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Miss., Ark. regulators complain to FERC about Entergy nuke's ROE

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Miss., Ark. regulators complain to FERC about Entergy nuke's ROE

The public service commissions of Arkansas and Mississippi filed a complaint with FERC Jan. 23 over the return on equity an Entergy Corp. subsidiary earns on power it supplies from the Grand Gulf nuclear plant.

Entergy's 1,428-MW Grand Gulf nuclear plant is located in Claiborne County, Miss., and operated by subsidiary System Energy Resources Inc., or SERI. The plant supplies power to Entergy utility subsidiaries Entergy Arkansas Inc., Entergy Mississippi Inc., Entergy New Orleans Inc. and Entergy Louisiana LLC. The retail electric rates of Entergy Arkansas and Entergy Mississippi include cost-of-service inputs affected by what the utilities pay for capacity and output supplied by Grand Gulf unit 1.

In the complaint, the commissions argued the 10.94% ROE earned by SERI for the power it supplies is "unjust and unreasonable." The regulators asked FERC to investigate the ROE element in SERI's formulaic sale-for-resale rate, under which SERI sells the output of its share of the Grand Gulf nuclear power plant to its affiliates, establish an effective date for refunds and enact a "new just and reasonable" ROE for electricity from Grand Gulf. The PSCs noted the current ROE was calculated based on a record that closed in or before January 1996.

"More than two decades after the DCF studies that produced SERI's existing 10.94% return, reexamination of SERI's current cost of equity is more than due," the commissions wrote in the complaint. They added that such a review is particularly timely following the U.S. Nuclear Regulatory Commission's renewal, in December 2016, of Grand Gulf's operating license for another 20 years.

Using the methodology FERC used to calculate the ROE for grand Gulf power now leads to an "indicated" ROE of 8.37%, the PSCs stated in the complaint. The Arkansas and Mississippi commissions estimated the portion of SERI's annual revenue requirement consisting of ROE and associated income tax to be approximately $125 million. Reducing the ROE to 8.5% would cut that revenue requirement component to approximately $97 million, according to the complaint.

In September 2016, Entergy shut down Grand Gulf for a maintenance outage but then decided to leave the plant shut down for needed maintenance and repairs. (FERC docket EL17-41)