UNITED STATES OF AMERICA

FEDERAL ENERGY REGULATORY COMMISSION

Before Commissioners: Joseph T. Kelliher, Chairman;

Suedeen G. Kelly, Marc Spitzer,

Philip D. Moeller, and Jon Wellinghoff.

Louisiana Public Service Commission Docket Nos. EL01-88-005

EL01-88-006

v\.

Entergy Services, Inc.

ORDER ON REHEARING AND COMPLIANCE

(Issued April 27, 2007)

1.  On November 17, 2006, the Commission accepted a compliance filing,
    as modified, filed by Entergy Services, Inc. (Entergy),[^1] as
    required by Opinion Nos. 480 and 480-A.[^2] The compliance filing
    consisted of amendments to the Entergy System Agreement (System
    Agreement) for the purpose of, among other things, maintaining rough
    production cost equalization among the five Entergy Operating
    Companies (Operating Companies).[^3] In this order, with one
    exception, we deny rehearing of the November 2006 Order. With
    respect to the issue of refunds among the Operating Companies, we
    defer action until a further order by the Commission. In addition,
    we accept a compliance filing, as discussed below.

**I. [Background ]{.underline}**

2.  On June 14, 2001, the Louisiana Public Service Commission (Louisiana
    Commission) filed a complaint in this docket pursuant to section 206
    of the Federal Power Act (FPA).[^4] The Louisiana Commission alleged
    that the System Agreement, a rate schedule that includes various
    service schedules that govern, among other things, the allocation of
    certain costs associated with the integrated operations of the
    Entergy system, no longer operated to produce rough production cost
    equalization.[^5]

3.  The Commission set the Louisiana Commission's complaint for hearing,
    and an Initial Decision held in part that the Entergy system was no
    longer in rough production cost equalization.[^6] The presiding
    judge ordered that a numerical bandwidth of +/- 5 percent deviation
    from the system average on a rolling three-year basis coupled with
    an annual bandwidth of +/- 7.5 percent be applied to restore rough
    equalization (*i.e.*, when the production costs of one Operating
    Company are above or below the bandwidth, those costs are shared
    among the other Operating Companies).

4.  On June 1, 2005, the Commission issued Opinion No. 480 affirming in
    part and reversing in part the Initial Decision. The Commission
    agreed that rough production cost equalization had been disrupted on
    the Entergy system, but broadened the bandwidth to +/- 11 percent,
    finding that the narrower bandwidth would result in substantial cost
    shifting and that the rolling three-year bandwidth would be
    difficult to implement.[^7] The Commission stated that the bandwidth
    would be implemented prospectively and would be effective for
    calendar year 2006, and clarified in Opinion No. 480-A that any
    equalization payments would then be made in 2007 after a full
    calendar year of data became available.[^8]

5.  On April 10, 2006, Entergy submitted a compliance filing to
    implement the directives of Opinion Nos. 480 and 480-A into its
    System Agreement. To do so, Entergy proposed to amend certain
    provisions of one of the service schedules, Service Schedule MSS-3.
    In the November 2006 Order, the Commission found that Entergy had
    properly implemented the +/-11 percent bandwidth remedy and had
    complied with Opinion Nos. 480 and 480-A. However, to alleviate
    concerns of protestors that combining the bandwidth function with
    other functions in Service Schedule MSS-3 would be confusing, the
    Commission directed Entergy to make transparent and separate the
    different functions in Service Schedule MSS-3. The Commission also
    directed Entergy to modify its billing procedure so that the
    preceding year's bandwidth payments would be made within the next
    calendar year. The Commission required Entergy to submit these
    revisions in a compliance filing within 30 days of the date of the
    order.

6.  Requests for rehearing of the November 2006 Order were filed by the
    Louisiana Commission, the Arkansas Office of the Attorney General
    (Arkansas AG), the Arkansas Public Service Commission (Arkansas
    Commission) and Arkansas Electric Energy Consumers, Inc. (AEEC).

7.  On December 18, 2006, Entergy filed a compliance filing as required
    by the November 2006 Order.

    **II. [Notice of Filing and Responsive Pleadings]{.underline}**

8.  Notice of Entergy's compliance filing was published in the *Federal
    Register*, 71 Fed. Reg. 78,173 (2006), with comments, protests or
    interventions due on or before January 17, 2007. The Louisiana
    Commission filed a one-paragraph protest, stating that it reserves
    and raises on rehearing herein, to the extent that it proves
    necessary, all issues that it raised on rehearing and in its
    Petition for Review of Opinion Nos. 480 and 480-A. The Louisiana
    Commission states that it believes that all of those issues are now
    before

    the United States Court of Appeals for the D.C. Circuit for
    decision, but is reserving those issues if it should be found that
    on appeal that some or all of those issues are not ripe for review
    until compliance procedures are final.

    **III. [Discussion]{.underline}**

    **A. [Requests for Rehearing]{.underline}**

    **1. [Nature of the System Agreement]{.underline}**

    **a. [November 2006 Order]{.underline}**

9.  In the November 2006 Order, the Commission stated that while the
    Commission seeks to avoid undue rate increases to the customers of
    those Operating Companies that are below the system average,
    increases may be necessary due to the nature and history of the
    Entergy System. The Commission stated that the nature of the System
    Agreement and Operating Companies' participation in the System
    Agreement dictate that benefits and burdens specific to each
    Operating Company have to be balanced with what is appropriate for
    the system as a whole.

    **b. [Request for Rehearing]{.underline}**

10. AEEC argues that the Commission erred in finding that "an individual
    operating company under the System Agreement is not guaranteed all
    of the benefits of its specific generation for an infinite amount of
    time."[^9] AEEC contends that various provisions of the System
    Agreement provide that the System Agreement will run until such time
    as the agreement is terminated by the mutual agreement of the
    parties, and that each company will normally own and operate
    generating capability to supply the requirements of its own
    customers.[^10] AEEC argues that these provisions demonstrate that
    the plain intention of the System Agreement is for an Operating
    Company to receive the benefits of the generation it owns.

11. AEEC argues that the Commission has rewritten the System Agreement
    that has, on the whole, achieved its purpose, *i.e.*, the planning,
    construction and operation of the electricity generation and
    transmission of the Operating Companies. It contends that if the
    Commission's interpretation of the System Agreement is correct, then
    it was never a valid contract and is unconscionable. AEEC argues
    that the Commission's interpretation would deprive Entergy Arkansas
    of the benefits of its depreciated base-load capacity, awarding
    those benefits to Louisiana after Entergy Arkansas' ratepayers have
    paid high front-end costs. AEEC argues that the Commission's finding
    that an Operating Company is not guaranteed all of the benefits of
    its generation for an infinite amount of time conflicts with the
    FPA's scheme of dual regulation. AEEC contends that states have full
    control over the siting of electric generating plants within their
    borders. It argues that if the Commission asserts that it can take
    the benefits of a power plant which the state approves and the
    ratepayers have an obligation to pay, states will be less likely to
    approve new generation.

    **c. [Commission Determination]{.underline}**

12. We deny AEEC's request for rehearing. The Commission was correct to
    state in the November 2006 Order that an individual Operating
    Company under the Entergy System Agreement is not guaranteed all of
    the benefits of its generation for an infinite amount of time. As we
    have stated repeatedly in this proceeding, by the very nature of the
    System Agreement and the Operating Companies' participation in the
    System Agreement, the benefits and burdens specific to each
    Operating Company have to be balanced with what is appropriate for
    the system as a whole.[^11]

13. The other issues AEEC raises were considered by the Commission in
    Opinion No. 480-A and are beyond the scope of this compliance filing
    as they are irrelevant to whether Entergy properly implemented the
    Commission's directives.[^12]

    **2. [Rate Shock]{.underline}**

    **a. [November 2006 Order]{.underline}**

14. In the November 2006 Order the Commission found that Entergy had
    properly implemented the bandwidth remedy and had complied with
    Opinion Nos. 480 and 480-A.[^13] The Commission found that AEEC's
    arguments concerning the magnitude of any possible rate impacts were
    beyond the scope of this compliance proceeding.[^14] The Commission
    noted that it has expressed concern about rate impacts at various
    times during the course of this proceeding, and that in Opinion No.
    480 it reversed a narrower bandwidth proposed by the presiding judge
    on the grounds that it would result in a significant rate shock to
    below system average companies.

    **b. [Request for Rehearing]{.underline}**

15. AEEC argues that implementation of the November 2006 Order will
    result in a rate shock that would dwarf the rate shock possibility
    that was found to be present in the presiding judge's original
    remedy in the Initial Decision. AEEC contends that the Commission
    has previously acted to mitigate serious adverse rate impacts on
    customers,[^15] and should therefore reconsider its rejection of
    AEEC's rate shock concerns. AEEC argues that the Commission ignores
    the fact that EAI and EMI bore the majority of the burden of system
    production costs from the mid 1980s through much of the 1990s. AEEC
    contends that Louisiana's high production costs are a direct result
    of ELL's continued reliance on its old, inefficient, generation
    units, and that this reliance results in an unjust and unreasonable
    subsidy burden on Arkansas' ratepayers.

    **c. [Commission Determination]{.underline}**

16. As stated above, in the November 2006 Order we held that AEEC's rate
    shock concerns were outside the scope of this compliance proceeding.
    Concerns regarding rate shock were considered by the Commission in
    Opinion No. 480.[^16] Accordingly, we will not address them here as
    they do not relate to whether Entergy properly implemented the
    Commission's directives in its compliance filing.

    **3. [Bandwidth Payments From One Year Must Be Made in the
    Next]{.underline}**

    **[Calendar Year]{.underline}**

    **a. [November 2006 Order]{.underline}**

17. In the November 2006 Order, the Commission accepted Entergy's
    proposal for bandwidth payments to begin in June of every year to
    implement the preceding year's bandwidth payment as in compliance
    with Opinion Nos. 480 and 480-A. The Commission stated that
    implementing the bandwidth remedy billing in June gives Entergy a
    reasonable amount of time between its Form 1 filing (due in April of
    each year) and the bandwidth remedy billing. However, the Commission
    rejected Entergy's billing proposal to allow bandwidth payments to
    carry over to May 31 of the following year. The Commission found
    that the proposal was not fully in compliance with Opinion No.
    480-A, which required a preceding year's bandwidth payments to be
    made within the next calendar year. Accordingly, the Commission
    directed Entergy to make a compliance filing providing that
    bandwidth payments must be made within the next calendar year
    (*i.e.*, payments as a result of 2006 data cannot be carried over to
    2008).[^17]

    **b. [Requests for Rehearing]{.underline}**

18. The Arkansas AG argues that the Commission should permit Entergy to
    make 12 equal bandwidth payments over the course of an entire
    calendar year, starting in June of each year and continuing through
    the following May. He contends that making all payments between June
    and December of each year will make the payments larger since the
    payments will be compressed into seven months. He contends that all
    bandwidth remedy payments being required within a seven month time
    frame is likely to be inefficient and may be difficult for Entergy
    to implement. He explains that the Commission has expressed a
    preference in other proceedings for payment schedules that spread
    out the recovery of costs over a longer period in order to mitigate
    the impacts of rate shock. He notes that in Opinion Nos. 480 and
    480-A the Commission expressed a desire to reduce impacts resulting
    from the bandwidth remedy.[^18]

19. The Louisiana Commission argues that due to the availability of
    computerized programs to provide cost and accounting information,
    Entergy can and does accumulate the relevant production cost data
    needed for remedial payments within the first half of January of the
    following year. The Louisiana Commission argues that approving a
    delayed remedy cannot be justified by finding that beginning
    payments in January would complicate the process and be burdensome
    to Entergy. The Louisiana Commission argues that Entergy has the
    ability to do the calculations earlier in the year if the Commission
    would permit it.

    **c. [Commission Determination]{.underline}**

20. We deny the Arkansas AG's and Louisiana Commission's requests for
    rehearing. In Opinion Nos. 480 and 480-A, the Commission ordered
    that payments and receipts based on the previous year be made fully
    within the next calendar year. We see no reason why it should be
    administratively more difficult for Entergy to separate bandwidth
    payments into seven months rather than twelve months and Entergy has
    not made that claim. Moreover, we note that the Commission has
    already mitigated the impact of the remedy in several ways,
    including adoption of a broader bandwidth than the Initial Decision
    and provision for payments to be spread over seven months instead of
    a lump sum yearly payment. Further, having payments commence in June
    is a reasonable approach as it gives Entergy sufficient time to
    calculate the payments and does not unduly delay the previous year's
    bandwidth payments. Contrary to the Louisiana Commission's
    contention, Entergy's annual Form 1 data is not due until April of
    each year. Implementing the bandwidth remedy billing in June is
    appropriate to give Entergy an adequate amount of time between its
    Form 1 filing and the bandwidth remedy billing. Allowing Entergy to
    wait until after Form 1 data is due and then requiring payments
    between June 1 and December 31 is a reasonable means of implementing
    the bandwidth remedy.

    **4. [Effective Date of Remedy]{.underline}**

    **a. [November 2006 Order]{.underline}**

21. The November 2006 Order accepted Entergy's proposal for the payments
    to become effective for the calendar year 2006, with any
    equalization payments being made in 2007.

    **b. [Request for Rehearing]{.underline}**

22. The Louisiana Commission argues that the Commission's orders in this
    proceeding allow Entergy to unduly delay remedial payments. It
    states that the November 2006 Order allows Entergy to implement the
    remedy for the first time, and on a prospective basis, on June
    1, 2007. The Louisiana Commission argues that this delay changes the
    effective date of the remedy from that ordered in Opinion No. 480,
    which stated that the remedy would be effective for 2006. It argues
    that the Commission should clarify whether it intends the remedy to
    commence June 1, 2007 rather than for 2006.

    The Louisiana Commission further argues that delaying a remedy until
    two years after the Commission found Entergy's rates unjust and
    unreasonable conflicts with precedent.[^19]

23. The Louisiana Commission states that the Commission's statement in
    the November 2006 Order that rough equalization payments are
    prospective indicates that the remedy would not begin until the
    payments are made. The Louisiana Commission alleges that such a
    determination would overrule Opinion No. 480 which made the remedy
    effective for calendar year 2006 and provided for after-the-fact
    equalization payments to roughly equalize the costs for that year.
    The Louisiana Commission argues that statements in the November 2006
    Order that the bandwidth payments bring the Operating Companies
    within the bandwidth on a prospective basis and that payments begin
    in June of every year to implement the previous year's bandwidth
    payment are inconsistent and require explanation.

    **c. [Commission Determination]{.underline}**

24. The Louisiana Commission misunderstands our decision in Opinion Nos.
    480 and 480-A. The bandwidth remedy for rough production cost
    equalization commenced on January 1, 2006. Calculations are made on
    an annual basis with the first annual calculations occurring for
    calendar year 2006. Payments will start in June 2007 to reflect the
    bandwidth remedy implementation that started on January 1, 2006. As
    we stated in the November 2006 Order:

    The correct implementation of the remedy is as follows: Entergy
    calculates production costs for 2006, payments and receipts for 2006
    occur in 2007. In calendar year 2007, production costs are again
    measured and bandwidth payments and receipts for 2007 would occur
    in 2008. The bandwidth payments/receipts from 2006 should not be
    reflected in the 2007 production costs.[^20]

25. We disagree with the Louisiana Commission that the prospective
    nature of the rough equalization payments indicates that the remedy
    would not begin until the payments are made, and is thus counter to
    what we said in Opinion No. 480. We also disagree with the Louisiana
    Commission's argument that there is inconsistency between the
    requirement that payments resulting from 2006 are to be made in 2007
    and the statement that payments would be prospective. This is
    entirely consistent with our prior orders. The Commission stated in
    Opinion No. 480 that the bandwidth would be implemented
    prospectively and would be effective for calendar year 2006, and we
    clarified in Opinion No. 480-A that any equalization payments would
    then be made in 2007 after a full calendar year of data became
    available.[^21] The Louisiana Commission's request is a collateral
    attack on Opinion Nos. 480 and 480-A and no further clarification is
    necessary.

26. Regarding the Louisiana Commission's claim that we impermissibly
    delayed implementing a remedy for two years, in Opinion No. 480 we
    explained that payments under the bandwidth remedy must be
    prospective because we are barred by the Federal Power Act's section
    206(c) from ordering refunds in this case.[^22] However, we note
    that the permissibility of refunds among Entergy's Operating
    Companies is pending on remand in another proceeding. *See Louisiana
    Public Service Comm'n v. FERC*, 2007 U.S. App. Lexis 7596 (D.C. Cir.
    2007). The Commission therefore will address the issue of refunds in
    a subsequent order after it has addressed the remand.

    **5. [Implementation of the Bandwidth Remedy]{.underline}**

    **a. [November 2006 Order]{.underline}**

27. In the November 2006 Order, the Commission accepted Entergy's
    proposed implementation of the bandwidth remedy as in compliance
    with Opinion Nos. 480 and 480-A. The Commission rejected arguments
    that Entergy's application of the remedy did not comply with the
    Commission's +/- 11 percent bandwidth remedy.

    **b. [Request for Rehearing]{.underline}**

28. AEEC again argues that Entergy's compliance filing did not provide
    for a real 22 percent bandwidth and that the Commission should
    reconsider its approval of the MSS-3 amendment.

    **c. [Commission Determination]{.underline}**

29. We deny rehearing. Contrary to AEEC's arguments, the Commission
    imposed a +/- 11 percent bandwidth, not a total 22 percent
    bandwidth. Entergy's filing complied with the Commission's directive
    and, as it failed to do in its protest in this proceeding, AEEC
    again fails to show that Entergy's filing does not comply with the
    Commission's directive.

    **6. [Inclusion of Interest in Bandwidth Payments]{.underline}**

    **a. [November 2006 Order]{.underline}**

30. In the November 2006 Order, the Commission decided not to require
    interest on bandwidth payments.[^23] The Commission stated that
    because there is a necessary delay owing to the need to perform the
    calculations, and because the Commission is requiring settlements to
    be made in a reasonable time period once the calculations are
    completed, there is no need to require that interest be applied to
    the payments.

    **b. [Request for Rehearing]{.underline}**

31. The Louisiana Commission argues that rough equalization payments
    should bear interest from the time costs are incurred by the
    Operating Companies to the time payments are made. It contends that
    interest is required to ensure that the economic value of the
    equalization payments is sufficient to bring the Operating Companies
    to the required bandwidth for the period for which the remedy
    applies. The Louisiana Commission further contends that failure to
    require interest payments cannot be justified because there is a
    "necessary delay" to perform the payment calculation. It states that
    the point of interest is to compensate for delay. It argues that the
    Commission's failure to require interest to compensate for the time
    value of money is inconsistent with longstanding Commission policy
    regarding deferred or delayed compensation, citing *Anadarko
    Petroleum Corp. v. FERC*.[^24] The Louisiana Commission states that
    according to *Anadarko*, the Commission's general policy is to allow
    interest to be paid on various types of overcharges and that
    interest is a way of ensuring full compensation.[^25]

    **c. [Commission Determination]{.underline}**

32. We deny rehearing. Opinion No. 480 provided that the payments made
    under the bandwidth remedy were prospective in nature[^26] and did
    not order interest to be made on any payments. In its request for
    rehearing, the Louisiana Commission cites *Anadarko* for the
    proposition that the Commission's general policy is to allow
    interest to be paid on various types of overcharges. However, a case
    like *Anadarko*, involving refunds, is not applicable here since we
    have already held that bandwidth payments are not refunds. In
    addition, as we have stated previously in this proceeding, our
    discretion is at its zenith when fashioning an appropriate
    remedy.[^27] In our discretion, we are requiring settlements to be
    made in a reasonable time period once the calculations are completed
    and, accordingly, there is no need to require that interest be
    applied to the payments.

    **7. [Inclusion of Bandwidth Payments in Service Schedule
    MSS-3]{.underline}**

    **a. [November 2006 Order]{.underline}**

33. In the November 2006 Order, we accepted, as in compliance with Order
    Nos. 480 and 480-A, Entergy's proposal to include in Service
    Schedule MSS-3 the bandwidth remedy function. We stated that Service
    Schedule MSS-3 would now be used both for pricing energy exchanged
    among the Operating Companies and also to calculate and provide for
    any rough production cost equalization payments, if such payments
    are required.

    **b. [Request for Rehearing ]{.underline}**

34. The Arkansas AG argues that the November 2006 Order allows the
    inclusion of bandwidth remedy provisions into Service Schedule MSS-3
    even though the Commission did not identify any benefits that would
    result from permitting Entergy to do this. He explains that the
    November 2006 Order fails to properly consider and balance the
    relative adverse impacts on Arkansas ratepayers that would result
    from the inclusion of the bandwidth remedy provisions in Service
    Schedule MSS-3, versus the lack of harm to Entergy that would result
    from incorporating such provisions in a separate Service Schedule.

    **c. [Commission Determination]{.underline}**

35. We deny the request for rehearing. In the November 2006 Order, the
    Commission considered arguments concerning the possible impacts of
    including two separate functions into Service Schedule MSS-3, and
    directed Entergy to make transparent and separate in its billing the
    amounts applicable to each of the service schedule's functions. In
    addition, Opinion Nos. 480 and 480-A did not require the bandwidth
    remedy to be separated from Service Schedule MSS-3, and we will not
    require Entergy to do so here. In addition, Service Schedule MSS-3
    is the most appropriate place in the Entergy's System Agreement to
    include bandwidth payments/receipts, given the nature of the costs
    that drive production cost disparities. Service Schedule MSS-3 has
    historically been used to allocate energy costs among the Operating
    Companies and, therefore, including bandwidth calculations in
    Service Schedule MSS-3 accurately reflects the nature of the costs
    driving the bandwidth payments.

    **8. [Inclusion of Interruptible Loads in Determining Bandwidth
    Payments]{.underline}**

    **a. [November 2006 Order]{.underline}**

36. In the November 2006 Order, we found that Entergy had complied with
    Opinion No. 480 by including interruptible loads in its calculation
    of total production costs in its compliance filing.[^28]

    **b. [Request for Rehearing]{.underline}**

37. The Louisiana Commission argues that the Commission\'s inclusion of
    interruptible loads in the production cost calculation violates
    Opinion Nos. 468 and 468-A.[^29] It states that in those two orders
    the Commission determined that the 12 coincident peak (CP) demand
    data used to allocate capacity costs among the Operating Companies
    should not include interruptible loads. The Louisiana Commission
    contends, however, that the November 2006 Order allows inclusion of
    interruptible loads in the 12 CP allocator used to allocate fixed
    capacity costs. It argues that the rationale the Commission used
    relied on a methodology proposed by Entergy in Exhibit ETR-26,
    despite the fact that parties agreed that the Commission's
    interruptible load ruling in Docket No. EL95-33-002, which was
    issued subsequent to the filing of ETR-26, would control the issue
    here.

38. According to the Louisiana Commission, it is not reasoned
    decision-making to allow the Entergy Exhibit ETR-26 methodology (one
    it claims violates Commission orders) simply because Entergy Exhibit
    ETR-26 was developed and filed prior to their issuance. The
    Louisiana Commission maintains that Exhibit ETR-26 did not exclude
    interruptible loads because the Commission had not decided the
    issue, and the parties (Entergy, the Arkansas Commission and the
    Mississippi Commission) agreed that the Commission\'s interruptible
    load ruling would control the issue here**.**

    **c. [Commission Determination]{.underline}**

39. In the Opinion No. 480 proceeding, the Commission directed Entergy
    to utilize the method in Exhibit ETR-26, which included
    interruptible load in the measurement of total production costs of
    each Operating Company for purposes of production cost comparisons.
    In the November 2006 Order, the Commission held that Entergy had
    complied with this directive to follow the Exhibit ETR-26
    methodology regarding the interruptible load issue.[^30] The
    Louisiana Commission does not argue that Entergy has failed to
    comply with this directive and, accordingly, we deny rehearing. We
    noted previously in the November 2006 Order[^31] that customers may
    file section 206 complaints if they seek to make a change.[^32]

    **9. [Allocation of Costs ]{.underline}**

    **a. [November 2006 Order]{.underline}**

40. In its compliance filing, Entergy proposed to allocate net general
    and intangible plant and related depreciation and amortization
    expenses on labor ratios. Entergy stated that its proposal was an
    adjustment to the methodology reflected in Exhibits ETR-26 and
    ETR-28. In the November 2006 Order, the Commission denied Entergy's
    request to make adjustments to the methodology reflected in Exhibits
    ETR-26 and ETR-28, stating that Entergy must comply with the
    requirements of Opinion Nos. 480 and 480-A. The Commission further
    stated that if Entergy wishes to make future changes to its
    methodology, it must make a section 205 filing with the Commission.

    **b. [Request for Rehearing]{.underline}**

41. The Arkansas Commission alleges that the Commission erred in
    rejecting Entergy's proposal to allocate certain costs on the basis
    of labor ratios rather than plant ratios. It contends that the
    Commission erred in rejecting Entergy's proposal to include payroll
    costs of certain Entergy service companies in the payroll costs of
    the Operating Companies when calculating labor ratios.

42. The Arkansas Commission states that the Commission, in rejecting
    Entergy's proposed modifications, stated only that Entergy must
    comply with Opinion Nos. 480 and 480-A. It claims that there has
    never been a serious dispute about whether general and intangible
    plant should be allocated on the basis of a labor ratio or a plant
    ratio. It argues that the Commission should decide whether or not to
    accept Entergy's proposals on labor ratios and payroll costs on the
    basis of cost allocation principles rather than on the basis of how
    an exhibit was prepared.

    **c. [Commission Determination ]{.underline}**

43. We deny rehearing. In the November 2006 Order, we denied Entergy's
    request to make adjustments to the methodology reflected in Exhibits
    ETR-26 and ETR-28, including allocating certain costs on the basis
    of labor ratios rather than plant ratios,[^33] because its proposed
    adjustments were inconsistent with what was required to comply with
    Opinion Nos. 480 and 480-A. We stated further that Entergy could
    seek to make a change in the methodology at any time by making a
    section 205 filing with the Commission.[^34]

# 10. The Pricing of Vidalia Power

> **a. [November 2006 Order]{.underline}**

44. In the November 2006 Order, the Commission accepted, as being in
    compliance with Opinion Nos. 480 and 480-A, Entergy's re-pricing of
    Vidalia energy based on the annual Service Schedule MSS-3 rate paid
    by ELL.

> **b. [Request for Rehearing]{.underline}**

45. The Louisiana Commission argues that if Vidalia is repriced, it
    should be repriced at the average MSS-3 rate, rather than the
    average MSS-3 rate *paid by ELL*. The Louisiana Commission contends
    that because ELL purchases disproportionately from the exchange at
    times when the price is low, Entergy\'s approach artificially lowers
    the hypothetical Vidalia cost in a manner not intended in the
    Commission\'s Orders. It contends that the adjustment produces a
    subnormal replacement cost, because ELL would purchase more energy
    from the exchange, at higher prices, if it did not have Vidalia

46. The Louisiana Commission argues that the Commission explicitly
    directed that Vidalia be repriced at the annual price of the MSS-3
    exchange, not at a price solely reflecting ELL's purchases from the
    exchange. The Louisiana Commission argues that allowing use of the
    average annual MSS-3 rate paid by ELL is a departure from the
    Commission's prior orders and understates the cost of replacing
    Vidalia.[^35]

    **c. [Commission Determination ]{.underline}**

47. We deny the request for rehearing. In the November 2006 Order, we
    stated that we would accept, as being in compliance with Opinion
    Nos. 480 and 480-A, Entergy's re-pricing of the Vidalia energy based
    on the annual Service Schedule MSS-3 rate paid by ELL.[^36] Contrary
    to the Louisiana Commission's argument that doing so would be a
    departure from our prior orders, in Opinion No. 480, the Commission
    stated that "\[f\]uture production cost comparisons among the
    Operating Companies should follow the methodology in Exhibit ETR-26,
    which accounts for Vidalia by re-pricing the energy at the annual
    \[Service Schedule\] MSS-3 rate."[^37] As we stated in the November
    2006 Order, Entergy's Exhibit ETR-26 includes the re-pricing of the
    Vidalia energy based on the annual Service Schedule MSS-3 rate *paid
    by ELL*.[^38] Thus, the Louisiana Commission's arguments were
    properly addressed in Opinion Nos. 480 and 480-A, and are beyond the
    scope of this proceeding as they are irrelevant to whether Entergy
    properly implemented the Commission's directives.

    **B. [Compliance Filing]{.underline}**

    **1. [Background]{.underline}**

48. On December 18, 2006, Entergy submitted its compliance filing as
    required by the November 2006 Order, revising MSS-3 section 30.12,
    Actual Production Costs, MSS-3 section 30.13, Average Production
    Cost, and MSS-3 section 30.14, Billing Procedure for section
    30.09(d). Entergy revised section 30.12 to reflect the methodology
    in Exhibit ETR-26 and ETR-28. These several changes include: (1)
    using plant ratios rather than labor ratios to calculate net General
    and Intangible Plant expenses, (2) removing the payroll costs of EOI
    and ESI from labor ratio calculations, (3) clarifying that the State
    Income Tax rate for EGS is the rate for Louisiana, and (4) amending
    the expense allocation in Account 923 (Outside Services) to be based
    on plant ratios instead of labor ratios.

49. Entergy also submitted revised language to a footnote in section
    30.12 to specify that an adjustment to the determination of Actual
    Production Cost would include the repricing of energy associated
    with the Vidalia purchase power contract for ELL "based on the
    average annual Service Schedule MSS-3 rate paid by ELL" as
    stipulated in the November 2006 Order. Entergy revised section 30.14
    to specify that the billing parameters for bandwidth payments would
    be in effect from June 1 until December 31 of each year and that
    payments would be made on a monthly basis based on dividing the
    amount payable by seven. Entergy also submitted minor typographical
    corrections to sections 30.12 and 30.13. Entergy states that these
    corrections were needed to properly reflect the Exhibit ETR-26
    methodology.

    **2. [Discussion]{.underline}**

50. Upon review of the filing, we find that Entergy has modified its
    System Agreement so that it is now in accordance with the November
    2006 Order. We accept Entergy' filing as being in compliance with
    the November 2006 Order and deny the Louisiana Commission's protest.

51. The only protest of Entergy's compliance filing comes in the form of
    a one-paragraph protest by the Louisiana Commission that seeks to
    reserve and raise on rehearing all issues that the Louisiana
    Commission raised in its challenges to Opinion Nos. 480 and 480-A.
    The Louisiana Commission provides no supporting information and does
    not even list which issues it is attempting to reserve and raise.
    Indeed, it has made no effort to demonstrate how Entergy's filing
    may not be in compliance with the Commission's November 2006 Order.
    A party making a protest in a Commission proceeding has an
    obligation to make its case before the Commission with reasonably
    articulated arguments to which the Commission can respond. But when
    a party advances a wholly undeveloped claim -- as here -- the
    Commission has little occasion to present a reasoned response.[^39]
    As the D.C. Circuit has held, when petitioners or appellants present
    no arguments to substantiate a claim of error, we normally decline
    to entertain the issue.[^40] Simply put, it is not the court's duty
    to identify, articulate, and substantiate a claim for the
    petitioner.[^41] Or, to express the matter in a different way, "the
    Commission cannot be asked to make silk purse responses to sow's ear
    arguments."[^42] In addition, nothing in our regulations or
    precedent provides for parties "reserving" issues that may or may
    not return to the Commission in a later proceeding as the Louisiana
    Commission requests. Accordingly, the Louisiana Commission's protest
    is denied.

[The Commission orders]{.underline}:

\(A\) The requests for rehearing with one exception are hereby denied,
as discussed in the body of this order.

\(B\) Action with respect to the issue of refunds among the Operating
Companies is hereby deferred, as discussed in the body of this order.

\(C\) Entergy's December 18, 2006 compliance filing is hereby accepted,
as discussed in the body of this order.

By the Commission.

( S E A L )

Kimberly D. Bose,

Secretary.

[^1]: *Entergy Services, Inc*., 117 FERC ¶ 61,203 (2006) (November 2006
    Order).

[^2]: *Louisiana Public Service Comm'n v. Entergy Services, Inc*.,
    Opinion No. 480, 111 FERC ¶ 61,311 (2005) (Opinion No. 480), *aff'd,
    Louisiana Public Service Comm'n v. Entergy Services, Inc*., Opinion
    No. 480-A, 113 FERC **¶** 61,282 (2005) (Opinion No. 480-A).

[^3]: Entergy Arkansas, Inc. (EAI), Entergy Louisiana, LLC (ELL),
    Entergy Mississippi, Inc. (EMI), Entergy Gulf States, Inc. (EGSI),
    and Entergy New Orleans, Inc. (ENOI).

[^4]: 16 U.S.C. § 824e (2000).

[^5]: In Opinion Nos. 234 and 292, the Commission applied a standard of
    "rough production cost equalization" to determine whether the Unit
    Power Sales Agreement and System Agreement, when taken together,
    were just and reasonable and not unduly discriminatory. Parties had
    argued, among other things, that because the Entergy system is
    highly integrated and generation facilities are planned and operated
    for the whole system, production costs among the Operating Companies
    should be "fully equalized," *i.e.*, shared, among the various
    Operating Companies. The Commission rejected the Louisiana
    Commission's proposal that full production cost equalization be
    adopted, finding that doing so was not necessary to remedy undue
    discrimination, and found instead that "rough equalization" was
    sufficient. *See Middle South Energy, Inc*., Opinion No. 234, 31
    FERC ¶ 61,305 (1985), *reh'g denied*, Opinion No. 234-A, 32 FERC ¶
    61,425 (1985), *aff'd in part sub nom. Mississippi Indus. v. FERC*,
    808 F.2d 1525 (D.C. Cir. 1987), *rev'd in part and remanded*, 822
    F.2d 1104 (D.C. Cir. 1987) (per curiam), *order on remand, System
    Energy Resources, Inc*., Opinion No. 292, 41 FERC ¶ 61,238 (1987),
    *reh'g denied*, Opinion No. 292-A, 42 FERC ¶ 61,091 (1998), *aff'd
    sub nom*. *City of New Orleans v. FERC*, 875 F.2d 903 (D.C. Cir.
    1989).

[^6]: *Louisiana Public Service Comm'n v. Entergy Services, Inc*., 106
    FERC ¶ 63,012 (2004) (Initial Decision).

[^7]: Opinion No. 480, 111 FERC ¶ 61,311 at P 138-39.

[^8]: Opinion No. 480-A, 113 FERC ¶ 61,282 at P 54.

[^9]: AEEC Request for Rehearing at 4 (*citing* November 2006 Order, 117
    FERC ¶ 61,203 at P 20).

[^10]: AEEC Request for Rehearing at 5 (*citing* System Agreement § 1.01
    and 4.01. AEEC also supports its position by citing exhibits
    presented during the trial in Docket No. EL01-88-000).

[^11]: *See* Opinion No. 480-A, 113 FERC ¶ 61,282 at P 106; November
    2006 Order, 117 FERC ¶ 61,203 at P 20.

[^12]: *See, e.g., Delmarva Power & Light Co*., 63 FERC ¶ 61,321 at
    63,160 (1993) (the sole relevant issue in reviewing \[a\] compliance
    filing is whether it complies with the directions in the \[order\]")
    (*Delmarva*); *accord, Sierra Pacific Power Co.*, 80 FERC ¶ 61,376
    at 62,271 (1997) (The sole purpose of a compliance filing is to make
    the revisions directed by the Commission").

[^13]: November 2006 Order, 117 FERC ¶ 61,203 at P 18.

[^14]: *Id*.

[^15]: AEEC Request for Rehearing at 3 (*citing*, *e.g.*, *California
    Independent System Operator Corp*., 111 FERC ¶ 61,337 (2005)).

[^16]: Opinion No. 480, 111 FERC ¶ 61,311 at P 139.

[^17]: November 2006 Order, 117 FERC ¶ 61,203 at P 46.

[^18]: Arkansas AG Request for Rehearing at 3 (*citing* Opinion No. 480,
    111 FERC ¶ 63,111 at P 139 and Opinion No. 480-A, 113 FERC ¶ 61,282
    at P 40).

[^19]: Louisiana Commission Request for Rehearing at 3 (*citing* *Office
    of Consumers' Counsel, Ohio v. FERC*, 783 F.2d 206 (D.C. Cir.
    1986)).

[^20]: November 2006 Order, 117 FERC ¶ 61,203 at P 41.

[^21]: Opinion No. 480, 111 FERC ¶ 61,311 at P 145; Opinion No. 480-A,
    113 FERC ¶ 61,282 at P 54. In addition, in the November 2006 Order,
    we stated that it was our intent that rough production cost
    equalization would be undertaken in the year following the year in
    which the costs are incurred. We also stressed that *all* payments
    as a result of calendar year 2006 data must be made entirely in
    2007, commencing in June. We have explained how the process of cost
    equalization would work: Entergy calculates production costs for
    2006, payments and receipts for 2006 occur in 2007. November 2006
    Order, 117 FERC ¶ 61,203 at P 41, 46.

[^22]: Opinion No. 480, 111 FERC ¶ 61,203 at P 145.

[^23]: November 2006 Order, 117 FERC ¶ 61,203 at P 51.

[^24]: *Anadarko Petroleum Corp. v. FERC*, 196 F.3d 1264 (D.C. Cir.
    1999) (*Anadarko*), *vacated in part on other issues on rehearing,*
    200 F.3d 867 (2000), *cert. denied*, 530 U.S. 1213 (2000).

[^25]: *Anadarko*, 196 F.3d 1264, 1267. (D.C. Cir. 1999).

[^26]: Opinion No. 480, 111 FERC ¶ 63,111 at P 145.

[^27]: Opinion No. 480-A, 113 FERC ¶ 61,282 at P 154.

[^28]: November 2006 Order, 117 FERC ¶ 61,203 at P 62.

[^29]: *Louisiana Public Service Comm'n v. Entergy Corp*., Opinion No.
    468, 106 FERC **¶** 61,228 (2004) (Opinion No. 468), *order on
    reh'g*, Opinion No. 468-A, 111 FERC ¶ 61,080 (2005) (Opinion No.
    468-A). Those orders held that the System Agreement was to be
    modified to exclude interruptible load from the calculation of peak
    load responsibility under Service Schedule (MSS-1) (Reserve
    Equalization) and MSS-5 (Distribution of Revenue from Sales Made for
    the Joint Account of All Companies).

[^30]: November 2006 Order, 117 FERC ¶ 61,203 at P 62.

[^31]: November 2006 Order, 117 FERC ¶ 61,203 at P 69.

[^32]: We note that on April 2, 2007, the Louisiana Commission filed a
    section 206 complaint in Docket No. EL07-52-000 on this
    interruptible load issue.

[^33]: November 2006 Order, 117 FERC ¶ 61,203 at P 69. *See, e.g.,
    Delmarva Power & Light Co*., 63 FERC ¶61,321 at 63,160 (1993) (the
    sole relevant issue in reviewing \[a\] compliance filing is whether
    it complies with the directions in the \[order\]") (*Delmarva*);
    *accord, Sierra Pacific Power Co.*, 80 FERC ¶ 61,376 at 62,271
    (1997) (The sole purpose of a compliance filing is to make the
    revisions directed by the Commission").

[^34]: We note that on March 30, 2007, Entergy made a section 205 filing
    in Docket No. ER07-682-000 to allocate certain costs on the basis of
    labor ratios rather than plant ratios.

[^35]: We note that on April 2, 2007, the Louisiana Commission filed a
    section 206 complaint in Docket No. EL07-52-000 alleging that
    Entergy's compliance filing in Docket No. EL01-88-004, and the
    Commission's acceptance of it, failed to adopt a pricing methodology
    to bring it in compliance with Opinion Nos. 480 and 480-A.
    (Specifically, that Entergy deviated from the "annual MSS-3 rate"
    and instead used the "average annual MSS-3 rate paid by ELL").

[^36]: November 2006 Order, 117 FERC ¶ 61,203 at P 59.

[^37]: Opinion No. 480, 111 FERC ¶ 61,311 at P 33.

[^38]: *See*, *e.g*., Testimony of Bruce Louiselle (Exhibit ETR-23) at
    pp. 41-42 ("The second \[analysis\] re-prices the Vidalia purchases
    to what they would have been had the price been equal to the average
    cost per kWh incurred by ELI incident to its "purchases" under the
    MSS-3.")

[^39]: *Pub. Serv. Electric and Gas Co. v FERC*, 2007 U.S. App. LEXIS
    8468 (D.C. Cir. 2007).

[^40]: *Carducci v. Regan*, 714 F.2d 171, 177 (D.C. Cir. 1983).

[^41]: *National Exchange Carrier Ass'n v. FCC*, 253 F.3d 1, 4 (D.C.
    Cir. 2001).

[^42]: *City of Vernon v. FERC*, 845 F.2d 1042, 1047 (D.C. Cir. 1988.)