Growing fight over Entergy nuclear plant could net millions in refunds for customers | news

The probe over Entergy’s accounting at its Grand Gulf nuclear power plant in Mississippi has morphed into a larger fight between regulators and the power company, which is accused of overcharging ratepayers at its various subsidiaries of hundreds of millions of dollars over a period of several years.

If the Louisiana Public Service Commission and other regulators prevail in the three main probes now open before the Federal Energy Regulatory Commission, or FERC, Entergy could be forced to pay substantial customers refunds.

What started as an obscure probe into arcane accounting practices has turned into a broader battle – over tax maneuvers, compensation for executives and the plant’s performance – the latter of which has drawn in former FERC commissioners and even Mississippi Gov. Tate Reeves, who wrote a letter to the commission about Grand Gulf’s economic impact to his state.

The potential refunds could amount to $1 billion or more across Entergy’s network if FERC sides with regulators across the board, which could mean hundreds of dollars for each affected customer. Regulators in one of the cases already won favorable a recommendation from a judge, who advised FERC to make Entergy pay back $422 million to customers, plus interest, for one of the allegations, likely bringing the tally for that case alone to over $600 million, according to an SEC filing Entergy made late last year.

The judge made that recommendation in April 2020. FERC has not yet made a decision on the case.

Customers of Entergy Louisiana and Entergy New Orleans would split the refunds with ratepayers in Mississippi and Arkansas – a group that totals about 2.5 million customers. Entergy Louisiana and New Orleans customers would get roughly 14% and 17% of the total refunds, respectively, according to the best estimates available in FERC filings.

‘Kind of like the coronavirus’

At issue is Grand Gulf, which contains the largest nuclear reactor in the US, located in Port Gibson, just across the Mississippi River from Tensas Parish. Unlike most of Entergy’s power plants, the nuclear unit operates as a wholesale power supplier, meaning it operates as a standalone company that sells power into the market. That’s why the battle has largely played out wholesale at FERC, a five-member panel that regulates, among other things, wholesale power sales. Both sides have filed thousands of pages of documents related to the three main complaints surrounding Grand Gulf.

But Grand Gulf’s only customers are Entergy’s Arkansas, Louisiana, Mississippi and New Orleans subsidiaries – all of which are regulated by the state Public Service Commissions or the New Orleans City Council. That’s why Louisiana regulators took interest.

The PSC, which regulates Entergy Louisiana, filed a complaint in 2018 accusing the company of violating accounting rules by overbilling ratepayers for a sale-leaseback arrangement – ​​where Entergy sold assets and leased them back from the new owner. Entergy owns 90% of Grand Gulf through a subsidiary called SERI, while Cooperative Energy of Mississippi owns the other 10%.

While investigating that complaint regulator, they say they uncovered of accounting practices that, taken together, amount to a scheme get a host to overcharge electric customers who together from Grand Gulf. Among those allegations is essentially that Entergy charged ratepayers more for taxes than it was paying.

At a hearing in 2020, Steven Glazer, the judge overseeing the initial case, said the ballooning list of claims was overcomplicating the case. He told regulators to file new complaints on many of the allegations.

“It sounds like the number of strange things that occur in SERI’s accounts…has grown, it’s something that we seem to be finding new things almost every week,” he said. “And it’s kind of like the coronavirus, it’s exponential.”

The allegations largely center around the interpretations of arcane tax and accounting principles. For instance, Glazer found Entergy should refund another $19 million stemming from a depreciation expense adjustment, though that could be offset by retroactive charges to customers.

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But there are also allegations that the utility is living high on the hog and trying to stick ratepayers with the bill. Among other charges, regulators questioned Entergy’s expenses for $1.6 million of private airplane travel, lobbying expenses, advertisements promoting Entergy and industry association dues. The PSC said Entergy has improperly assessed ratepayers for those expenses.

Complaints turn to performance issues

Last year, the inquiry widened further. The PSC, the New Orleans City Council and regulators in Arkansas and Mississippi filed a new complaint asking FERC to force Entergy to reimburse customers for a host of glaring performance problems at the nuclear plant – the least reliable nuclear plant in the nation from 2018-2020 , according to figures compiled by the Nuclear Energy Institute. The figures showed Grand Gulf was running at full power less frequently than any other nuclear plant in the US

Part of the reason power companies invest in nuclear power is that it has the highest “capacity factor”–how often it runs at full power–than any other source of electricity, at 92%. Regulators argue Grand Gulf’s low rate has driven up costs for customers, because the utilities had to buy more expensive replacement power when Grand Gulf wasn’t running.

Entergy has fought the allegations, asking FERC to dismiss the filings. But the complaints about Grand Gulf’s performance – and specifically whether its project to “uprate” the plant a decade ago, expanding the amount of power it could generate, was a wise investment – ​​has prompted a full-court press by Entergy.

In September, four former FERC commissioners wrote a letter to the agency defending Entergy and asking the commission not to investigate the expansion. Doing so, they argued, would needed “have a chilling effect on utility investment, including investment in clean energy infrastructure.” Nuclear energy doesn’t produce direct emissions, like gas- and coal-fired plants do.

The four former commissioners all went on to represent power companies or the natural gas industry. They are: Mike Naeve, an attorney who represents power companies; Elizabeth Moler, a retired executive at Exelon Corporation; Donald Santa, Jr., head of an association representing natural gas pipelines; and Philip Moeller, an executive at the Edison Electric Institute, which represents investor-owned utilities like Entergy.

Reeves, Mississippi’s governor, also wrote to FERC to warn that a “negative outcome” of the case could hurt the state’s economy because Grand Gulf employs hundreds of workers and pays millions of dollars in taxes. It’s unclear what Reeves views as a “negative outcome;” his office did not respond to questions about the letter.

FERC has yet to take any action on the latest complaint, which was filed almost a year ago.

Entergy spokesperson David Freese said that while the company does not normally comment on pending litigation, it believes its accounting and tax practices “are in the best interest of our customers and support the low rates we are able to deliver.”

“It’s also important to note that lobbying and image advertising are not included in the bills that customers pay,” Freese said. “Further, we dispute the allegations that we have not prudently operated and managed Grand Gulf. In fact, this past year, Grand Gulf achieved all-time plant records for both gross generation and net generation in megawatt-hours.”

FERC and the PSC declined to comment, citing pending litigation, as did Craig Greene, who chaired the PSC until recently.

Grand Gulf, which was built in the 1970s, has been troubled from the start. Its two units were budgeted to cost $1.2 billion, but its first unit wound up costing nearly $3 billion. The energy it produced when it went online was about 13 cents per kilowatt hour, well above the typical price of power of about 3 cents per kilowatt hour, according to a FERC filing made by the PSC.

“Grand Gulf has been a bad apple since the late 1970s,” said Logan Burke, head of the Alliance for Affordable Energy. “The costs to run it are going up, benefits from running it are going down, and customers are kind of stuck paying for this thing.”

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