinion No. 561.21

8. Entergy stated that, consistent with the Commission’s directive in Opinion No. 561, Entergy corrected

the accounting for the three identified regulatory asset

deferrals for the 2005 period and the associated

amortization in 2006 and 2007. Entergy asserted that,

beginning with the 2008 bandwidth calculation, the

bandwidth formula was amended (2009 Amendment)22

Id. P 121.

Entergy Compliance Filing at 12-13.

The Commission accepted the 2009 Amendment with an

effective date of May 31, 2009. Entergy Servs., Inc., 128 FERC

¶ 61,069 (2009). Entergy filed the 2008 bandwidth calculation on

App. 27

to require purchased power costs to be reflected in the

year in which they are incurred.23 Entergy stated that,

specifically, the definition of Purchased Power Expense

(PURP) was modified to exclude “the effects, debits

and credits, resulting from a regulatory decision that

causes the deferral of the recovery of costs or the amortization of previously deferred costs.”24 Entergy contended that, therefore, in bandwidth calculations for

years subsequent to 2007, accounting changes associated with the regulatory assets identified in Opinion

No. 561 were not relevant to the bandwidth calculation.25

9. On August 6, 2018, the Louisiana Commission protested the filing, explaining that, in Opinion No. 561,

the Commission ordered Entergy to change the 2005

deferrals of the three regulatory assets from Accounts

407.3 and 407.4 to Account 555 and to reflect the related amortization of the deferred costs in subsequent

years in Account 555 as well.26 The Louisiana Commission stated that Entergy did so for 2006 and 2007, but

did not do so for 2008 and 2009. The Louisiana Commission contended that this adjustment violated the

May 29, 2009. Entergy, Filing of Rates to Implement Opinion Nos.

480 and 480-A, Docket No. ER09-1224-000 (filed May 29, 2009).

Entergy Compliance Filing at 7 n.37.

Id. (citing Entergy Servs., Inc., 128 FERC ¶ 61,069 at P 6).

Id.

Louisiana Commission August 6, 2018 Protest at 4 (citing

Opinion No. 561, 163 FERC ¶ 61,116 at P 121).

App. 28

Commission’s instructions to reflect the changes “for

any subsequent years.”27

II.

Compliance Order and Rehearing Request

10. On May 30, 2019, the Commission issued the

Compliance Order, accepting Entergy’s accounting

changes. The Commission agreed with Entergy that

the 2009 Amendment to the bandwidth formula was

directly relevant as to whether the amortizations for

2008 and 2009 should be included in the bandwidth

calculations for those years. The 2009 Amendment revised the definition of variable PURP in the bandwidth

formula to include the following language:

PURP = Purchased Power Expense recorded

in FERC Account 555, but excluding payments made pursuant to Section 30.09(d) of

this Service Schedule and excluding the effects, debits and credits, resulting from a regulatory decision that causes the deferral of the

recovery of current year costs or the amortization of previously deferred costs.28

11. The Commission found that, because the 2009

Amendment was in effect for the 2008 and 2009 bandwidth calculations, any revisions to the accounting for

the 2005 regulatory asset deferrals for 2008 and 2009

would have had no effect on the bandwidth payments

Id.

Entergy, Filing to Amend the System Agreement, Docket

No. ER09-1185-000, Attached First Revised Sheet No. 54 (emphasis added) (filed May 21, 2009) (2009 Filing Letter).

App. 29

and receipts for those years. Accordingly, given the

Commission’s directive in Opinion No. 561 that accounting corrections should be limited to adjustments

that have a bandwidth implication, the Commission

found that Entergy was correct to revise the accounting for the 2005 regulatory assets for only the test

periods in which those adjustments would have a

bandwidth implication – the 2005, 2006, and 2007 periods.29

12. The Commission noted that the 2009 Amendment

was the filed rate for the 2008 and 2009 bandwidth

calculations and Entergy had no discretion in making

accounting adjustments for 2008 and 2009.30 The

Commission also stated that not making accounting

adjustments for 2008 and 2009 did not constitute retroactive application of the 2009 Amendment because

if Entergy had, for 2008 and 2009, reclassified amortization related to the three regulatory assets deferrals

from Accounts 407.3 and 407.4 to Account 555, and

then recalculated bandwidth payments and receipts

for 2008 and 2009 without excluding that amortization, its calculation would have violated the filed rate

for those test years.31 The Commission also dismissed

the Louisiana Commission’s argument that the Commission should take into consideration the fact that if

this proceeding had not been delayed, the accounting

would have been corrected long before the filing of the

Compliance Order, 167 FERC ¶ 61,186 at P 25.

Id. P 27.

Id. P 28.

App. 30

2008 bandwidth calculation. The Commission stated

that, in a compliance proceeding, the Commission considers only whether the filing complies with the underlying order.32

13. On June 28, 2019, the Louisiana Commission

filed its rehearing request.

III. Discussion

A. Interpretation of the 2009 Amendment

14. On rehearing, the Louisiana Commission argues

that the Compliance Order arbitrarily adopts an interpretation of the 2009 Amendment to the bandwidth

formula that is at odds with the parties’ intent, the

explanatory filing by Entergy Services, and a settlement that was filed and approved by the Commission.33 Specifically, the Louisiana Commission argues

that the Compliance Order interprets the 2009 Amendment to apply prospectively to deferrals commencing

in 2008, but to amortizations related to deferrals

that occurred prior to 2008.34 The Louisiana Commission states that the Commission’s interpretation of

the 2009 Amendment conflicts with statements made

in the settlement that led to the 2009 Amendment

Id. P 29.

Rehearing Request at 4-12.

Id. at 1.

App. 31

(Settlement Agreement)35 and Entergy’s 2009 Filing

Letter that accompanied the 2009 Amendment.36

15. The Louisiana Commission explains that the

Settlement Agreement made no mention of excluding

the amortizations of prior year deferrals. The Louisiana

Commission asserts that the Settlement Agreement

applied to costs and deferrals going forward, beginning

in the 2008 test year used for the 2009 bandwidth calculation to ensure that “all purchased power costs will

be included in the bandwidth calculation in the year

the costs are incurred.”37 The Louisiana Commission

points to section 7.3 of the Settlement Agreement to

support its point:

ESI will make a Section 205 filing amending

MSS-3 starting with the 2009 Bandwidth

Calculation (i.e., effective May 31, 2009) to

provide that all purchased power costs will

be included in the Bandwidth Calculation in

the year the costs are incurred, regardless of

Entergy, Offer of Settlement, Docket No. ER08-1056-002

(filed May 21, 2009). The Settlement Agreement is an uncontested

partial settlement concerning the 2008 and 2009 bandwidth calculations filed by Entergy on behalf of the Arkansas Public Service Commission, the Council of the City of New Orleans, the

Louisiana Commission, the Mississippi Public Service Commission, East Texas Cooperatives, and the Texas Industrial Energy

Consumers.

Rehearing Request at 7-8 (citing 2009 Filing Letter at 5

n.15).

Id. at 1-2, 5-7.

App. 32

whether they are deferred on the individual

Operating Company’s books.38

16. The Louisiana Commission further argues that

Entergy stated in its 2009 Filing Letter that the 2009

Amendment applied only to “new deferrals beginning

in 2008.”39 The Louisiana Commission reasons that

since the 2009 Amendment applied for the first time to

“2008 costs,” to both the “debits and credits” resulting

from each deferral decision, and did not apply to pre2008 deferrals, it could not apply to the debits resulting from the 2005 deferral. The Louisiana Commission

maintains that the Commission adopted an imbalanced interpretation of the 2009 Amendment that disconnects the “debits” from the “credits” resulting from

a regulatory decision.

17. The Louisiana Commission also asserts that extrinsic evidence demonstrates that the 2009 Amendment was never intended to apply to the amortization

of past deferrals.40 In addition to its own witness, the

Louisiana Commission points to testimony of Trial

Staff witness John Sammon to argue that no one contemplated that the 2009 Amendment might be used

to exclude the amortization of a past deferral.41 The

Louisiana Commission also references testimony of

Entergy witness Bruce Louiselle who stated that, “if

Id. at 6 (citing Louisiana Commission August 8, 2018 Protest, Attachment 2, section 7.3 of the Settlement Agreement).

Id. at 2, 4-5.

Id. at 9-10.

Id. at 10 (citing Tr. 357-58).

App. 33

the Commission were to accept [Trial Staff witness’]

accounting recommendation for purposes of the June

1, 2005 through December 31, 2005 test period used in

this proceeding, it should be necessary to recalculate

the compliance filing for at least the Bandwidth test

years 2006, 2007, and 2008.”42

18. We deny rehearing. We are not persuaded that

statements in the Settlement Agreement and the 2009

Filing Letter are dispositive of our determination here,

nor are we persuaded by the statements made at the

hearing regarding the parties’ intent. In the 2009

Amendment, Entergy modified the definition of variable PURP in the bandwidth formula to exclude current

year deferrals as well as amortization associated with

prior period deferrals from variable PURP. In accordance with this amendment, in its compliance filing,

Entergy excluded amortization associated with the

2005 regulatory asset deferrals that occurred in the

2008 and 2009 bandwidth periods because doing so

allowed Entergy to follow the applicable filed rate.

While the Louisiana Commission claims that the Settlement Agreement made no mention of excluding

amortization of prior years’ deferrals and the 2009 Filing Letter indicated the amendment would only apply

to “new deferrals beginning in 2008,” the 2009 Amendment expressly states that PURP excludes “the amortization of previously deferred costs.”43

Id. at 9 (citing ESI-28 at 14-15).

See supra P 10 (quoting 2009 Filing Letter, First Revised

Sheet No. 54).

App. 34

19. The Louisiana Commission is now taking issue

with the language of the filed rate that it previously

supported,44 pointing to isolated statements in the

record to reinterpret that language. The Commission

is cognizant that, when the 2009 Amendment was introduced, parties may not have anticipated that accounting corrections stemming from a bandwidth

calculation for the 2005 period would impact bandwidth test years for which the 2009 Amendment was

applicable, and that this possibility was not addressed

in the 2009 Filing Letter or Settlement Agreement.

However, we cannot ignore the express language of the

filed rate. That language – which no party protested45

– excludes the amortization of previously deferred

costs. The statements at hearing do not persuade us to

interpret the language differently, and as the Commission has stated previously, in the event of a conflict

between pleadings and proposed tariff language, the

tariff language controls.46

20. We also disagree with the Louisiana Commission’s contention that the Commission’s interpretation

of the 2009 Amendment disconnects the “debits” from

Entergy Servs., Inc., 128 FERC ¶ 61,069 at P 4.

Id.

See Midcontinent Indep. Sys. Operator, Inc., 162 FERC

¶ 61,253, at P 6 (2018) (citing Midwest Indep. Transmission Sys.

Operator, Inc., 142 FERC ¶ 61,149, at P 25 (2013); Cal. Indep.

Sys. Operator Corp., 132 FERC ¶ 61,154, at P 10 (2010); Midwest

Indep. Transmission Sys. Operator, Inc., 129 FERC ¶ 61,268, at

n.8 (2009); Cal. Indep. Sys. Operator Corp., 124 FERC ¶ 61,095,

at P 22 (2008)).

App. 35

the “credits” resulting from a regulatory decision.47 The

Commission correctly interpreted the 2009 Amendment to apply both prospectively to newly established

deferrals beginning in 2008 as well as amortizations

that occurred in the 2008 and 2009 bandwidth periods,

stemming from a previously established deferral. We

recognize that, due to the express language of the 2009

Amendment, amortized amounts relating to the 2005

deferral were not fully captured in the bandwidth formula. However, as the Commission explained in the

Compliance Order, to the extent any costs were not

fully captured, that is the result of the application of

the filed rate in effect in 2008 and 2009.48 The Louisiana Commission has provided no argument on rehearing to persuade us that the 2009 Amendment, the filed

rate, should not be followed.

B. Compliance Requirements

21. On rehearing, the Louisiana Commission argues

again that Entergy did not comply with the requirement in Opinion No. 561 to include amortization for

any subsequent years after the 2005 deferral.49 The

Rehearing Request at 8.

Compliance Order, 167 FERC ¶ 61,186 at P 26.

Rehearing Request at 19-21. The Louisiana Commission

points to the following passage in Opinion No. 561 to support its

point:

However, we agree with the Louisiana Commission

that once accounting errors are shown to be relevant to

the 2005 bandwidth calculation, the Operating Companies should be required to correct their FERC Form 1

reports for the three regulatory assets at issue for

App. 36

Louisiana Commission asserts that the Commission

misinterpreted Opinion No. 561 in finding Entergy in

compliance because the 2009 Amendment was not

even discussed in Opinion No. 561.50 We are not persuaded by this argument. As the Commission stated in

the Compliance Order, Opinion No. 561 directed that

changes in accounting with regard to the three regulatory assets should be reflected in rates under the filed

formula.51 For 2008 and 2009, the filed formula includes the 2009 Amendment. We maintain that it is

appropriate to follow the filed rate, regardless of

whether the Commission specifically identified the

2009 Amendment in its compliance directive.

22. Similarly, we are not persuaded by the Louisiana

Commission’s contention that the Compliance Order

erred in stating that there was a “directive in Opinion

No. 561 that accounting corrections should be limited

to adjustments that have a bandwidth implication.”52

subsequent bandwidth test years, and make corresponding corrections to the bandwidth payments and

receipts for those test years, to ensure that legitimate

production costs are properly accounted for on the

FERC Form 1 reports and reflected in rates under the

filed formula.

Opinion No. 561, 163 FERC ¶ 61,116 at P 121.

Rehearing Request at 19-20.

Compliance Order, 167 FERC ¶ 61,186 at P 26 (citing

Opinion No. 561, 163 FERC ¶ 61,116 at P 123) (“We also affirm

the Presiding Judge’s determination that accounting corrections

should be limited to accounting adjustments that have been

shown to have a bandwidth implication.”)).

Rehearing Request at 21 (citing Compliance Order, 167

FERC ¶ 61,186 at P 25).

App. 37

Pointing to the Commission’s directive concerning Entergy Arkansas’ Grand Gulf purchased power energy

regulatory asset, the Louisiana Commission explains

that while the Commission held that accounting corrections were unnecessary for accounts not in the

bandwidth formula, the Commission also held that

accounting corrections “are necessary for accounts in

the formula even if the tariff excludes the costs at issue.”53 Specifically, in Opinion No. 561, the Commission

stated, in reference to Grand Gulf, “[a]lthough this accounting change will not change the results of the

bandwidth calculation, because Account 555 is a bandwidth-eligible account, Entergy must nevertheless correct its accounting to help ensure that the bandwidth

calculation will be populated with the correct inputs.”54

23. We recognize that the correction required for

Grand Gulf differs from the Commission’s directive to

limit accounting corrections to those adjustments that

have a bandwidth implication. In hindsight, the Commission did not need to require the correction as to

Grand Gulf because such correction did not impact

the bandwidth payments and receipts.55 In any event,

this point is irrelevant to the Louisiana Commission’s

Id. (citing Opinion No. 561, 163 FERC ¶ 61,116 at P 123).

Opinion No. 561, 163 FERC ¶ 61,116 at P 123.

As noted by the Louisiana Commission, the System Agreement explicitly excludes the costs at issue from the bandwidth

formula. See System Agreement, Service Schedule MSS-3, section

30.12, n.1 (excluding from the bandwidth formula “the [Entergy

Arkansas] and [Entergy Mississippi] retail approved Grand Gulf

Accelerated Recovery Tariff effects on purchased power on [Entergy Arkansas] and [Entergy Mississippi] production cost”).

App. 38

request that amortization associated with the 2005

regulatory asset deferrals that occurred in the 2008

and 2009 bandwidth periods be included in the compliance filing at issue here. The 2009 Amendment required Entergy to exclude current year deferrals as

well as amortization associated with prior period deferrals from variable PURP. Because the 2009 Amendment was in effect for the 2008 and 2009 bandwidth

calculations, any revisions to the accounting for the

2005 regulatory asset deferrals for 2008 and 2009

would have had no effect on the bandwidth payments

and receipts for those years. Thus, we affirm that it was

appropriate for Entergy to follow the filed rate in effect

and to limit its accounting revisions, for purposes of its

compliance filing, to the 2005, 2006 and 2007 bandwidth periods.

C. Nature of the Proceeding

24. On rehearing, the Louisiana Commission asserts

that any unjust results in the bandwidth calculation in

this proceeding result from the Commission’s unlawful

delay of the bandwidth remedy.56 The Louisiana Commission explains that had this proceeding not been

delayed, it would have preceded other bandwidth proceedings, particularly the 2008 bandwidth calculation

proceeding. The Louisiana Commission argues that,

when the accounting for the deferral was corrected,

the accounting for subsequent years would have been

as well. The Louisiana Commission contends that,

Rehearing Request at 13.

App. 39

therefore, there would be no possibility of an “incomplete” correction because the 2009 Amendment would

have explicitly provided for the recognition of the

amortization of past deferrals.57

25. The Louisiana Commission also argues that the

Compliance Order fails to consider the Commission’s

power to correct the unjust consequences of its own

legal error by relying on the fact that this is a compliance proceeding.58 The Louisiana Commission asserts

that the Commission’s Federal Power Act (FPA) section 30959 power is not constrained by the nature of

the proceeding because “[t]he Commission is obligated to correct the unjust consequences of its delay

of the remedy in any proceeding in which the consequence arises.”60

26. We are not persuaded by these arguments. As

the Commission previously stated, in a compliance

proceeding, the Commission considers only whether

the filing complies with the underlying order.61 Based

on the Commission’s directive in Opinion No. 561, affirming the Presiding Judge’s determination that

accounting corrections should be limited to accounting adjustments that have been shown to have a

Id. at 14.

Id. at 12-21.

16 U.S.C. § 825h (2018).

Rehearing Request at 12; see also id. at 14-16 (citing TNA

Merch. Products, Inc. v. FERC, 857 F.3d 354 (D.C. Cir. 2017); Xcel

Energy Servs. v. FERC, 815 F.3d 947 (D.C. Cir. 2016)).

Compliance Order, 167 FERC ¶ 61,186 at P 29 (citing ISO

New England Inc., 133 FERC ¶ 61,013, at P 22 (2010)).

App. 40

bandwidth implication,62 the parties reasonably should

have and could have anticipated that Entergy would

prepare – and Entergy did, in fact, prepare – its compliance filing in accordance with the applicable bandwidth formula which, for 2008 and 2009, includes the

2009 Amendment. However, even if this proceeding

were not limited to only compliance-related issues, we

cannot presume – as the Louisiana Commission asks –

that the text of the 2009 Amendment would have been

different if the 2005 bandwidth calculation at issue in

Opinion No. 561 had been conducted at an earlier date.

The 2009 Amendment is part of the filed rate for 2008

and 2009, and Entergy was required to comply with its

terms when preparing its compliance filing.

27. In addition, we find the Louisiana Commission’s

arguments regarding FPA section 309 to be misplaced.

Even assuming that Entergy was not required to adhere to the 2009 Amendment, we are not persuaded

that FPA section 309 requires a different result here.63

The decision whether to direct remedial relief is discretionary,64 based on the Commission’s evaluation of the

Opinion No. 561, 163 FERC ¶ 61,116 at P 120.

16 U.S.C. § 825h (“to perform any and all acts, and to prescribe, issue, make, amend, and rescind such orders, rules, and

regulations as it may find necessary or appropriate to carry out

the provisions of this [Act]”) (emphasis added).

The Louisiana Commission is incorrect that FPA section

309 “obligates” the Commission to provide its requested relief. See

La. Pub. Serv. Comm’n v. FERC, 772 F.3d 1297, 1302-03 (D.C.

Cir. 2014).

App. 41

relevant equities.65 As noted above, the Commission is

cognizant that, when the 2009 Amendment was introduced, parties may not have expected that accounting

corrections stemming from a bandwidth calculation for

the 2005 period would impact bandwidth test years for

which the 2009 Amendment was applicable, and that

this possibility was not addressed in the 2009 Filing

Letter or Settlement Agreement. That said, there is

no suggestion that the parties lacked adequate notice of the 2009 Amendment. Nor do we agree with

the Louisiana Commission that the timing of this

proceeding warrants additional remedial relief. As explained above, the Louisiana Commission’s arguments

concerning delay incorrectly presume that the 2009

Amendment would have been different if the 2005

bandwidth calculation required by Opinion No. 561

had been conducted at an earlier date.

D. Retroactive Ratemaking

28. Finally, we disagree with the Louisiana Commission’s argument that applying the 2009 Amendment to

debits resulting from the 2005 deferral constitutes

retroactive ratemaking.66 The Louisiana Commission

argues that it is impermissibly retroactive to apply the

2009 Amendment to some debits resulting from a

2005 deferral, but none of the credits.67 The Louisiana

See Xcel Energy Servs. Inc. v. FERC, 815 F.3d at 955 (remanding for the Commission to consider the relevant equities in

deciding whether to order refunds).

Rehearing Request at 22-23.

Id. at 22.

App. 42

Commission also states that the 2009 Amendment applies to deferral decisions because the 2009 Amendment excludes the effects “resulting from a regulatory

decision that causes the deferral of the recovery of current years costs or the amortization of previously deferred costs.”68 The Louisiana Commission asserts that

applying the 2009 Amendment to a decision made

prior to the amendment is retroactive ratemaking.69

29. As noted above, we disagree with the Louisiana

Commission’s interpretation of the 2009 Amendment

and reiterate that the 2009 Amendment applies both

prospectively to newly established deferrals beginning

in 2008 as well as amortizations that occurred in the

2008 and 2009 bandwidth periods, stemming from a

previously established deferral.70 We do not view this

as retroactive ratemaking. Instead, application of the

2009 Amendment is a straightforward recognition of

the bandwidth formula rate, the applicable rate, in effect for 2008 and 2009. As the Commission explained

in the Compliance Order:

If, for 2008 and 2009, Entergy had reclassified

amortization related to the three regulatory

assets deferrals from Accounts 407.3 and

407.4 to Account 555, and then recalculated

bandwidth payments and receipts for 2008

and 2009 without excluding that amortization, its calculation would have violated the

filed rate for those test years. No party at

Id. at 23 (emphasis in pleading).

Id.

See supra P 20.

App. 43

hearing argued that the effective date or application of the 2009 Amendment should be

reopened or altered, and the Commission did

not direct Entergy to disregard the 2009

Amendment when following the Commission’s directives in Opinion No. 561.71

30. The Louisiana Commission’s citation to Transwestern Pipeline Co. v. FERC to support its retroactive ratemaking argument is similarly unpersuasive.72 In that

case, the court ruled that the Commission could not

adopt a new rate imposing liability for rate undercollections accrued prior to the notice of the new rate.73

However, here, there is no notice issue with regard to

the 2009 Amendment because the Louisiana Commission, as a timely intervenor in the proceeding,74 was

aware of both the 2009 Amendment and its effective

date as early as June 11, 2009. In fact, the 2009

Amendment and its effective date were supported by

all parties in the proceeding, including the Louisiana

Commission.75 The fact that parties may not have been

able to predict that the 2009 Amendment would eventually prevent accounting corrections from the 2005

test period from being included in subsequent-year

bandwidth calculations does not allow us to ignore the

Compliance Order, 167 FERC ¶ 61,186 at P 28.

Rehearing Request at 23 (citing Transwestern Pipeline Co.

v. FERC, 897 F.2d 570 (D.C. Cir. 1990) (Transwestern Pipeline)).

Transwestern Pipeline, 897 F.2d at 580.

Louisiana Public Service Commission, Notice of Intervention and Comments, Docket No. ER09-1185-000, at 2 (filed June

11, 2009).

Entergy Servs., Inc., 128 FERC ¶ 61,069 at P 4.

App. 44

filed rate for test years 2008 and 2009. Accordingly, the

Louisiana Commission has not persuaded us to alter

the Commission’s previous findings.

The Commission orders:

The rehearing request is hereby denied, as discussed in the body of this order.

By the Commission.

(SEAL)

Nathaniel J. Davis, Sr.

Deputy Secretary

App. 45

167 FERC ¶ 61,186

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners:

Neil Chatterjee, Chairman;

Cheryl A. LaFleur,

Richard Glick, and

Bernard L. McNamee.

Louisiana Public

Service Commission

Docket No.

EL01-88-021

Entergy Services, Inc.

ORDER ON COMPLIANCE

(Issued May 30, 2019)

1. On July 16, 2018, Entergy Services, Inc. (Entergy)

filed a compliance filing as required by Opinion No.

561.1 Opinion No. 561 addressed rates filed by Entergy

on behalf of the Entergy Operating Companies (Operating Companies),2 implementing the Commission’s

bandwidth formula for a seven-month period from

June 1, 2005 through December 31, 2005, as required

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., Opinion No.

561, 163 FERC ¶ 61,116 (2018).

The five Operating Companies involved in this proceeding

were, at the time of this filing: Entergy Arkansas, Inc. (Entergy

Arkansas); Entergy Louisiana, Inc. (Entergy Louisiana); Entergy

Mississippi, Inc. (Entergy Mississippi); Entergy New Orleans,

Inc. (Entergy New Orleans); and Entergy Gulf States, Inc. (Entergy Gulf States). At the end of 2007, Entergy Gulf States was

split into Entergy Texas, Inc. (Entergy Texas) and Entergy Gulf

States Louisiana, LLC (Entergy Gulf States Louisiana).

App. 46

by a prior order.3 As discussed below, in this order we

accept Entergy’s compliance filing.

Background

2. This case arose from a complaint filed by the Louisiana Public Service Commission (Louisiana Commission) against Entergy and the Operating Companies

concerning the Entergy System Agreement’s requirement that production costs be “roughly equal” among

the Entergy Operating Companies. Upon review of an

Initial Decision,4 in Opinion Nos. 480 and 480-A,5 the

Commission determined that rough production cost

equalization on the Entergy system had been disrupted, and that a numerical bandwidth of +/- 11 percent was an appropriate remedy. This remedy, usually

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 137 FERC

¶ 61,047, at P 34 (2011).

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 106 FERC

¶ 63,012 (2004).

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., Opinion No.

480, 111 FERC ¶ 61,311, at P 136 (2005), order on reh’g, Opinion

No. 480-A, 113 FERC ¶ 61,282 (2005), order on compliance, 117

FERC ¶ 61,203 (2006) (November 2006 Compliance Order), order

on reh’g and compliance, 119 FERC ¶ 61,095 (2007) (April 2007

Compliance Order), aff ’d in part and remanded in part sub nom.

La. Pub. Serv. Comm’n v. FERC, 522 F.3d 378 (D.C. Cir. 2008)

(Louisiana Remand), order on remand, 137 FERC ¶ 61,047 (2011)

(2011 Order on Remand), order dismissing reh’g, 137 FERC

¶ 61,048 (2011), order on reh’g, 146 FERC ¶ 61,152 (2014) (2014

Order on Rehearing), order denying reh’g, 153 FERC ¶ 61,034

(2015) (2015 Order Denying Rehearing II), remanded, La. Pub.

Serv. Comm’n v. FERC, 866 F.3d 426 (D.C. Cir. 2017) (affirming

2011 Order on Remand and 2014 Order on Rehearing).

App. 47

referred to as the bandwidth remedy or bandwidth formula, changes the allocation of production costs among

the Operating Companies on an annual basis to maintain rough production cost equalization. Opinion No.

480, issued June 1, 2005, implemented the bandwidth

remedy prospectively based on a full calendar year of

data, i.e., data for 2006, with payments beginning in

June 2007 after calendar year 2006 data were available. Entergy subsequently submitted a compliance filing containing its proposed bandwidth formula, as part

of the System Agreement. The Commission accepted

the bandwidth formula, to be applied prospectively for

production costs incurred during calendar year 2006

and all calendar years thereafter.6

3. In its remand7 of Opinion Nos. 480 and 480-A, the

United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) held that the Commission

had not provided a reasonable explanation for the

Commission’s decision to delay implementation of the

bandwidth remedy until a full year of data had become

available for the 2006 test year. In the subsequent 2011

Order on Remand, the Commission held that it would

implement the bandwidth remedy on June 1, 2005, the

date the Commission issued Opinion No. 480, determining that the rates were unjust and unreasonable.

The Commission directed Entergy to submit a compliance filing calculating the bandwidth payments and

See November 2006 Compliance Order, 117 FERC ¶ 61,203;

April 2007 Compliance Order, 119 FERC ¶ 61,095.

Louisiana Remand, 522 F.3d 378.

App. 48

receipts for the period June 1, 2005 through December

31, 2005 (2005 period).8

4. On February 28, 2014, the Commission issued an

order9 rejecting a compliance filing submitted by Entergy on December 19, 2011 in response to the 2011

Order on Remand. The Commission rejected Entergy’s

use of six months of data as the basis for the calculation for the seven-month period at issue, rather than

actual data for all seven months, and required Entergy to submit a subsequent compliance filing. The

Commission stated that in Entergy’s subsequent compliance filing, Entergy must perform bandwidth calculations for the 2005 period using monthly data

wherever possible. The Commission stated that, for

components of the bandwidth formula where monthto-month variations in costs are not meant to be captured, end-of-year amounts should be used.10

5. On April 29, 2014, as amended on May 7, 2014 and

May 23, 2014, Entergy submitted a compliance filing

(2014 Compliance Filing) in response to the 2014 Order Rejecting Compliance Filing. The 2014 Compliance

Filing calculated bandwidth payments and receipts for

the 2005 period. On October 15, 2015, the Commission

issued an order stating that the 2014 Compliance

Filing raises issues of material fact and setting the

2011 Order on Remand, 137 FERC ¶ 61,048 at P 37.

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 146 FERC

¶ 61,153 (2014) (2014 Order Rejecting Compliance Filing), order

denying reh’g, 153 FERC ¶ 61,033 (2015) (2015 Order Denying

Rehearing I).

Id. PP 26-27.

App. 49

matter for hearing and settlement judge procedures.11

On December 4, 2015, the participants in the settlement proceedings recommended initiation of hearing

procedures to be conducted with settlement procedures. On January 29, 2016, the Presiding Judge issued an Order Establishing Procedural Schedule for

the hearing to be conducted regarding the 2014 Compliance Filing.12

6. Following the hearing, the Presiding Judge issued

his initial decision13 on November 7, 2016. The Commission subsequently issued Opinion No. 561, affirming the Initial Decision and providing additional

discussion regarding an accounting issue. As pertinent

here, in Opinion No. 561 the Commission affirmed the

Presiding Judge’s decision “to change the accounting

for three regulatory asset deferrals from Accounts

407.3 (Regulatory Debits) and 407.4 (Regulatory Credits), which are not bandwidth-eligible accounts, to Account 555 (Purchased Power), which is a bandwidtheligible account.”14 This finding was based on the

Commission’s holding in Opinion No. 505, which

found that when the source of a regulatory asset is

identifiable, the Commission’s Uniform System of Accounts (USofA) requires the entries establishing and

Hearing Order, 153 FERC ¶ 61,032.

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., Docket No.

EL01-88-015, Order Establishing Procedural Schedule (Jan. 29,

2016).

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 157 FERC

¶ 63,018 (2016).

Opinion No. 561, 163 FERC ¶ 61,116 at P 119.

App. 50

amortizing a regulatory asset to be credited and

charged to the same account that would have been

charged if the item had been included in income when

incurred.15

7. The Commission agreed with the Louisiana Commission that once accounting errors are shown to be

relevant to the 2005 bandwidth calculation, the Operating Companies should be required to correct their

FERC Form 1 reports for the three regulatory assets

at issue for subsequent bandwidth test years, and

make corresponding corrections to the bandwidth payments and receipts for those test years, to ensure that

legitimate production costs are properly accounted for

on the FERC Form 1s.16 The Commission also affirmed

the Presiding Judge’s determination that accounting

corrections should be limited to accounting adjustments that have been shown to have a bandwidth implication.17 The Commission directed Entergy to revise

and refile the Operating Companies’ FERC Form 1s to

correct the accounting for the regulatory assets for

subsequent years, to “revise and refile” the bandwidth

filings in accordance with the refiled FERC Form 1s,

and to “calculate the revised tariff payments and receipts among the Operating Companies for the test

years affected.”18

Id. (citing Opinion No. 505, 130 FERC ¶ 61,023 at PP 262-

263).

Id. P 121.

Id. P 120.

Id. P 121.

App. 51

II.

Entergy’s Compliance Filing

8. Entergy’s compliance filing contains the comprehensive bandwidth recalculation report showing the

payment/receipt amounts based on the 2005 period

(June 1 through December 31, 2005) data, including

workpapers. Entergy’s filing also contains the recalculation report showing revised payment/receipt

amounts based on 2006 and 2007 data following accounting corrections directed by the Commission in

Opinion No. 561.19

9. Entergy’s compliance filing addresses, inter alia,

accounting changes for three regulatory assets. Entergy states that, in Opinion No. 561, the Commission

“affirm[ed] the Presiding Judge’s decision to adopt

Trial Staff ’s recommendation to change the accounting for three regulatory asset deferrals from Accounts

with the Commission’s directive, Entergy has corrected the accounting for the three identified regulatory asset deferrals for the 2005 period and the

associated amortization in 2006 and 2007. Entergy

asserts that, beginning with the 2008 bandwidth calculation, the bandwidth formula was amended (2009

Entergy Compliance Filing at 12-13.

Id. at 6 (citing Opinion No. 561, 163 FERC ¶ 61,116 at

P 119).

App. 52

Amendment)21 to require purchased power costs to be

reflected in the year in which they are incurred.22 Entergy states that, specifically, the definition of Purchased Power Expense was modified to exclude “the

effects, debits, and credits, resulting from a regulatory decision that causes the deferral of the recovery

of costs or the amortization of previously deferred

costs.”23 Entergy contends that, therefore, in bandwidth calculations for years subsequent to 2007, accounting changes associated with the regulatory assets

identified in Opinion No. 561 are not relevant to the

bandwidth calculation.24

III. Notice of Filing and Responsive Pleadings

10. Notice of Entergy’s compliance filing was published in the Federal Register, 83 Fed. Reg. 34,840

(2018), with interventions and protests due on or before August 6, 2018. The Louisiana Commission filed

a protest. Entergy filed an answer to the Louisiana

Commission’s protest. The Louisiana Commission filed

an answer to Entergy’s answer.

The Commission accepted the 2009 Amendment with an

effective date of May 31, 2009. Entergy Servs., Inc., 128 FERC

¶ 61,069 (2009). Entergy filed the 2008 bandwidth calculation on

May 29, 2009. Entergy, Filing of Rates to Implement Opinion Nos.

480 and 480-A, Docket No. ER09-1224-000 (filed May 29, 2009).

Entergy Compliance Filing at 7 n.37.

Id. (citing Entergy Servs., Inc., 128 FERC ¶ 61,069 at P 6).

Id.

App. 53

A. Louisiana Commission’s Protest

11. The Louisiana Commission contends that Entergy did not follow the requirements of Opinion No.

561 in its compliance filing. The Louisiana Commission

explains that, in Opinion No. 561, the Commission ordered Entergy to change the 2005 deferrals of the three

regulatory assets from Account 407.4 to Account 555

and to reflect the related amortization of the deferred

costs in subsequent years in Account 555 as well.25 The

Louisiana Commission explains that Entergy did so for

2006 and 2007, but did not do so for 2008 and 2009.

The Louisiana Commission contends that this adjustment violates the Commission’s instructions to reflect

the changes “for any subsequent years.”26

12. The Louisiana Commission argues that Entergy’s

failure to include the 2008 and 2009 amortization

traps costs outside the bandwidth calculation and defeats the purpose of the amendment. The Louisiana

Commission contends that Entergy’s action also creates an imbalance in Entergy’s accounting for Entergy

Louisiana. The Louisiana Commission argues that the

deferral of $56 million in 2005 has not been corrected

by moving the deferral to Account 555. The Louisiana

Commission adds that, however, only $24.5 million of

the amortization has been moved to Account 555, while

$31 million remains in the wrong account – Account

407.4 – for 2008 and 2009. The Louisiana Commission

Louisiana Commission Protest at 4 (citing Opinion No.

561, 163 FERC ¶ 61,116 at P 121).

Id.

App. 54

adds that in this compliance proceeding Entergy is required to follow the directives in Opinion No. 561. The

Louisiana Commission argues that Entergy does not

have discretion to make changes based on late-arising

legal theories.27 The Louisiana Commission also notes

that Entergy did not request rehearing of the issue of

excluding the costs at issue in 2008 and 2009.

13. The Louisiana Commission argues that the 2009

Amendment was never intended to apply to an amortization of costs from a prior year that results from the

correction of an accounting error. The Louisiana Commission explains that, in Docket No. ER08-1056-000,

Entergy deferred purchased power costs from Account

555 rather than following its prior practice of deferring

them in Account 407.4. The Louisiana Commission explains that this change raised a concern that the costs

might not ultimately be reflected appropriately in

bandwidth filings. The Louisiana Commission further

explains that Entergy’s deferral was contested and the

parties eventually settled, agreeing to reflect the deferred costs in the year they were deferred rather than

over time.28

14. The Louisiana Commission contends that if the

Commission were to apply the 2009 Amendment, it

would create a conflict with Opinion No. 561. The Louisiana Commission argues that the bandwidth remedy does not require the exclusion of deferrals.29 The

Id. at 7.

Id. at 10.

Id. at 11 (citing Ex. ESI-3 at 48F (PURP variable)).

App. 55

Louisiana Commission contends that Opinion No. 561

required that current year deferrals be included in the

bandwidth calculation; i.e., the deferral is to be recognized in the appropriate account and be removed from

production costs in the test year. The Louisiana Commission adds that even if Entergy’s action did not violate Opinion No. 561, Entergy’s filing would be unjust

and unreasonable because it would exclude legitimate

production costs from the bandwidth calculation.30

15. The Louisiana Commission argues that applying

the 2009 Amendment to a deferral decision made in

2005 would be retroactive ratemaking. The Louisiana

Commission explains that the costs were deferred in

2005, before the 2009 Amendment was filed. The Louisiana Commission argues that, because the deferral

required the related amortization in 2008 and 2009,

the amortization cannot be separated from the deferral

in an attempt to avoid the rule against retroactive

ratemaking. The Louisiana Commission adds that the

2009 Amendment applies to deferral decisions, i.e., it

excludes the effects “resulting from a regulatory decision that causes the deferral of the recovery of current

years’ costs or the amortization of previously deferred

costs.”31 The Louisiana Commission explains that, unless the amendment is only applied prospectively to

deferral decisions, the results will be out of balance.

16. The Louisiana Commission argues that had

the remedy in this proceeding not been delayed, the

Id. at 16.

Id. at 17 (citing Ex. S-57 at 4 (emphasis added)).

App. 56

accounting would have been corrected long before the

2008 bandwidth filing. The Louisiana Commission contends that if the accounting for the deferrals had been

corrected, as is being required in this case, the accounting for subsequent years would have been corrected as

well. The Louisiana Commission explains that this

would have left no possibility of an incomplete correction that distorts the reflection of production costs in

the bandwidth calculation.32

B. Entergy’s Answer

17. In its answer, Entergy explains that the Commission held in Opinion No. 561 that “accounting corrections should be limited to accounting adjustments that

have been shown to have a bandwidth implication.”33

Entergy notes that, as it explained in its compliance

filing, the 2009 Amendment modified the definition of

Purchased Power Expense to exclude “the effects,

debits, and credits, resulting from a regulatory decision that causes the deferral of the recovery of costs or

the amortization of previously deferred costs.”34 Entergy contends that, because the Commission accepted

the 2009 Amendment with the requested date of May

31, 2009, for purposes of the 2008 bandwidth calculation (which was originally filed in 2009), the bandwidth

formula required Entergy to exclude amounts recorded

Id. at 18.

Entergy Answer at 2 (citing Opinion No. 561, 163 FERC

¶ 61,116 at P 120).

Id. (citing Entergy Servs., Inc., 128 FERC ¶ 61,069 at P 6).

App. 57

in Account 555 that resulted from the amortization of

deferred costs.35 Entergy notes that this language was

not in the formula for purposes of the 2005, 2006, or

2007 bandwidth calculation. Entergy contends that no

party at hearing argued that the effective date of the

2009 Amendment should be altered.36

C. Louisiana Commission’s Answer and

Motion to Lodge

18. In its answer, the Louisiana Commission argues

that Entergy errs in relying on the 2009 Amendment

to prevent recognizing the amortization of 2005 deferred costs in 2008 and 2009 in the 2008 and 2009

bandwidth calculations. The Louisiana Commission

reiterates that the 2009 Amendment was intended to

apply only to deferrals going forward and was intended

to ensure that legitimate costs are included, rather

than excluded from the bandwidth calculation. The

Louisiana Commission adds that in Entergy’s transmittal letter for the 2009 Amendment, Entergy stated

that:

[Entergy] is proposing that the Amendment

apply only to new deferrals beginning in 2008.

Thus, the Amendment will apply for the first

time to the bandwidth calculation that will be

Id. at 3.

Id. at 4.

App. 58

on or about May 29, 2009, which will be based

on 2008 costs.37

19. The Louisiana Commission adds that in accepting the 2009 Amendment, the Commission accepted

the change to the bandwidth formula as proposed by

Entergy.38 The Louisiana Commission contends that,

accordingly, the 2009 Amendment does not apply to

deferral decisions made before 2008. The Louisiana

Commission adds that the 2009 Amendment’s “goingforward intent” is reinforced by the language of the

amendment itself, which requires the exclusion of “the

effects, debits and credits, resulting from a regulatory

decision that defers costs.” The Louisiana Commission

argues that, in this case, the Commission required that

the entire amount of deferrals for 2005 be recognized

in Account 555 as credits, but Entergy only recognized

a portion of the debits to Account 555 necessary to

amortize the deferrals. The Louisiana Commission

argues that in the subsequent bandwidth calculations,

Entergy recognized the debits for 2006 and 2007, but

not for 2008 and 2009.39

20. The Louisiana Commission adds that, at hearing,

Trial Staff ’s witness testified that it would be “unfair”

Louisiana Commission Answer at 3 (citing Entergy, Transmittal Letter, Docket No. ER09-1185-000, at 5 n.15 (filed May 21,

2009)).

Id. at 4 (citing Entergy Servs., Inc., 128 FERC ¶ 61,069,

at P 11 (2009) (“Entergy’s proposed amendment to the System

Agreement, effective May 31, 2009, as requested.” (emphasis

added))).

Id. at 4.

App. 59

to exclude the amortization.40 The Louisiana Commission further adds that even Entergy advocated to

include the 2008 amortization in the bandwidth calculation. The Louisiana Commission contends that

Entergy’s witness stated that if the accounting recommendations for the deferrals were adopted for the 2005

period, “it should be necessary to recalculate the compliance filing for at least [b]andwidth test years 2006,

2007 and 2008.”41

21. The Louisiana Commission included with its answer a motion to lodge Entergy’s May 21, 2009 transmittal letter for the 2009 Amendment.

IV. Discussion

A. Procedural Matters

22. Rule 213(a)(2) of the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.213(a)(2) (2018),

prohibits an answer to a protest or an answer unless

otherwise ordered by the decisional authority. We will

accept the answers filed in this proceeding because

they have assisted us in our decision-making process.

We will also accept the Louisiana Commission’s motion

to lodge as part of its answer.

Id. at 5 (citing Tr. 357-58).

Id. at 5-6 (citing Ex. ESI-28 at 14-15).

App. 60

B. Commission Determination

23. We accept Entergy’s accounting changes for three

identified regulatory asset deferrals for the 2005 period and the associated amortization in 2006 and 2007

as in compliance with Opinion No. 561. In Opinion No.

561, the Commission adopted the Presiding Judge’s decision to change the accounting for the three deferrals

from Accounts 407.3 (Regulatory Debits) and 407.4

(Regulatory Credits), which are not bandwidth-eligible

accounts, to Account 555 (Purchased Power), which is

a bandwidth-eligible account. The Commission also affirmed the Presiding Judge’s determination that accounting corrections “should be limited to accounting

actions that have been shown to have a bandwidth implication.”42 The Commission also found that:

once accounting errors are shown to be relevant to the 2005 bandwidth calculation, the

Operating Companies should be required to

correct their FERC Form 1 reports for the

three regulatory assets at issue for subsequent bandwidth test years, and make corresponding corrections to the bandwidth

payments and receipts for those test years, to

ensure that legitimate production costs are

properly accounted for on the FERC Form 1

reports and reflected in rates under the filed

formula.43

24. However, as noted by Entergy, the 2009 Amendment to the bandwidth formula is directly relevant as

Opinion No. 561, 163 FERC ¶ 61,116 at P 120.

Id. P 121.

App. 61

to whether the amortizations for 2008 and 2009 should

be included in the bandwidth calculations for those

years.44 The 2009 Amendment revised the definition

of variable PURP in the bandwidth formula to include

the following language:

PURP = Purchased Power Expense recorded

in FERC Account 555, but excluding payments made pursuant to Section 30.09(d) of

this Service Schedule and excluding the effects, debits and credits resulting from a regulatory decision that causes the deferral of the

recovery of current year costs or the amortization of previously deferred costs.45

25. We find that, because the 2009 Amendment was

in effect for the 2008 and 2009 bandwidth calculations,

any revisions to the accounting for the 2005 regulatory

asset deferrals for 2008 and 2009 would have had no

effect on the bandwidth payments and receipts for

those years. Accordingly, given the Commission’s directive in Opinion No. 561 that accounting corrections

should be limited to adjustments that have a bandwidth implication, we find that Entergy was correct to

revise the accounting for the 2005 regulatory assets for

only the test periods in which those adjustments would

have a bandwidth implication – the 2005 period, 2006,

and 2007. Beginning with the 2008 bandwidth calculation, the 2009 Amendment was part of the bandwidth

formula on file and in effect and required the exclusion

Entergy, Filing to Amend the System Agreement, Docket

No. ER09-1185-000, at 6 (filed May 21, 2009).

Id., Attached First Revised Sheet No. 54 (emphasis added).

App. 62

of amortization associated with the regulatory asset

deferrals recorded in Account 555 from variable PURP.

26. We are not persuaded by the Louisiana Commission’s argument that failure to make the accounting

change for 2008 and 2009 would impermissibly result

in costs trapped outside the bandwidth calculation.

First, we note that, in its exceptions to the Initial Decision, the Louisiana Commission only objected to

“trapping legitimate production costs outside the

[b]andwidth [c]alculation through an incomplete correction of accounting errors . . . ”46 Here, any “trapping” of costs would be the result of the application of

the filed rate in effect in 2008 and 2009, not accounting errors. Further, we note that the Commission

stated in Opinion No. 561 that any ordered changes

in accounting with regard to the three regulatory assets “should be reflected in rates under the filed formula.”47

27. We disagree that application of the 2009 Amendment causes a conflict with Opinion No. 561. The Louisiana Commission is correct that the 2009 Amendment

was not in effect for the 2005 period, and Entergy does

not propose to apply it to bandwidth payments and

receipts for the 2005 period. However, the 2009

Amendment was the filed rate for the 2008 and 2009

bandwidth calculations. Accordingly, Entergy has no

discretion to disregard the 2009 Amendment when

making accounting adjustments for 2008 and 2009.

Louisiana Commission Brief on Exceptions at 62-63.

Opinion No. 561, 163 FERC ¶ 61,116 at P 123.

App. 63

Similarly, we disagree with the Louisiana Commission’s argument that application of the 2009 Amendment conflicts with the amendment’s “going-forward

intent.” The 2009 Amendment explicitly requires the

exclusion of the effects, debits and credits resulting

from a regulatory decision that causes the deferral of

the recovery of current year costs or the amortization

of previously deferred costs.

28. We also disagree with the Louisiana Commission’s

argument that not making accounting adjustments for

2008 and 2009 constitutes retroactive application of

the 2009 Amendment. If, for 2008 and 2009, Entergy

had reclassified amortization related to the three regulatory assets deferrals from Accounts 407.3 and 407.4

to Account 555, and then recalculated bandwidth payments and receipts for 2008 and 2009 without excluding that amortization, its calculation would have

violated the filed rate for those test years. No party at

hearing argued that the effective date or application of

the 2009 Amendment should be reopened or altered,

and the Commission did not direct Entergy to disregard the 2009 Amendment when following the Commission’s directives in Opinion No. 561. To the

contrary, at hearing Trial Staff stated that:

Any accounting corrections ordered in this

proceeding concerning an Operating Company’s amortization of purchased power expenses deferred to a regulatory asset account

cannot effect annual bandwidth implementation calculations beginning with the 2009

annual bandwidth calculation. This is so

App. 64

because beginning with the third annual

bandwidth implementation, the Form 1 Account 555 input variable “PURP” must be

adjusted to “exclud[e] the effects, debits and

credits, resulting from a regulatory decision

that causes the deferral of the recovery of current costs or the amortization of previously

deferred costs.”48

29. Lastly, we dismiss the Louisiana Commission’s

argument that the Commission should take into consideration the fact that if this proceeding had not been

delayed, the accounting would have been corrected

long before the filing of the 2008 bandwidth calculation. In a compliance proceeding, the Commission

considers only whether the filing complies with the underlying order.49 Entergy complied with the requirements of Opinion No. 561, while taking into account

the filed rate, i.e., the bandwidth formula on file and in

effect as of June 1, 2009 for the 2008 and 2009 bandwidth calculations. The Louisiana Commission did not

seek to modify or amend the applicable bandwidth formula for the 2008 and 2009 calculations, but instead

asks the Commission to arbitrarily set it aside here,

which we cannot do. The Commission was also clear

in addressing the Louisiana Commission’s exceptions

that the ordered changes in accounting should be “reflected in rates under the filed formula.”50 Accordingly,

we will accept Entergy’s compliance filing as filed, and

Second Revised Ex. S-56 at 23.

ISO New England Inc., 133 FERC ¶ 61,013, at P 22 (2010).

Opinion No. 561, 163 FERC ¶ 61,116 at P 121.

App. 65

decline the Louisiana Commission’s requested modifications.

The Commission orders:

Entergy’s compliance filing is hereby accepted, as

discussed in the body of this order.

By the Commission.

(SEAL)

Kimberly D. Bose,

Secretary.

App. 66

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

-----------------------------------------------------------------------

No. 20-1024

September Term, 2021

FERC-167FERC61186,

FERC-169FERC61247

Filed On: October 29, 2021

Louisiana Public Service Commission,

Petitioner

Federal Energy Regulatory Commission,

Respondent

--------------------------------Entergy Services, LLC and

Arkansas Public Service Commission,

Intervenors

BEFORE:

Srinivasan, Chief Judge; Henderson,

Rogers, Tatel, Millett, Pillard, Wilkins,

Katsas, Rao, Walker, and Jackson,

Circuit Judges

ORDER

Upon consideration of petitioner’s petition for rehearing en banc, the response thereto, and the absence

of a request by any member of the court for a vote, it is

ORDERED that the petition be denied.

App. 67

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

BY:

/s/

Daniel J. Reidy

Deputy Clerk

App. 68

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

-----------------------------------------------------------------------

No. 20-1024

September Term, 2021

FERC-167FERC61186,

FERC-169FERC61247

Filed On: October 29, 2021

Louisiana Public Service Commission,

Petitioner

Federal Energy Regulatory Commission,

Respondent

--------------------------------Entergy Services, LLC and

Arkansas Public Service Commission,

Intervenors

BEFORE:

Henderson, Pillard, and Katsas, Circuit Judges

ORDER

Upon consideration of petitioner’s petition for

panel rehearing filed on September 21, 2021, and the

response thereto, it is

ORDERED that the petition be denied.

App. 69

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

BY:

/s/

Daniel J. Reidy

Deputy Clerk

App. 70

163 FERC ¶ 61,116

UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Kevin J. McIntyre, Chairman;

Cheryl A. LaFleur, Neil

Chatterjee, Robert F.

Powelson, and Richard Glick.

Louisiana Public

Service Commission

Docket No. EL01-88-015

Entergy Services, Inc.

OPINION NO. 561

ORDER ON INITIAL DECISION

(Issued May 17, 2018)

1. This case is before the Commission on exceptions

to an Initial Decision1 issued November 7, 2016, and

involves a “bandwidth” calculation filing, covering a

seven-month period in 2005, submitted by Entergy

Services, Inc. (Entergy Services)2 on behalf of the Entergy Operating Companies (Operating Companies)3

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 157 FERC

¶ 63,018 (2016) (Initial Decision).

Entergy is a wholly-owned subsidiary of Entergy Corporation.

The five Operating Companies involved in this proceeding

were, at the relevant times for filing pursuant to this bandwidth

calculation filing: Entergy Arkansas, Inc. (Entergy Arkansas),

Entergy Louisiana, Inc. (Entergy Louisiana), Entergy Mississippi, Inc. (Entergy Mississippi), Entergy New Orleans, Inc.

App. 71

(collectively, Entergy).4 Entergy’s filing was made pursuant to a remand by the D.C. Circuit Court of Appeals

and subsequent Commission order. On October 15,

2015, the Commission issued an order5 accepting and

suspending Entergy’s proposed rates and establishing

hearing and settlement judge procedures. In this order,

as discussed below, we affirm the Presiding Judge’s

findings in the Initial Decision, with additional discussion regarding one accounting issue.

Procedural Background

2. The Commission has held that the System Agreement required that production costs be “roughly equal”

among those Operating Companies participating in

the System Agreement.6 In Opinion Nos. 480 and

(Entergy New Orleans), and Entergy Gulf States, Inc. (Entergy

Gulf States). At the end of 2007, Entergy Gulf States was split

into Entergy Texas, Inc. (Entergy Texas) and Entergy Gulf States

Louisiana, LLC (Entergy Gulf States Louisiana).

As explained below, Entergy bandwidth calculation filings

are annual filings to achieve rough production cost equalization

among the Operating Companies participating in the Entergy

System Agreement (System Agreement). The System Agreement

terminated in 2016.

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 153 FERC

¶ 61,032 (2015) (Hearing Order), reh’g denied, 155 FERC ¶ 61,118

(2016), aff ’d, Ark. Pub. Serv. Comm’n v. FERC, No. 16-1193 (D.C.

Cir. Jan. 30, 2018).

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., Opinion No.

480, 111 FERC ¶ 61,311, at P 136 (2005), order on reh’g, Opinion

No. 480-A, 113 FERC ¶ 61,282 (2005), order on compliance, 117

FERC ¶ 61,203 (2006) (November 2006 Compliance Order), order

on reh’g and compliance, 119 FERC ¶ 61,095 (2007) (April 2007

Compliance Order), aff ’d in part and remanded in part sub nom.

App. 72

480-A, the Commission held that the Entergy System

was no longer in rough production cost equalization

and adopted a numerical bandwidth remedy. This

bandwidth remedy achieves rough production cost

equalization on the Entergy System among the Operating Companies participating in the System Agreement by not allowing any Operating Company to have

production costs that are more than 11 percent above

or below the Entergy System average production

costs. Under the bandwidth remedy, each calendar

year, the production costs of each Operating Company are calculated, with payments made by the low

cost Operating Company(ies) to the high cost Operating Company(ies) such that, after reflecting the payments and receipts, no Operating Company would

have production costs more than 11 percent above the

Entergy System average or more than 11 percent below the Entergy System average. The 11 percent figure

was based on historical cost data, such that the bandwidth remedy would apply if the Entergy System exceeded historical cost disparities.7

3. In Opinion No. 480, issued June 1, 2005, the

Commission found that the bandwidth remedy should

La. Pub. Serv. Comm’n v. FERC, 522 F.3d 378 (D.C. Cir. 2008)

(Louisiana Remand), order on remand, 137 FERC ¶ 61,047 (2011)

(2011 Order on Remand), order dismissing reh’g, 137 FERC

¶ 61,048 (2011), order on reh’g, 146 FERC ¶ 61,152 (2014) (2014

Order on Rehearing), order denying reh’g, 153 FERC ¶ 61,034

(2015) (2015 Order Denying Rehearing II), remanded, La. Pub.

Serv. Comm’n v. FERC, 866 F.3d 426 (D.C. Cir. 2017) (affirming

2011 Order on Remand and 2014 Order on Rehearing).

Opinion No. 480, 111 FERC ¶ 61,311 at P 144.

App. 73

apply prospectively starting in calendar year 2006,

with the first payments, based on calendar year 2006

production costs, occurring in 2007. Entergy subsequently submitted a compliance filing containing its

proposed bandwidth formula, as part of the System

Agreement. The bandwidth formula was accepted by

the Commission8 to be applied prospectively for production costs incurred during calendar year 2006 and

all calendar years thereafter.

4. In its remand9 of Opinion Nos. 480 and 480-A, the

United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) held that the Commission

had not provided a reasonable explanation for the

Commission’s decision to delay implementation of the

bandwidth remedy until a full year of data had become

available for the 2006 test year. The court held that the

Commission’s argument that use of the first calendar

year of data was “the most appropriate and equitable

way” to implement the bandwidth remedy was a conclusion rather than a reason, and that the Commission

had failed to explain why it believed that the first calendar year was the most equitable time.10

5. In the subsequent 2011 Order on Remand, the Commission held that it would implement the bandwidth

remedy on June 1, 2005, the date the Commission

See November 2006 Compliance Order, 117 FERC ¶ 61,203;

April 2007 Compliance Order, 119 FERC ¶ 61,095 (2006 Compliance Tariff ).

Louisiana Remand, 522 F.3d 378.

Id. at 400.

App. 74

issued Opinion No. 480 determining that the rates

were unjust and unreasonable. The Commission stated

that allowing the bandwidth remedy to be implemented on June 1, 2005 is consistent with the court’s

direction that, absent a reasonable explanation for a

delay to implement the bandwidth remedy, it would be

arbitrary and capricious for the Commission to delay

implementation of a just and reasonable rate.11 The

Commission directed Entergy to submit a compliance

filing calculating the bandwidth payments and receipts for the period June 1, 2005 through December

31, 2005 (2005 period).12

6. On February 28, 2014, the Commission issued an

order13 rejecting a compliance filing submitted by Entergy on December 19, 2011 in response to the 2011

Order on Remand. The Commission rejected Entergy’s

use of six months of data as a basis for the calculation

for the seven-month period at issue, rather than actual

data for all seven months, and required Entergy to submit a subsequent compliance filing. The Commission

stated that in Entergy’s subsequent compliance filing,

Entergy must perform bandwidth calculations for the

2005 period using monthly data wherever possible.

2011 Order on Remand, 137 FERC ¶ 61,047 at P 34. The

Commission denied a Louisiana Commission request for rehearing regarding these rulings in the 2014 Order on Rehearing. 2014

Order on Rehearing, 146 FERC ¶ 61,152 at P 33.

Id.

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 146 FERC

¶ 61,153 (2014) (2014 Order Rejecting Compliance Filing), order

denying reh’g, 153 FERC ¶ 61,033 (2015) (2015 Order Denying

Rehearing I).

App. 75

The Commission stated that, for components of the

bandwidth formula where month-to-month variations

in costs are not meant to be captured, end-of-year

amounts should be used.14 The Commission also stated

that payments associated with the 2005 period must

include interest.15

II.

Entergy’s Filing

7. On April 29, 2014, as amended on May 7, 2014 and

May 23, 2014, Entergy submitted a compliance filing

in response to the 2014 Order Rejecting Compliance

Filing. The compliance filing calculated bandwidth

payments and receipts for the 2005 period. As part of

its compliance filing, as amended, Entergy filed a comprehensive recalculation report showing the payment/

receipt amounts based on the 2005 monthly data. Entergy stated that the sources of the monthly data are

the actual books and records of each Operating Company that existed at that time. Entergy contended that

it used monthly data as the source for those variables

not based on data as of December 31, 2005, e.g., rate

base components use year-end balances. Entergy

stated that with respect to the Demand Ratio and Entergy Ratio, Entergy applied a seven-month average

balance. Entergy states that the resulting variations

or disparities from the system average cost for each

Operating Company are as follows. Variations below

the system average are in parentheses.

Id. PP 26-27.

Id. P 30.

App. 76

Operating Company

% Initial

% Final

Disparity

(Before Remedy) (After Remedy)

Entergy Arkansas

(23.37%)

(11.00)%

Entergy Gulf States

Louisiana

13.92%

5.64%

Entergy Louisiana

(1.04)%

Entergy Mississippi

10.56%

5.64%

Entergy New

Orleans

6.79%

5.64%

Entergy Texas

13.54%

5.64%

8. As shown above, Entergy Arkansas has an initial

disparity in the Compliance Filing exceeding the plus

or minus 11 percent from system average costs set

forth in Opinion No. 480 and 480-A. The payments and

receipts pursuant to Service Schedule MSS-3 section

30.11 are as follows:

Company

Entergy Arkansas

(Payment)/Receipt

($ Millions)

($167.3)

Entergy Gulf States Louisiana

$72.8

Entergy Louisiana

$0.0

Entergy Mississippi

$33.2

Entergy New Orleans

$2.1

Entergy Texas

$59.2

App. 77

9. With regard to interest calculations, Entergy

stated that it had computed interest on the payments

and receipts based on the calculations included in its

compliance filing. Entergy stated that interest was

compounded quarterly from June 1, 2006 through May

14, 2014, the date upon which its current compliance

filing payments will be made.

Company

(Payment)/Receipt

($ Millions)

(Interest Amounts)

Entergy Arkansas

($56.5)

Entergy Gulf States Louisiana

$24.0

Entergy Louisiana

$0.0

Entergy Mississippi

$11.0

Entergy New Orleans

$0.5

Entergy Texas

$21.0

10. On October 15, 2015, the Commission issued an

order stating that the compliance filing raises issues of

material fact and setting the matter for hearing and

settlement judge procedures.16 On December 4, 2015,

the participants in the settlement proceedings recommended initiation of hearing procedures to be conducted with settlement procedures.

11. On July 11, 2016, the parties and Commission

trial staff (Trial Staff) filed a Joint Statement of

Hearing Order, 153 FERC ¶ 61,032.

App. 78

Contested Issues and Positions17 in accordance with

the procedural schedule. The parties and Trial Staff

identified thirteen issues to be decided in this case.18

12. On June 30, 2016, Entergy filed a motion for partial summary judgment in this proceeding.19 Entergy’s

motion asserted that the Commission had already

ruled on the applicable tariff in this proceeding and

that the bandwidth formula accepted in the Commission’s prior orders governs the calculation of payments

and receipts for the 2005 period. On July 28, 2016, the

Presiding Judge issued a partial initial decision,20 finding that the Compliance Tariff filed by Entergy on December 18, 2006 constitutes the bandwidth formula

that should be used in this proceeding. The Presiding

Judge also summarily disposed of certain other issues

in this case pertaining to the application of the compliance tariff. On May 17, 2018 the Commission issued an

order21 affirming the Partial Initial Decision.

Entergy July 11, 2016 Joint Statement of Contested Issues

and Positions at 1-45.

In order to maintain consistency with briefs and exhibits

filed in this proceeding, the issues discussed herein (i.e., Issue

Nos. 4, 6, 12, and 13) retain the original numbers that were designated in the Joint Statement of Contested Issues and Positions

that were filed on July 11, 2016 in accordance with the procedural

schedule.

Entergy June 30, 2016 Motion for Partial Summary Disposition at 1.

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 156 FERC

¶ 63,018 (2016) (Partial Initial Decision).

La. Pub. Serv. Comm’n v. Entergy Servs., Inc., 163 FERC

¶ 61,117 (2018).

App. 79

III.

Initial Decision

13. On November 7, 2016, the Presiding Judge issued

the Initial Decision addressing those issues not already resolved in the Partial Initial Decision. Entergy,

Trial Staff, and the Louisiana Public Service Commission (Louisiana Commission) filed briefs on exceptions.

Entergy, Trial Staff, the Louisiana Commission, and

the Arkansas Public Service Commission (Arkansas

Commission) filed briefs opposing exceptions.

14. The Initial Decision covered various issues, including: (1) whether interest on payments related to

the 2005 bandwidth test period should be accrued from

June 1, 2005, the first day of the test period, or from

June 1, 2006, the date that those payments should

have been made; (2) whether Entergy Louisiana’s Net

Operating Loss Accumulated Deferred Income Tax

(ADIT) is attributable to the Entergy Louisiana’s 2001

“Vidalia tax deduction,” and, if so, whether it is appropriate to exclude Entergy Louisiana’s Net Operating

Loss ADIT recorded in Account 190 caused by the Vidalia tax deduction from the 2005 bandwidth calculation; (3) whether Entergy Louisiana’s accounting for

the leased portion of the Waterford 3 Nuclear Plant

sale/leaseback should be changed to be the same as the

accounting for the owned portion of the plant; (4)

whether the Operating Companies properly accounted

for regulatory asset deferrals and amortizations identified in Exhibits S-28 through S-32; and (5) whether

the deferrals and amortizations identified in Exhibits

S-28 through S-32 should affect the amount of costs reflected in the bandwidth calculation.

App. 80

15. In the Initial Decision, the Presiding Judge finds,

inter alia, (1) that the appropriate start date for interest on bandwidth payments in this proceeding is June

1, 2006; (2) that a portion of Entergy Louisiana’s Net

Operating Loss ADIT must be excluded from the ADIT

input variable of the bandwidth formula to the extent

that the ADIT is properly attributable to the Vidalia

tax deduction; (3) that Entergy Louisiana’s accounting

for the leased portion of the Waterford 3 plant should

be revised to reflect that it is a financing transaction;

(4) that Entergy did not properly account for certain

regulatory asset deferrals and amortizations identified

in Exhibits S-28 through S-32; and (5) that Entergy

will be required to determine the impact of accounting

changes on the bandwidth calculation for the 2005

bandwidth period and make a compliance filing to

change the result accordingly.

IV.

Discussion

16. Having fully evaluated the Initial Decision, the

parties’ briefs, and the record before us, we affirm the

Presiding Judge’s findings. Specifically, we affirm the

Presiding Judge’s findings that the appropriate start

date for interest is June 1, 2006. We also agree with the

Presiding Judge’s finding that a portion of Entergy

Louisiana’s Net Operating Loss ADIT is attributable

to the Vidalia tax deduction. We affirm the Presiding

Judge’s related finding that it is appropriate to exclude

from the 2005 bandwidth calculation Net Operating

Loss ADIT recorded in Account 190 that is attributable to the Vidalia tax deduction. We agree with the

App. 81

Presiding Judge that Entergy did not properly account

for certain regulatory asset deferrals. Although the

Presiding Judge did not address whether corrections

for the regulatory asset deferrals should be made for

years subsequent to the 2005 bandwidth period, we

find that making such corrections is necessary to ensure proper implementation of the filed rate.22 We also

agree with the Presiding Judge that Entergy must determine the impact of accounting changes as discussed

in this order and file a compliance filing.

17. Lastly, we note that no parties excepted to the

Presiding Judge’s ruling on whether Entergy Louisiana’s accounting for the leased portion of the Waterford 3 plant should be changed to be the same as the

accounting for the owned portion of the plant. Accordingly, we summarily affirm the Presiding Judge on this

issue.

A. Issue Four: Start Date for Interest

on Bandwidth Payments

1. Background

18. On February 28, 2014, the Commission issued

two orders in this proceeding ordering interest on

bandwidth payments for 2005 bandwidth period. In

The Presiding Judge noted that the omission from the Initial Decision of any argument raised by the participants in this

proceeding does not mean it that it has not been considered. Rather, it indicates that issues not specifically discussed or addressed have been considered and are rejected. Initial Decision,

157 FERC ¶ 63,018 at P 28.

App. 82

the 2014 Order on Rehearing, which addressed requests for rehearing of the 2011 Order on Remand, the

Commission granted the Louisiana Commission’s request that interest be required on the bandwidth payments in this proceeding.23 The Commission required

that interest be calculated on the payment/receipt

amounts as of June 1, 2006.24 In the 2014 Order Rejecting Compliance Filing, which rejected Entergy’s initial

compliance filing regarding bandwidth payments for

the 2005 bandwidth period, the Commission, inter alia,

agreed with the Louisiana Commission’s argument

that payments/receipts for the 2005 bandwidth period

must include interest.25

19. Entergy requested rehearing of the Commission’s

determination regarding interest in both orders, resulting in the issuance of two similar Commission orders26 on October 15, 2015. In the 2015 Order Denying

Rehearing I, the Commission rejected Entergy’s request for rehearing of the 2014 Order Rejecting Compliance Filing, again affirming the Commission’s

prior determination regarding interest.27 In the 2015

Order Denying Rehearing II, the Commission denied

2014 Order on Rehearing, 146 FERC ¶ 61,152 at P 42.

Id.

2014 Order Rejecting Compliance Filing, 146 FERC

¶ 61,153 at P 30. The 2014 Order Rejecting Compliance Filing

found that interest was required but did not specify a start date.

2015 Order Denying Rehearing I, 153 FERC ¶ 61,033 and

2015 Order Denying Rehearing II, 153 FERC ¶ 61,034 (jointly,

2015 Orders Denying Rehearing).

2015 Order Denying Rehearing I, 153 FERC ¶ 61,033 at

PP 12-16.

App. 83

Entergy’s request for rehearing of the 2014 Order on

Rehearing, affirming the Commission’s prior ruling

that interest must be included on payment/receipts for

the 2005 bandwidth period.28

20. In the 2005 bandwidth calculation, Entergy computed interest as of the date of issuance of transfer

payments and receipts among the Operating Companies, which is June 1, 2006.29 The Louisiana Commission argued that the 2015 Orders Denying Rehearing

indicated that the correct start date should be one year

earlier, June 1, 2005, the date on which the 2005 bandwidth period begins.30

2. Initial Decision

21. The Presiding Judge found that interest for the

2005 bandwidth period should begin to accrue as of

June 1, 2006. The Presiding Judge explained that there

is no overall rule dictating when the interest clock of a

remedy starts to run. The Presiding Judge explained

that the June 1, 2006 date was established in the 2014

Order on Rehearing, in which the Commission found

that:

In the instant case, due to the length of time

that has passed, we find that it is appropriate

to follow our general policy and require interest to be paid on the bandwidth remedy

2015 Order Denying Rehearing II, 153 FERC ¶ 61,034 at

PP 13-17.

Ex. ESI-2 at 6.

Louisiana Commission Post-hrg. Br. at 1.

App. 84

payments for the seven-month period in 2005

to ensure full compensation. As the court explained in Anadarko Petroleum Corp. v.

FERC, “interest is simply a way of ensuring

full compensation. This is why the delay between the time of the customers’ injury and

the granting of relief is a reason for awarding

interest, not denying it. . . .” This finding is

also consistent with our more recent orders

regarding the bandwidth remedy. Consistent

with those orders, we will direct that interest

be calculated on the payment/receipt amounts

from June 1, 2006 until the date of the Entergy Intra-System Bill that will reflect the

bandwidth calculation amounts for the sevenmonth 2005 period.31

22. The Presiding Judge explained that the Commission “muddied the waters” with regard to the interest

question in the 2015 Order Denying Rehearing II.32 In

that order, the Commission found:

On March 31, 2014, Entergy Services, Inc.,

(Entergy) requested rehearing of the Commission’s ruling in a prior order that Entergy

must include interest, beginning June 1, 2006,

and the recalculated bandwidth payment and

receipt amounts for the seven-month period

from June 1, 2005 through December 31,

2005. . . . The request for rehearing is denied.

2014 Order on Rehearing, 146 FERC ¶ 61,152 at P 42 (footnotes omitted) (emphasis added).

Initial Decision, 157 FERC ¶ 63,018 at P 36.

App. 85

Entergy also argues that the general policy

considerations set forth in Anadarko in support of interest are inapplicable to bandwidth

payments. However, the first policy consideration, just compensation, is fully applicable. In

the circumstances of this case, the implementation date of the bandwidth remedy has been

pushed back seven months to June 1, 2005,

and full compensation requires interest from

that date until the date of the Intra-System

bill that will reflect the bandwidth calculation

amounts for calendar year 2006.33

23. The Presiding Judge found that because the text

of the Order Denying Rehearing II contains irreconcilable provisions, it is appropriate to ignore the language

in the two 2015 orders denying rehearing and to rely

instead on the 2014 Order on Rehearing’s interest

start date of June 1, 2006. The Presiding Judge also

noted that there is no language in the Order Denying

Rehearing II that overrides the motivations of the

2014 Order on Rehearing that the June 1, 2006 start

date ensures “full compensation.”34

24. The Presiding Judge found that there is a practical problem with starting the interest clock on the first

day of implementation of the bandwidth remedy. The

Presiding Judge explained that the Compliance Tariff provides that bandwidth transfer payments and

2015 Order Denying Rehearing II, 153 FERC ¶ 61,034 at

PP 1, 13, 17 (emphasis added). The 2015 Order Denying Rehearing I contained identical language.

Initial Decision, 157 FERC ¶ 63,018 at P 40.

App. 86

receipts are computed on the basis of “the preceding

year’s results.”35 The Presiding Judge explained that

the amounts of the first set of transfer payments were

unknowable until the applicable test period was completed. The Presiding Judge found that, accordingly, it

would not be possible to establish as of the very first

day of that period which Operating Companies would

be making transfer payments, and which would be receiving payments, or even if payments were to be made

at all.36 The Presiding Judge found that the Commission “cannot have intended Entergy to embark on a

mathematically impossible task.”37

3. Briefs on Exceptions

25. The Louisiana Commission argues that the correct start date for interest associated with the 2005

bandwidth period is June 1, 2005. The Louisiana Commission explains that in the 2011 Order on Remand,

the Commission ordered the bandwidth remedy to be

implemented on June 1, 2005, and further ordered

Entergy to calculate bandwidth payments and receipts for the seven-month period of June 1, 2005

through December 31, 2005.38 The Louisiana Commission contends that the Commission found the System

Agreement rates to be unduly discriminatory as of that

Id. P 41 (citing Arkansas Commission Post-hg. Brief at 4-

5).

Id.

Id. (citing 2011 Order on Remand, 137 FERC ¶ 61,047 at

P 34) (emphasis added).

App. 87

date, and that it “would be arbitrary and capricious of

the Commission to delay implementation of a just and

reasonable rate.”39 The Louisiana Commission argues

that, consistent with established practice in the bandwidth proceedings, interest is due on delayed payments from the time the bandwidth rate is made

effective. The Louisiana Commission contends that the

payments are for the seven-month 2005 bandwidth period, and interest must be paid for the delay since

that time to ensure adequate compensation for the undue discrimination. The Louisiana Commission argues

that the Commission reiterated in numerous orders

that the bandwidth payments and receipts were “for”

the 2005 bandwidth period, with an effective date of

June 1, 2005.40 The Louisiana Commission argues that,

accordingly, there can be no serious question that the

rates at issue in this proceeding are effective on June

1, 2005, and that interest should flow from the same

date that rates are effective.

26. The Louisiana Commission contends that this

case is different from other bandwidth implementation

proceedings in that the rates, as Entergy has filed

them, are not based on a preceding year of data as required by Service Schedule MSS-3. The Louisiana

Commission explains that in the other cases, the bandwidth calculation was based on data from the year

Louisiana Commission Brief on Exceptions at 10 (citing

2011 Order on Remand, 137 FERC ¶ 61,047 at P 34).

Id. at 19-20 (citing 2014 Order Rejecting Compliance Filing, 146 FERC ¶ 61,153 at PP 1, 27; 2015 Order Denying Rehearing I, 153 FERC ¶ 61,033 at P 12).

App. 88

preceding the effective date of the rates. The Louisiana

Commission contends that, accordingly, unlike other

bandwidth implementation years, the “test period” and

the “rate effective period” are the same. The Louisiana

Commission argues that because the rate-effective period occurred many years ago, there is no need to use

a test year “proxy” to represent the rate-effective period.41

27. The Louisiana Commission contends that the interest start date should be based on the Commission’s

most recent expressions of will, which would support a

June 1, 2005 interest start date. The Louisiana Commission argues that although the 2014 Order on Rehearing establishes June 1, 2006 as the start date for

interest, the 2015 Orders Denying Rehearing required

that interest commence June 1, 2005.42 The Louisiana

Commission argues that the two orders should control

the start date for interest, as they are the most recent

and are consistent with the purpose of providing interest, i.e., ensuring just compensation. The Louisiana

Commission also argues that the order setting this

case for hearing is the latest, most applicable authority

on interest, and it recognized that payments associated with the 2005 bandwidth period “must include

interest.”43 The Louisiana Commission argues that the

Id. at 22.

Id. (citing 2015 Order Denying Rehearing II, 153 FERC

¶ 61,034 at P 17; 2015 Order Denying Rehearing I, 153 FERC

¶ 61,033 at P 16).

Id. at 24 (citing Hearing Order, 153 FERC ¶ 61,032 at P 6)

(emphasis added).

App. 89

Hearing Order also recognizes June 1, 2005 as the effective date for rates in this proceeding.44 The Louisiana Commission notes that the Hearing Order cites to

the 2014 Order Rejecting Compliance Filing, which

states that “bandwidth payments associated with the

[2005 bandwidth period] must also include interest.”45

The Louisiana Commission further notes that the 2014

Order Rejecting Compliance Filing also confirms that

the remedy in this proceeding is “for” the 2005 bandwidth period.46 The Louisiana Commission explains

that in response to Entergy’s request for rehearing of

the 2014 Order Rejecting Compliance Filing, the Commission issued the Order Denying Rehearing I, which,

according to the Louisiana Commission, specifies a

June 1, 2005 start date for interest.47 The Louisiana

Commission argues that, accordingly, the Hearing Order emerges from a line of Commission orders that recognize the June 1, 2005 effective date.

28. The Louisiana Commission argues that the Initial Decision erred in ignoring the 2015 Orders Denying Rehearing due to “irreconcilable” language, i.e.,

denying rehearing of the order listing June 1, 2006 as

the start date for interest, while, according to the

Id. (citing Hearing Order, 153 FERC ¶ 61,032 at P 22

n.30). The Hearing Order stated that June 1, 2005 is the effective

date for the rates in this proceeding, but did not discuss the start

date for interest.

Id. (citing 2014 Order Rejecting Compliance Filing, 146

FERC ¶ 61,153 at P 30).

Id. (citing 2014 Order Rejecting Compliance Filing, 146

FERC ¶ 61,153 at P 26).

Id. at 25.

App. 90

Louisiana Commission, stating that the interest start

date is June 1, 2005.48 The Louisiana Commission asserts that the Commission is free to clarify its orders

as long as it retains jurisdiction over the case. The Louisiana Commission argues that there is also an internal conflict in the 2014 Order on Rehearing. The

Louisiana Commission explains that in that order, the

Commission granted the Louisiana Commission’s request for rehearing, which requested a June 1, 2005

start date for interest, but inconsistently stated that

interest would start June 1, 2006. The Louisiana Commission adds that the Commission ruled that the

bandwidth remedy would be “for” the 2005 bandwidth

period.49 The Louisiana Commission argues that the

Initial Decision fails to explain how one “irreconcilable

conflict” differs from the other.50 The Louisiana Commission adds that because the 2014 Order Rejecting

Compliance Filing did not explicitly repeat the June 1,

2006 interest start date contained in the 2014 Order

on Rehearing, the Commission erred in referring to the

June 1, 2006 interest start date on rehearing of that

order in the 2015 Order Denying Rehearing I. The Louisiana Commission contends that the 2014 Order Rejecting Compliance Filing only agreed in general terms

Id. at 11.

Id. (citing 2014 Order on Rehearing, 146 FERC ¶ 61,152

at P 42).

Id.

App. 91

“that bandwidth payments associated with the sevenmonth period must include interest. . . .”51

29. The Louisiana Commission disputes the Initial

Decision’s finding that it would be mathematically impossible to calculate interest from June 1, 2005, because the amounts owed are not known until the

remedy period is completed.52 The Louisiana Commission argues that the Presiding Judge mistakes calculating interest for the period June 1, 2005 forward with

calculating interest on June 1, 2005. The Louisiana

Commission adds that it is not necessary to know the

amounts of the payments on June 1, 2005 to calculate

interest beginning June 1, 2005. The Louisiana Commission argues that, instead, once the payments were

known, refunds and interest on those refunds could be

calculated. The Louisiana Commission argues that

this could occur any time after Entergy’s filing to determine the payments for the 2005 period.53

30. The Louisiana Commission argues that both

section 205(e)54 and 206(b)55 of the Federal Power

Act (FPA) make clear that refunds are determined

from the commencement of the remedy period, when

the Commission determines the just and reasonable

rates and provides for paying interest. The Louisiana

Id. at 27 (citing 2014 Order Rejecting Compliance Filing,

146 FERC ¶ 61,153 at P 30).

Id. (citing Initial Decision, 157 FERC ¶ 63,018 at P 41).

Id. at 45.

16 U.S.C. § 824d(e) (2012).

16 U.S.C. § 824e(b) (2012).

App. 92

Commission contends that the amounts are never

known during the period being remedied, but they are

known once the Commission determines the refunds

for the rate-effective period. The Louisiana Commission argues that the Initial Decision would prevent the

Commission from ever attaching interest for a refund

period, because it assumes that interest has to be calculated during that period. The Louisiana Commission

contends that when unjust and unreasonable costs in

rates are refunded, the amounts owed are always calculated after the unjust and unreasonable rates were

assessed.56

31. The Louisiana Commission contends that a June

1, 2005 start date for interest is required by the Commission’s regulations, which state that “[i]nterest shall

be computed from the date of collection until the date

refunds are made. . . .”57 The Louisiana Commission

argues that, in this case, the payments would have

started on the date of the rates. The Louisiana Commission adds that, even if they were delayed a year, the

“date of collection” in the regulation is not the date that

bandwidth payments would have started, but instead

should be the date that the overpayments were “collected” from ratepayers who were deprived of the use

of their money from that date.58

Louisiana Commission Brief on Exceptions at 11.

Id. at 41 (citing 18 C.F.R. § 35.19a (2017) (emphasis

added).

Id. (citing San Diego Gas & Elec. v. Sellers of Energy, 105

FERC ¶ 61,066 (2003)).

App. 93

4. Briefs Opposing Exceptions

32. Entergy, the Arkansas Commission, and Trial

Staff all argue that the correct start date for interest

in this proceeding is June 1, 2006. Trial Staff contends

that the 2014 Order on Rehearing unambiguously establishes a June 1, 2006 interest start date and is the

controlling legal precedent, and that the Commission’s

subsequent orders support this finding. Trial Staff argues that the 2015 Orders Denying Rehearing support

a June 1, 2006 interest effective date. Trial Staff explains that both of the 2015 Orders Denying Rehearing

denied Entergy’s request for rehearing of the issue of

whether interest was due for the payments and receipts in the 2005 bandwidth period, but did not address a change in the interest effective date.59

33. Trial Staff argues that because the 2014 Order on

Rehearing is the only Commission order that directly

addresses the interest effective date, and rehearing of

that order was denied, the establishment of a June 1,

2006 interest start date must stand. Trial Staff disagrees with the Louisiana Commission’s assertion that

a sentence in the 2015 Orders Denying Rehearing referring to June 1, 2005 requires a change in the start

date. Trial Staff contends that the sentence appears in

a paragraph responding to a claim in Entergy’s request

for rehearing whether policy considerations regarding

the application of interest apply to this proceeding.

Trial Staff argues that given the context, it is clear that

the Commission was addressing policy about whether

Trail Staff Brief Opposing Exceptions at 14.

App. 94

interest should apply, not the date from which interest

should be calculated.60

34. Entergy explains that the remedy effective date

is not the same as the effective date for payments and

interest. Entergy contends that the Louisiana Commission blurs the rate effective date and the interest

start date by arguing that, because bandwidth payments are “for” the 2005 bandwidth period, interest

must be paid beginning June 1, 2005. Entergy explains

that the Commission has previously explained the distinction between the effective date of the bandwidth

remedy and the date on which payments should be

made. Entergy contends that in Opinion No. 480, the

Commission originally held that the bandwidth remedy would be “effective for calendar year 2006.”61 Entergy explains that in its subsequent compliance filing

in that proceeding, Entergy proposed a rate schedule

that utilized calendar year 2006 production cost data

to calculate payments beginning June 1, 2007. Entergy

explains that the Commission rejected the Louisiana

Commission’s arguments that a June 1, 2007 payment

date was inconsistent with the Commission’s prior ruling that the bandwidth remedy be effective for calendar year 2006, thereby drawing a clear distinction

between the effective date of the remedy and the effective date of the annual bandwidth payments.62

Id. at 16.

Entergy Brief Opposing Exceptions at 8 (citing Opinion

No. 480, 111 FERC ¶ 63,111 at P 145).

Id. (citing Opinion No. 480-A, 113 FERC ¶ 61,282 at P 47).

App. 95

35. The Arkansas Commission adds that interest

should be determined on bandwidth payments per the

bandwidth formula in Service Schedule MSS-3. The

Arkansas Commission asserts that the tariff language

provides that payments start on June 1, 2006 following

the 2005 bandwidth period, and failure to follow that

mandate would violate the as-filed bandwidth formula.63 The Arkansas Commission disagrees with the

Louisiana Commission’s argument that interest is required as of June 1, 2005 to address alleged unjust and

unreasonable “cost disparities” among the Operating

Companies existing on that date. The Arkansas Commission argues that the Commission requires interest

payments to provide the time value of payments received by the Operating Companies starting June 1,

2006, not on alleged overpayments beginning June 1,

2005. The Arkansas Commission explains that there

can be no such overpayments since the bandwidth payments for 2005 would not commence until June 1,

2006.64

36. Entergy and the Arkansas Commission argue

that the Presiding Judge correctly determined that

the Commission did not intend for Entergy to undertake a mathematically impossible task. Entergy agrees

with the Presiding Judge that the amounts of the

transfer payments “were unknowable until the applicable test period was completed.”65 Entergy explains

Arkansas Brief Opposing Exceptions at 4.

Id. at 5.

Entergy Brief Opposing Exceptions at 15 (citing Initial Decision at P 41).

App. 96

that, therefore, it would be impossible to establish as

of the very first day of the test period which Operating

Company would be making or receiving payments.66

The Arkansas Commission contends that the Louisiana Commission’s exception misses the point that even

if it were mathematically possible to determine payments beginning June 1, 2005, the bandwidth remedy

is prospective in nature, and applying the formula retroactively to June 1, 2005 would violate the filed rate.67

37. Trial Staff, Entergy, and the Arkansas Commission also disagree with the Louisiana Commission’s assertion that a June 1, 2006 start date for interest is

inconsistent with the Commission’s regulations. Trial

Staff disputes the Louisiana Commission’s contention

that 18 C.F.R. 35.19a, Refund requirements under suspension orders, is controlling and requires interest to

be paid from the date customers initially began paying

overcharges. Trial Staff explains that this date does

not apply because the Commission has stated repeatedly that the bandwidth remedy does not involve refunds.68 Entergy and the Arkansas Commission add

that even if the interest regulation were applicable

here, the Initial Decision correctly recognized that the

date of collection is the date on which bandwidth payments would have started, which is June 1, 2006.69

Id.

Arkansas Commission Brief Opposing Exceptions at 13.

Trial Staff Brief Opposing Exceptions at 31 (citing, e.g.,

Opinion No. 480, 111 FERC ¶ 61,311 at P 145).

Entergy Brief Opposing Exceptions at 14; Arkansas Commission Brief on Exceptions at 12.

App. 97

Trial Staff argues that the Louisiana Commission incorrectly argues that the FPA requires interest to be

paid on unjustified rates or charges. Trial Staff contends that the Louisiana Commission cites a permissive passage despite claiming a mandatory rule. Trial

Staff explains that the cited material notes that the

Commission “may by further order require . . . refund,

with interest . . . such increased rates or changes as by

its discretion shall be found not justified.”70

38. The Arkansas Commission adds that, contrary to

the assertion made by the Louisiana Commission, the

most recent relevant order supports a June 1, 2006 interest start date. The Arkansas Commission explains

that the Commission’s order on rehearing and clarification issued September 22, 2016, in Docket No. ER1

0- 13 50-005, concludes that the interest effective date

is June 1, 2006.71 The Arkansas Commission explains

that, in that order (regarding bandwidth payments for

calendar year 2009), interest is necessary on bandwidth payments given the delay since the June 1, 2010

effective date of such payments, “in order to ensure full

compensation.”72 The Arkansas Commission further

explains that, in support of its determination, the

Commission stated that “[t]his determination is also

consistent with numerous recent orders regarding

Trial Staff Brief Opposing Exceptions at 33 (citing 16

U.S.C. § 824d(e) (emphasis added)).

Arkansas Commission Brief Opposing Exceptions at 10

(citing Entergy Servs., Inc., 156 FERC ¶ 61,196, at P 151 (2016)).

Id.

App. 98

interest and the bandwidth calculation,”73 with a citation to a paragraph in the 2014 Order on Rehearing

that requires interest in this proceeding to be calculated from June 1, 2006. The Arkansas Commission argues that because the Louisiana Commission believes

that the interest start date should be determined by

the Commission’s most recent expression of will, the

Commission’s September 22, 2016 order in Docket No.

ER1 0- 13 50-005 should control the interest start date

in this proceeding.

5. Commission Determination

39. We affirm the Presiding Judge’s ruling that interest on bandwidth payments in this proceeding should

accrue from June 1, 2006. To the extent that any language in any prior order is ambiguous, we clarify that

June 1, 2006 is the correct date.

40. In the April 2007 Compliance Order, the Commission, in part, addressed the issue of interest to be applied to bandwidth payments and receipts.74 In that

order, the Commission denied a Louisiana Commission

request for rehearing and reaffirmed that interest was

not required on bandwidth payments.75 Subsequently,

after the D.C. Circuit remanded to the Commission

the matter of determining the effective date of the

Id. (citing 2014 Order on Rehearing, 146 FERC ¶ 61,152

at P 42).

April 2007 Compliance Order, 119 FERC ¶ 61,095 at PP

30-32.

Id. P 32.

App. 99

bandwidth remedy, and after the Commission issued

its 2011 Order on Remand establishing a June 1, 2005

effective date for the bandwidth remedy,76 the Commission determined in the 2014 Order on Rehearing that

interest would be required on bandwidth payments in

this proceeding.77 The Commission determined that

“due to the length of time that has passed . . . it is

appropriate to follow our general policy and require

interest to be paid on the bandwidth payments for

the seven-month period in 2005 to ensure full compensation.”78 The Commission unambiguously ordered

that “interest be calculated on the payment/receipt

amounts from June 1, 2006 until the date of the Entergy IntraSystem Bill that will reflect the bandwidth

recalculation amounts for the seven-month period.”79

No party sought rehearing of the Commission’s ruling

on the effective date for interest. June 1, 2006 is therefore the correct date from which to calculate interest.

41. The Louisiana Commission argues incorrectly

that the Commission changed the start date to June 1,

2005 when the Commission denied Entergy’s request

for rehearing on the question of whether, not when, to

apply interest in the 2015 Orders Denying Rehearing.

The Louisiana Commission’s argument relies on a single sentence in the nearly identical 2015 orders. However, the purpose of those orders was not to change the

2011 Order on Remand, 137 FERC ¶ 61,047 at P 34.

2014 Order on Rehearing, 146 FERC ¶ 61,152 at PP 41-42.

Id. P 42.

Id. (emphasis added).

App. 100

effective date for interest. Rather, the 2015 Orders

Denying Rehearing only address the question of

whether interest should apply, not the date from which

interest should apply. Each of the relevant paragraphs

in the 2015 Orders Denying Rehearing describe Entergy’s request for rehearing and confirm that the

scope of the order is limited to whether interest should

apply. The 2015 Orders Denying Rehearing do not

meaningfully delve into the interest effective date

specified in the 2014 Order on Rehearing Accordingly,

we reject the argument that the Commission expressly

intended in those orders to reset that date to June 1,

2005.80

42. Moreover, the Commission made clear in the 2015

Orders Denying Rehearing that its decision to require

interest for the 2005 bandwidth calculation was “consistent with numerous recent orders regarding interest and the bandwidth formula,”81 which required that

interest be effective June 1 of the year following the

test period subject to the annual bandwidth calculation (i.e., when annual bandwidth payments and receipts occur).82 For example, in the first and second

Trial Staff Brief Opposing Exceptions at 14.

2015 Order Denying Rehearing I, 153 FERC ¶ 61,033 at P

12 n.19; 2015 Order Denying Rehearing II, 153 FERC ¶ 61,034 at

P 13 n.25).

See, e.g., April 2007 Compliance Order, 119 FERC

¶ 61,095 at PP 24-25 (noting that the 2007 bandwidth calculation

was based on a 2006 test year with payments to begin in June

2007); Entergy Servs., Inc., Opinion No. 518, 139 FERC ¶ 61,105,

at P 3 (2012) (noting that “Entergy is required, by June 1 of each

App. 101

bandwidth calculation filings, in Docket Nos. ER07956 and ER08-1056, respectively, interest was required

from the payment date, i.e., June 1 of the year following the test period.83 The 2014 Order on Rehearing, the

2014 Order Rejecting Compliance Filing, and the 2015

Orders Denying Rehearing all cite to the relevant orders in these two dockets, noting that the interest ruling for the instant proceeding is “consistent with

[these] more recent orders.” Furthermore, testimony

provided at hearing by Entergy witness Hunt indicated that all of the bandwidth calculations for which

interest is required would include interest from this

date, not including the test period.84 Accordingly, we

find that this approach, as specified in the Commission’s orders and relied upon for the June 1, 2006 interest requirement in this proceeding, should be

followed here rather than the Louisiana Commission’s

proposal to apply interest from the remedy effective

date.

year, to make a compliance filing implementing the bandwidth

formula using the prior year’s production costs.”).

Entergy Servs., Inc., 139 FERC ¶ 61,104, at P 13 (2012)

(requiring Entergy to calculate interest from June 1, 2007 for the

2006 bandwidth calculation); Entergy Servs., Inc., 142 FERC

¶ 61,011, at P 21 (requiring Entergy to calculate interest from

June 1, 2008 for the 2007 bandwidth calculation). See also Entergy Arkansas, Inc., 148 FERC ¶ 61,088, at PP 13-14 (2014) (ordering Entergy to file a new compliance filing “based on the 2006

and 2007 calendar year data, with interest, from June 1, 2007 or

June 1, 2008, as appropriate.”).

Tr. 275:17-22; Tr. 285:5-22.

App. 102

43. Given that our recent orders concerning interest

and the bandwidth formula require that interest be effective June 1 of the year following the test year, we

reject the Louisiana Commission’s argument that the

2014 Order on Rehearing is internally inconsistent in

establishing an interest start date of June 1, 2006

while also stating that interest is “for” the sevenmonth 2005 bandwidth period.85 As noted above, the

remedy is prospective, based on the annual production cost data, with rough production cost equalization payments to begin the following year. Accordingly,

payments beginning the following year are the Commission’s established remedy for the prior year, or in

this case, the seven-month 2005 bandwidth period. The

Commission’s use of the word “for” is simply referring

to the payments which are the remedy for the 2005

bandwidth period. It does not imply that interest

should be granted “for” the 2005 bandwidth period as

the Louisiana Commission suggests. To the contrary,

the Commission used nearly identical language in requiring interest to be paid in Docket Nos. ER07-956

and ER08-1056, which led to interest being calculated

from June 1 of the year following the test year. Specifically, in Docket No. ER07-956, the Commission required Entergy to calculate interest on the payment/

receipt amounts from June 1, 2007 until the IntraSystem Bill that will reflect the bandwidth calculation amounts for calendar year 2006.”86 The calculation was based upon calendar year 2006 production

Louisiana Commission Brief Opposing Exceptions at 32.

Entergy Servs., Inc., 139 FERC ¶ 61,104 at P 13.

App. 103

cost data, while interest accumulated from June 1,

2007, the date payments were to begin. Nearly identical language was used by the Commission in Docket

No. ER08-1056 in requiring interest to be calculated

from June 1, 2008 for the 2007 test period.87 Importantly, the 2014 Order on Rehearing noted that the

June 1, 2006 effective date was consistent with the

above cited orders in Docket Nos. ER07-956 and ER081056. Accordingly, the statement in the 2014 Order on

Rehearing that interest is required on the bandwidth

payments for the previous year cannot reasonably be

read to imply an interest effective date other than June

1 of the following year, i.e., 2006.

44. We also reject the Louisiana Commission’s argument that the Hearing Order supports its contention

that June 1, 2005 is the appropriate start date for interest. The Louisiana Commission’s primary argument

is that the Hearing Order cites the 2014 Order Rejecting Compliance, which in turn broadly states that interest is required, and states that the remedy is “for”

the 2005 bandwidth period. However, as discussed

above, use of the word “for” simply refers to bandwidth

payments being made a remedy “for” a relevant period,

and prior cases using similar language confirm this interpretation. The Louisiana Commission adds that the

2015 Order Denying Rehearing I denied rehearing of

the 2014 Order Rejecting Compliance Filing, which indicates that the Hearing Order “emerges from a line of

Commission orders that . . . recognize June 1, 2005 as

Entergy Servs., Inc., 142 FERC ¶ 61,152 at P 42 n.60.

App. 104

the start date for interest.”88 However, as discussed

above, the 2015 Orders Denying Rehearing substantively discuss whether interest should apply, not the

interest start date, and deny rehearing of the 2014 Order on Rehearing. The Hearing Order is otherwise bereft of any indication that the Commission intended a

June 1, 2005 start date for interest.

45. Further, we agree with the Presiding Judge that

it would be mathematically impossible to begin the interest clock on June 1, 2005. As explained above, the

bandwidth calculation uses a historical test period,

and the payments and receipts calculated based on

that test period occur beginning June 1 of the year following the test period. In this case, the test period ends

December 31, 2005. As noted by the Presiding Judge,

the amounts of the transfer payments “were unknowable until the applicable test period was completed.”89

Accordingly, the Presiding Judge was correct to find

that it would thus be impossible “to establish as of the

very first day of that period which Entergy Operating

Companies would be making payments, which would

be receiving payments, or even if payments were to be

made at all.”90 Therefore, it would also be mathematically impossible to calculate interest starting June 1,

2005.

46. Despite the Presiding Judge’s clear reasoning,

the Louisiana Commission contends that the Presiding

Louisiana Commission Brief Opposing Exceptions at 25.

Initial Decision, 157 FERC ¶ 63,018 at P 41.

Id.

App. 105

Judge was under the impression that it was necessary

to know the amounts of payments on June 1, 2005 to

calculate interest as of that date. However, we find that

this is not a reasonable interpretation of the Initial Decision. The Presiding Judge stated that it would be impossible “to compute interest on these payments” with

interest starting June 1, 2005 because the amounts of

the payments that would have been due are unknowable “until the applicable test period was completed.”91

It is only after the test year is completed that it becomes clear which Operating Companies would be

making or receiving bandwidth payments. Further,

contrary to the Louisiana Commission’s argument that

the Commission can simply backdate interest to June

1, 2005 once the amounts are known, the Commission

provides interest to compensate for the time value of

money, based on when a person would otherwise have

had use of the funds.92 Those Operating Companies

would not have use of any funds until after the 2005

bandwidth period. Accordingly, we find that the Presiding Judge was correct in ruling that the calculation of

interest from June 1, 2005 is not mathematically possible and not what the Commission intended.

47. We also disagree with the Louisiana Commission’s argument that a June 1, 2006 interest effective

Id.

See, e.g., H.Q. Energy Servs., Inc., 113 FERC ¶ 61,184, at

P 40 (2005). See also PPL Wallingford Energy, LLC, 116 FERC

¶ 61,078, at P 31 & n.38 (2006) (“[T]he purpose of ordering interest is to make the recipient whole for the time value of money it

would otherwise have received.”).

App. 106

date is inconsistent with the Commissions regulations.

Specifically, 18 C.F.R. § 35.19a, Refund requirements

under suspension orders, does not apply because the

bandwidth remedy does not involve refunds. The Commission has stated repeatedly since the inception of

the bandwidth remedy that the remedy is to apply prospectively, and does not involve refunds. In Opinion

No. 480, the Commission explicitly held that refunds

would not be allowed, citing section 206(c) of the FPA.93

The issue was reconsidered in the 2011 Order on Remand, and the Commission opted to “apply here our

usual practice in such cases, invoking our equitable

discretion not to order refunds, notwithstanding our

authority to do so.”94 The issue was laid to rest in the

2014 Order on Rehearing, which denied a Louisiana

Commission request for rehearing.95 Accordingly, as

applied prospectively and explicitly not involving refunds, the bandwidth remedy does not implicate the

Commission’s regulations regarding suspension orders.

48. Finally, the Louisiana Commission incorrectly argues that section 206 of the FPA requires interest to be

paid on unjustified rates or charges. However, we agree

with Trial Staff that the Louisiana Commission is citing a permissive passage despite claiming that it is a

mandatory rule.96 The cited material notes that the

Opinion No. 480, 111 FERC ¶ 61,311 at P 145 (citing

U.S.C. § 824e(c) (2000)).

2011 Order on Remand, 137 FERC ¶ 61,047 at PP 31-32.

2014 Order on Rehearing, 146 FERC ¶ 61,152 at P 59.

Trial Staff Brief Opposing Exceptions at 33.

App. 107

Commission “may by further order require . . . refund,

with interest . . . such increased rates or charges as

by its decision shall be found not justified.”97 As often

noted in bandwidth proceedings, the Commission’s

“discretion is at its zenith in determining an appropriate remedy.”98 Accordingly, this statutory provision

does not compel any particular result and therefore

does not controvert the correct application of a June 1,

2006 effective date.

B. Issue Six: Net Operating Loss ADIT

and the Vidalia Tax Deduction

1. Background

a. ADIT and the Bandwidth Formula

49. As a general matter, under federal and certain

state income tax regulations for the period at issue in

this case, a Net Operating Loss is created when deductions taken on a corporate tax return exceed taxable

income for a given year. In that situation, the company

may apply the Net Operating Loss against net taxable

income for that year, and if any Net Operating Loss remains the company may use it to offset taxable income

in other years and thereby reduce its tax expense for

those years. The offset may be applied to the company’s

net taxable income the previous two years in the case

of federal income tax and the previous three years in

16 U.S.C. § 824d(e) (emphasis added).

April 2007 Compliance Order, 119 FERC ¶ 61,095 at P 32.

App. 108

the case of Louisiana state income tax (a “carryback”),

and may also be applied in the following 20 tax years

for federal tax and the following 15 years for Louisiana

tax (a “carryforward”). The tax benefit of the Net Operating Loss carryforward is recognized as a deferred

tax asset recorded in Uniform System of Accounts

(USofA) Account 190, Accumulated deferred income

taxes (ADIT).

50. ADIT on the Operating Companies’ books as of

December 31, 2005 is a factor with regard to production costs as calculated in the bandwidth formula. The

ADIT input variable is derived from USofA Accounts

190, 281, and 282, with certain adjustments.99 Entergy

excludes several ADIT items of each Operating Company from the bandwidth formula’s ADIT variable. Entergy Louisiana’s excluded-ADIT items for the 2005

bandwidth period include ADIT for the year ended December 31, 2005 resulting from a Net Operating Loss

carryforward for Louisiana state income tax, in the

amount of $97 million.100

51. In the first bandwidth calculation proceeding, for

calendar year 2006, in Opinion No. 505,101 Opinion No.

505-A,102 and a subsequent clarifying order,103 the

Commission held that Entergy must include certain

Net Operating Loss carryforwards in the bandwidth

Ex. ESI-3 at 6.

Ex. ESI-2 at 185-186.

101

Opinion No. 505, 130 FERC ¶ 61,023 (2010).

102

Opinion No. 505-A, 139 FERC ¶ 61,103.

103

Opinion No. 505 Clarifying Order, 145 FERC ¶ 61,045.

100

App. 109

calculation according to a ratio of certain tax-deductible utility expenses derived from each Operating Company’s FERC Form 1.104 In 2013, Entergy made a

compliance filing to calculate the Net Operating Loss

carryforward amount to include in the bandwidth calculation for calendar year 2006 in accordance with the

ratio created by the Commission in the three orders. In

this proceeding, Entergy seeks to exclude from the

2005 bandwidth period ADIT associated with the Louisiana state income tax Net Operating Loss carryforward that results from the Vidalia tax deduction, as

discussed below.

b. The Vidalia Tax Deduction

52. In 1985, Louisiana Power & Light Company, the

predecessor of Entergy Louisiana, entered into an

agreement to purchase up to 94 percent of the output

from the Vidalia Hydroelectric Power plant (Vidalia).105 In that year, the Louisiana Commission approved a phased-in rate schedule for the costs of the

plant by means of a long-term contract (the Vidalia

Contract). The Vidalia Contract sets forth specific rates

to be paid by Entergy Louisiana, which escalate during

the contract term (ending in 2031) to a peak of 20.5

cents per kWh. These rates are, and are expected to

104

Opinion No. 505, 130 FERC ¶ 61,023 at P 234; Opinion

No. 505-A, 139 FERC ¶ 61,103 at PP 59-60; Opinion No. 505 Clarifying Order, 145 FERC ¶ 61,045 at PP 18-19.

105

Ex. ESI-4 Revised at 33:6-9 (Louiselle Answering Test.).

See also Opinion No. 480, 111 FERC ¶ 61,311 at n.14.

App. 110

remain, significantly above market value.106 In 2002, in

recognition of this above-market cost, Entergy Louisiana came up with a tax strategy to reduce the cost of

this contract to customers. This strategy resulted in a

$1.8 billion deduction that translated into a tax savings for Entergy Louisiana of approximately $680 million.

53. As explained by the Presiding Judge, Entergy

Louisiana took the Vidalia tax deduction in 2001, resulting in a Net Operating Loss for that year that Entergy Louisiana carried forward to succeeding years.107

In tax year 2001, the Vidalia tax deduction amounted

to $2.3 billion in 2001.108 Together with Entergy Louisiana’s other taxable income and deductions, the Vidalia tax deduction generated an initial Net Operating

Loss in tax year 2001 that was attributable to Louisiana state tax in the amount of $2.014 billion.109 The

Net Operating Loss for 2001 was carried forward on

Entergy Louisiana’s books to offset taxable income in

future years or until it expired.110 After 2001, Entergy

Louisiana generated Net Operating Losses in tax

years 2003 and 2005, whereas it had taxable income

in tax years 2002 and 2004.111 As a consequence, the

Louisiana state Net Operating Loss of $2.014 billion,

being the earliest Net Operating Loss available,

106

Initial Decision, 157 FERC ¶ 63,018 at P 50.

Id. P 53.

108

Id. P 54.

109

Id.

110

Trial Staff Post-hg. Brief at 9.

111

Entergy Post-hg. Brief at 17.

107

App. 111

reduced Entergy Louisiana’s taxable income by $61

million in 2002 and $156 million of its taxable income

in 2004. At the end of tax year 2004, $1.797 billion of

the 2001 Net Operating Loss was left for use, if needed,

in tax year 2005 and subsequent tax years.

54. The tax effect of the Net Operating Loss ADIT

generated by the Vidalia tax deduction was used in

part to reduce electric rates for Entergy Louisiana’s

customers. In 2002, the Louisiana Commission entered

a settlement with Entergy Louisiana whereby Entergy

Louisiana’s customers were provided a guaranteed

share of the tax benefits of the transaction.112 Through

2015, Entergy Louisiana’s customers have been credited with $199.1 million, and they are projected to be

credited with a total of $419.1 million through 2026.113

Thus, the settlement reduces rates for Louisiana jurisdictional customers of Entergy Louisiana, while at the

same time it grants Entergy Louisiana the right to retain Vidalia’s accelerated tax deductions for the remaining life of the contract.

c. Vidalia Tax Deduction and the

Bandwidth Formula

55. Because the tax benefits from the Vidalia tax deduction were retained by Entergy Louisiana and

flowed, in part, directly to its Louisiana retail ratepayers, the Commission concluded in Opinion No. 480 that

Vidalia was an Entergy Louisiana-only resource, not a

112

113

Id. at 10.

Id.

App. 112

system-wide production cost that should be equalized

among all the Operating Companies.114

56. The Commission directed that the bandwidth formula exclude the capital and tax-related effects of the

Vidalia tax deduction in order to avoid shifting its tax

burdens and benefits to other Operating Companies.

To ensure that costs associated with the Vidalia tax deduction stay in Louisiana, the Commission approved

the inclusion of footnote 1 to the bandwidth formula

which specifies, inter alia, that:

All Rate Base, Revenue and Expense items

shall be based on the actual amounts of the

Company’s books for the twelve months ended

December 31 of the previous year as reported

in FERC Form 1 or such other supporting

data as may be appropriate for each Company; and shall include certain regulatory adjustments . . . including, but not limited to: . . .

(3) repricing of energy associated with the Vidalia purchase power contract for [Entergy

Louisiana] based on the average annual Service Schedule MSS-3 rate paid by [Entergy

Louisiana], including the exclusion of the income tax savings of the Vidalia purchase

power contract from ADIT and reflecting

the reversal of the Vidalia capital transaction. . . .115

114

115

n.1).

Opinion No. 480, 111 FERC ¶ 61,311 at PP 183-184.

See Ex. ESI-3 at 5 (citing Compliance Tariff at § 30.12,

App. 113

2. Initial Decision

57. The Presiding Judge began his examination of

the Net Operating Loss ADIT and the Vidalia transaction by noting that the focus of this issue, footnote 1 of

the bandwidth formula, strives to fulfill the Commission’s longstanding aim concerning the Vidalia tax

transaction that “what happens in Louisiana stays in

Louisiana.”116 The Presiding Judge found that the following highlighted words of footnote 1 provide the

operative language: “All Rate Base, Revenue and Expense items . . . shall include certain regulatory adjustments . . . including the exclusion of the income tax

savings of the Vidalia purchase power contract from

ADIT. . . .”117 The Presiding Judge noted that no party

suggested that footnote 1 should be ignored.

58. The Presiding Judge rejected arguments by the

Louisiana Commission that Entergy Louisiana’s 2005

Net Operating Loss ADIT is a deferred tax accounting

item that has not yet produced a “tax savings,” and

therefore cannot fall within the meaning of the Vidalia

exclusion required by footnote 1. The Presiding Judge

found that, contrary to the Louisiana Commission’s argument, the plain meaning of footnote 1 is to remove a

certain “savings” amount from a deferred tax that is

found in an ADIT account, not a savings amount from

116

Initial Decision, 157 FERC ¶ 63,018 at P 73 (citing Entergy Servs., Inc., Opinion No. 514, 137 FERC ¶ 61,029, at P 78

(2011) (“ . . . [C]osts associated with Vidalia must stay in Louisiana.”).

117

Id. (citing Ex. ESI-3 at 5 n.1).

App. 114

a current tax that comprises an item of expense.118 The

Presiding Judge found that because Net Operating

Loss ADIT in Account 190 is plainly a savings of deferred tax, all or part of it can be excluded from the

ADIT input variable of the bandwidth formula to the

extent that it is properly attributable to the Vidalia tax

deduction.

59. The Presiding Judge disagreed with the Louisiana Commission’s argument that Opinion No. 505 and

the Opinion No. 505 Clarifying Order show how Net

Operating Loss ADIT should be allocated and included

in the ADIT input variable in the bandwidth formula.

The Presiding Judge found that the Commission orders in the Opinion No. 505 proceeding provide only a

general rule for including Net Operating Loss ADIT for

every Operating Company in the bandwidth formula.

The Presiding Judge explained that the Opinion No.

505 orders do not discuss the Vidalia tax deduction.

The Presiding Judge further explained that the general rule of those orders is an outcome of protracted

litigation and is not part of the bandwidth formula itself. The Presiding Judge found that, by contrast, “the

issue at hand concerns a specific rule for excluding only

the Vidalia portion of [Entergy Louisiana

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