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Ark. AG warns of rate hikes from Entergy coal retirement settlement

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Ark. AG warns of rate hikes from Entergy coal retirement settlement

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The 1,639-MW White Bluffs coal plant near Redfield, Ark., which is slated to be retired by the end of 2028.
Source: Entergy Arkansas Inc.

Arkansas' attorney general criticized a settlement between Entergy Arkansas Inc. and environmentalists, asking a federal judge to intervene on behalf of ratepayers to prevent a rate increase that could stem from future coal retirements.

In November, the Entergy Corp. subsidiary reached an agreement with the Sierra Club and the National Parks Conservation Association that would see the groups drop their long-running Clean Air Act lawsuit against the utility in exchange for Entergy Arkansas retiring its two remaining coal plants and one of its four remaining gas plants.

But the Republican attorney general of Arkansas, Leslie Rutledge, wants to step in before the U.S. Environmental Protection Agency and the U.S. Department of Justice approve the settlement, which is scheduled for mid-January. Rutledge argued in a Dec. 13 filing with an Arkansas federal court that despite the agreement limiting review to the EPA and DOJ, she has standing to intervene in her role as ratepayer advocate.

"Entergy has shown through its actions and by entering into the settlement agreement that it cannot and will not protect the interests of its customers," Rutledge wrote. "Its action could also negatively impact other Arkansas ratepayers. As a result, the measures contained in the settlement agreement are likely to result in an unreasonable increase in rates to Arkansas ratepayers."

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Arkansas Attorney General Leslie Rutledge.
Source: Arkansas Attorney General's Office

The agreement between Entergy Arkansas and environmentalists undermines state regulatory authority over the utility because the Arkansas Public Service Commission did not sign off on the deal, Rutledge wrote. One of Rutledge's requests from the U.S. District Court for the Eastern District of Arkansas is for the PSC to establish an investigatory docket on the agreement.

Rutledge filed with the PSC, calling for an investigation and asking the commission to find that Entergy Arkansas' pursuit of judicial approval for the deal is "likely to have very significant and long-term impacts on [Entergy Arkansas'] operations and costs to ratepayers, without providing analysis supporting the settlement or providing an adequate opportunity for review by the commission, does not constitute a prudent utility action, and therefore may subject [Entergy Arkansas] to cost disallowances."

The agreement calls for Entergy Arkansas, starting no later than the end of June 2021, to use only low-sulfur coal at the 1,639-MW White Bluff and 1,657-MW Independence plants. The utility, which serves 700,000 customers, is the lead owner of both facilities along with several electric cooperatives and municipal utilities. Entergy then must stop using coal entirely at White Bluff by the end of 2028 and at Independence by the end of 2030.

Its provisions also call for retiring the 528-MW Lake Catherine gas plant by the end of 2027 along with developing 800 MW of renewable energy projects. At least half of that renewable capacity must come online by the end of 2022 and the remainder by the end of 2027. These projects can either be new builds or power purchase agreements, including Entergy's existing contracts with the 100-MW Chicot and 81-MW Stuttgart solar farms.

Rutledge contends that Entergy Arkansas not going to the PSC was "unilateral and discretionary, and therefore [its] shareholders alone should bear any risks of future cost disallowances related to the settlement agreement, including possible disallowed rate recovery because of imprudence."

The utility should also be required to modify its current long-term energy plan to include an analysis of ratepayer cost and other impacts of the settlement in comparison to other alternatives, the attorney general said.

The EPA and the DOJ have until Jan. 10, 2019, to review the proposed agreement.