Rate-glum Entergy will seek rehearing

Denied a $145 million rate increase by the Arkansas Public Service Commission, Entergy Arkansas said Monday that it intends to seek a rehearing from the commission later this month.

The utility was allowed an $81 million rate increase in a final ruling last week by the commission.

Entergy initially requested a $178 million rate increase in March, but lowered that to about $145 million in October. But on Thursday,the Public Service Commission denied that increase and allowed the utility, which has about 700,000 customers in Arkansas, the $81 million.

That rate increase is close to the $85 million rate increase that the Arkansas attorney general’s office had recommended.

Despite the rate increase, Entergy’s residential customers in Arkansas will see a 4.9 percent decline in their monthly electric bills. So a residential customer who had a bill of $100 a month last year will have a bill of $95.10 for the same electricity usage this year.

There are two reasons for the decline in monthly charges for customers: Entergy Arkansas’ withdrawal on Dec. 19 from its decades-long system agreement with its parent company, Entergy Corp., and its five sister utilities in Louisiana, Mississippi and Texas and, secondly, Entergy Arkansas’ move last month to join Midcontinent Independent System Operator, a regional transmission organization that oversees the electricity grid in 13 states.

The system agreement, under which costs were shared, had added more than $1 billion to Entergy Arkansas customers’ bills over the past eight years because of federal rulings that required Arkansans to make payments to Entergy’s Louisiana utilities to more closely balance bills between the two states. Those payments ended last month.

The move to Midcontinent provides many cost-saving benefits, the utility said, up to $263 million over 10 years based on a 2011 Entergy Arkansas estimate.

Entergy Arkansas would like a rehearing from the commission later this month to seek clarification of some parts of the commission’s decision, Julie Munsell, Entergy’s spokesman, said Monday.

John Bethel, executive director of the commission’s general staff, said the commission denied a request for incentive pay for 782 Entergy Corp. employees who are eligible for stock options or restricted stock awards.

Only 144 - or about 18 percent - of those employees live in Arkansas. The rest live in other Entergy areas in Louisiana, Mississippi and Texas.

Bethel also said the commission lowered the requested return on equity from the 10.4 percent sought by Entergy Arkansas, to 9.3 percent. Return on equity is the amount of net income Entergy Arkansas can earn as a percentage of the shareholders investment.

The order from the commission gave Entergy Arkansas some tools to prepare for the future, particularly ways to help it to operate in Midcontinent and for getting out of the system agreement, Munsell said.

But the company was disappointed in other parts of the order, Munsell said.

One is the required return on equity, 9.3% being the lowest allowed for all Southern utilities, Munsell said.

Without the exit from the system agreement and without joining Midcontinent, Entergy Arkansas’ $81 million increase would have meant about an 8 percent increase in monthly charges for customers, Bethel said.

The commission initially issued an order on the rates on Dec. 30 but asked the commission’s general staff to review the order. The staff filed testimony on Jan. 9 quantifying the commission’s order, Bethel said. On Thursday, the commission affirmed the December order.