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Entergy Arkansas, the state's largest utility, is seeking a $167 million increase in its rates, the firm said Friday in a filing with the Arkansas Public Service Commission.

If approved, a customer with an average monthly bill of $100 would see it increase to about $113 a month beginning in March next year, assuming the same electricity usage.

Entergy Arkansas has about 700,000 customers in the state, including almost 590,000 residential customers.

The increase covers the utility's proposed acquisition of one of the four units at the Union Power Station near El Dorado; plant additions related to recent storm damage; operation and maintenance expenses, including pensions, benefits and storm costs; and other miscellaneous increases.

"The reason for the request is that we've been spending a lot of capital in terms of increasing the reliability of the system, the transmission and distribution side as well our generation side," said Hugh McDonald, Entergy Arkansas' chief executive officer.

Even with the rate increase, Entergy rates remain below national and regional averages, McDonald said.

The cost of the 495-megawatt unit of the natural gas-powered Union Power Station will be about $53 million.

Entergy also is building or planning to build multiple high-voltage transmission systems around the state, McDonald said. Part of that process is at the direction of Entergy's regional transmission operator, Midcontinent Independent System Operator. Midcontinent oversees the electricity grid of Entergy Arkansas and its sister companies in Louisiana, Mississippi and Texas.

"That increases the reliability and capacity of the system so our customers continue to see the benefit of the lowest cost energy sources that we can get," McDonald said.

The attorney general's office has begun to review Entergy's filing and its supporting documents, said Judd Deere, a spokesman for the office.

The general staff of the Public Service Commission also is reviewing the filing, said John Bethel, executive director of the general staff.

"It will take several months of reviewing the application and the support," Bethel said. "There will be an evidentiary hearing and public comments as well."

Generally, if a utility spends money on "used and useful investments," then it is entitled to recover the expenses, said David Cruthirds, a Houston-based regulatory attorney.

The commission will determine whether Entergy's requested rate of return is fair, Cruthirds said.

"The Arkansas commission generally has held Entergy's feet to the fire and not given them the rates of return they've wanted," Cruthirds said.

There are two new commissioners who have not presided in an Entergy rate case -- Ted Thomas, the chairman who was appointed by Gov. Asa Hutchinson, and Lamar Davis, who was appointed by Gov. Mike Beebe a week before he left office in January. Elana Wills is the third commissioner, serving a term that expires in 2017.

"This will be a test for two new commissioners," Cruthirds said. "Will they be receptive to Entergy's arguments?"

A segment of the rate increase request is for pensions and employee benefits.

In 2013, part of Entergy Arkansas' rate increase request was for long-term compensation for some of Entergy Corp.'s top executives. Of the 53 Entergy Corp. executives eligible for long-term compensation covered in Entergy Arkansas' case, two lived in Arkansas.

Friday's rate increase request includes salary increases for all company employees and short-term compensation for employees and executives, McDonald said. It does not include requests for long-term, stock-based incentive compensation, McDonald said.

Many utilities seek such requests for their executives, Cruthirds said.

"The utilities make the argument that if you want us to be a well-run utility, then we need to attract and retain the very best people," Cruthirds said. "And incentives and stock options and bonuses are how we do that. Hugh McDonald is in Arkansas and his incentives may be something [the commission] would allow. But when you get above that and get to people in New Orleans [where Entergy Corp. has its headquarters], you have a much harder case to say this is a benefit for Arkansas ratepayers."

It isn't a certainty that the commission will approve the increase.

"Typically what the company asks for is greater than what they ultimately receive in rates," Bethel said.

In March 2013, Entergy filed a request for $178 million in increased rates. It was eventually awarded an increase of about $86 million.

The commission is required by law to make a decision within 10 months of the utility's application, Bethel said. So a final decision some be made sometime before next February.

Business on 04/25/2015

Print Headline: Needs $167M boost in rates, Entergy says


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