Entergy Gulf States Louisiana, L.L.C., 121516 FERC, ER15-1436-000

• Party Name: Entergy Gulf States Louisiana, L.L.C. Entergy Arkansas, Inc. Entergy Louisiana, LLC Entergy Mississippi, Inc. Entergy New Orleans, Inc. Entergy Texas, Inc. Entergy Arkansas, Inc. Entergy Gulf States Louisiana, L.L.C. Entergy Louisiana, LLC Entergy Mississippi, Inc. Entergy New Orleans, Inc. Entergy Texas, Inc. Entergy Arkansas, Inc. Entergy ...
• Judge Panel: Before Commissioners: Norman C. Bay, Chairman; Cheryl A. LaFleur, and Colette D. Honorable. Nathaniel J. Davis, Sr., Deputy Secretary.
• Case Date: December 15, 2016
• Court: Federal Energy Regulatory Commission

157 FERC ¶ 61, 201

Entergy Gulf States Louisiana, L.L.C. Entergy Arkansas, Inc. Entergy Louisiana, LLC Entergy Mississippi, Inc. Entergy New Orleans, Inc. Entergy Texas, Inc. Entergy Arkansas, Inc. Entergy Gulf States Louisiana, L.L.C. Entergy Louisiana, LLC Entergy Mississippi, Inc. Entergy New Orleans, Inc. Entergy Texas, Inc. Entergy Arkansas, Inc. Entergy Louisiana, LLC Entergy Mississippi, Inc. Entergy New Orleans, Inc. Entergy Texas, Inc.

Nos. ER15-1436-000, ER15-1453-000, ER16-1528-000

United States of America, Federal Energy Regulatory Commission

December 15, 2016

Before Commissioners: Norman C. Bay, Chairman; Cheryl A. LaFleur, and Colette D. Honorable.

ORDER ACCEPTING AND SUSPENDING FILINGS, ESTABLISHING HEARING AND SETTLEMENT JUDGE PROCEDURES, AND CONSOLIDATING PROCEEDINGS

1. On April 1, 2015 in Docket No. ER15-1436-000, on behalf of the Entergy Operating Companies¹ and pursuant to section 205 of the Federal Power Act (FPA), ^[2]Entergy Services, Inc. (Entergy) filed proposed changes to the Entergy Operating Companies' transmission formula rate templates (transmission formula rate templates) in Attachment O of the Midcontinent Independent System Operator, Inc. (MISO) Open Access Transmission, Energy and Operating Reserve Markets Tariff (Tariff), to become effective June 1, 2015, as described below. On the same day, in Docket No. ER15-1453-000, Entergy filed an actuarial report in support of the 2014 amounts for Post-Retirement Benefits Other than Pensions (PBOP) to be included in the Entergy Operating Companies' Attachment O annual formula rate update to become effective on June 1, 2015. On October 30, 2015, Entergy supplemented the filing with the specific amounts of PBOP costs for calendar year 2014. On April 28, 2016, in Docket No. ER16-1528-000, Entergy filed specific amounts of PBOP costs for calendar year 2015 to be included in the Entergy Operating Companies' Attachment O annual formula rate update to become effective June 1, 2016. Entergy also submitted an actuarial report in support of those costs.

2. In this order, we accept the proposed formula rate changes and PBOP amounts for filing and suspend the filings for a nominal period, to become effective on the dates requested, subject to refund. We also establish hearing and settlement judge procedures. Further, we consolidate Docket Nos. ER15-1436-000, ER15-1453-000, and ER16-1528-000 for purposes of hearing and settlement judge procedures and decision.

I. Background

3. The Entergy Operating Companies joined MISO as transmission-owning members on December 19, 2013. On February 15, 2013, in Docket No. ER13-948-000, Entergy and MISO filed the proposed transmission formula rate templates to establish formula rates for the Entergy Operating Companies to recover their transmission revenue requirements in four proposed transmission pricing zones of MISO. The proposed transmission formula rates were modeled on the standard form of Attachment O under the MISO Tariff, with several proposed modifications to incorporate established practices under the then-existing open access transmission tariff of the Entergy Operating Companies (Entergy OATT).³ On June 20, 2013, the Commission accepted the transmission formula rate templates for filing effective December 19, 2013, subject to refund, and instituted hearing proceedings, which the Commission held in abeyance subject to the outcome of settlement proceedings.⁴

4. On July 31, 2015, Entergy, MISO and Joint Customers⁵ filed an offer of partial settlement (Settlement) regarding the transmission formula rates (Settlement Transmission Formula Rate Templates). In the initial filing, Entergy proposed to reflect in the transmission formula rate templates the effects of excess deferred income taxes and permanent differences in income taxes.⁶ As part of the Settlement, Entergy committed to make a filing in a separate docket to include the effects of excess deferred income taxes and permanent differences in income taxes in the transmission formula rate templates. On August 23, 2016, the Commission issued a letter order approving the Settlement, ⁷and, on September 28, 2016, granted Entergy's request for limited clarification to correct effective dates.^[8]

II. Notice of Filings and Responsive Pleadings

5. Notice of the April 1, 2015 filing in Docket No. ER15-1436-000 was published in the Federal Register, 80 Fed. Reg. 19, 078 (2015), with protests and interventions due on or before April 22, 2015. Timely motions to intervene were filed by South Mississippi Electric Power Association, NRG Companies, East Texas Electric Cooperative, Inc., Mississippi Delta Energy Agency, Arkansas Public Service Commission, Arkansas Electric Cooperative Corporation, and MISO. A timely protest and motion to consolidate was filed by Public Service Commission of Yazoo City, Clarksdale Public Utilities Commission, Mississippi Delta Energy Agency, South Mississippi Electric Power Association, Arkansas Electric Cooperative Corporation, and East Texas Electric Cooperative, Inc. (collectively, Joint Customers). Entergy filed an answer to the Joint Customers' protest. Joint Customers filed an answer to Entergy's answer.

6. Notice of the April 1, 2015 filing in Docket No. ER15-1453-000 was published in the Federal Register, 80 Fed. Reg. 19, 656 (2015), with protests and interventions due on or before April 22, 2015. Timely motions to intervene were filed by Council of the City of New Orleans, East Texas Electric Cooperative, Mississippi Delta Energy Agency, Clarksdale Public Utility Commission, Public Service Commission of Yazoo City, South Mississippi Electric Power Association, and Arkansas Electric Cooperative Corporation. Joint Customers filed a protest and motion to consolidate. Entergy filed an answer and Joint Customers filed an answer to Entergy's answer.⁹ Notice of the October 30, 2015 supplement was published in the Federal Register, 80 Fed. Reg. 69, 205 (2015) with protests and interventions due on November 20, 2015. None were filed.

7. Notice of the April 28, 2016 filing in Docket No. ER16-1528-000 was published in the Federal Register, 81 Fed. Reg. 28, 864 (2016), with protests and interventions due on or before May 19, 2016. Timely motions to intervene were filed by South Mississippi Electric Power Association, and Arkansas Electric Cooperative Corporation. On May 12, 2016, Entergy submitted an errata filing to correct an inadvertently provided attachment.

III. Filings

A. Docket No. ER15-1436-000

1. Entergy Filing

8. On April 1, 2015, Entergy proposed two changes to the transmission formula rate templates that were not reflected in the Settlement Transmission Formula Rate Templates. The first change, as provided under the Settlement, reflects the effects of excess deferred income taxes and permanent differences in income taxes. The second change reflects the inclusion in rate base of Accrued Pension Cost/Prepaid Pension Cost associated with the qualified defined benefit pension plans of the Entergy Operating Companies, which Entergy states it was unable to resolve in the Settlement.¹⁰

9. With regard to the tax related changes, Entergy states that excess deferred income taxes exist for the Entergy Operating Companies for tax depreciation normalized prior to the Tax Reform Act of 1986.^[11] Entergy states that the income tax rate was higher in years prior to 1987, and that the difference between the historic tax rate and the current tax rate results in excess deferred income taxes. Entergy states that excess deferred income taxes reduce customer rates over the life of the property giving rise to the deferred taxes and that excess deferred income taxes are reversed using the average rate assumption method.

10. In addition, Entergy states that permanent differences in income taxes arise when income taxes or expenses on an Entergy Operating Company's financial statements are never taxable or deductible on the income tax return, or when income or expenses are recognized on the income tax return but are never recorded in the financial statements.^[12]Entergy states that, unlike temporary differences, which eventually reverse and equal out between the financial statements and the income tax return, permanent differences never reverse.

11. Entergy states that its proposal to include formula elements in the transmission formula rate templates to address excess deferred income taxes and permanent differences in income taxes is consistent with Order No. 144, ¹³ in which the Commission established the requirement that a public utility account for excess or deficiency in deferred taxes. To account for excess deferred income taxes, Entergy proposes to include the following language in the transmission formula rates as a new row: "Excess Deferred Income Taxes (enter negative)." In addition, Entergy proposes to add the following language to Note I: "Excess Deferred Income Taxes reduce income tax expense revenue requirement by the amount of the expense multiplied by (1/1-T)." Similarly, Entergy proposes to include a new row called "Permanent Differences in Incomes Taxes" and add the following language to Note I: "Permanent Differences in Income Taxes increases the income tax expense revenue requirement by the amount of the expense multiplied by (1/1-T) for differences in the income taxes under the Federal and State calculations and the income taxes recorded on the Company's financial statement." Entergy also provides, as an attachment to the filing, an illustration that shows how the proposed income tax adjustments will appear in the transmission formula rate templates. Regarding both proposed formula elements, Entergy states that other MISO transmission owners with transmission formula rates on file with the Commission have adopted...