Company: EAI
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0000065984-25-000012
Chunk: 508

Company: ENTERGY ARKANSAS, LLC
Filing Date: 2025-02-18
Form: 10-K
Item: Item 7
Chunk 508
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 Energy presented evidence to show that none of the proposed adjustments were needed.  On the issue of below-the-line expenses, during discovery procedures System Energy identified a historical allocation error in certain months and agreed to provide a bill credit to customers to correct the error.  In response to the APSC’s claims, System Energy argued that the Unit Power Sales Agreement did not include System Energy’s borrowings from the Entergy system money pool or earnings on deposits to the Entergy system money pool in the determination of the cost of capital; and accordingly, no refunds were appropriate on those issues.  In response to the City Council’s claims, System Energy argued that it has reasonably managed its cash and that the City Council’s theory of cash management was defective because it failed to adequately consider the relevant cash needs of System Energy and it made faulty presumptions about the operation of the Entergy system money pool.  System Energy further pointed out that the issue of its capital structure was already subject to pending FERC litigation.In March 2022 the FERC trial staff filed direct and answering testimony in response to the LPSC, the APSC, and the City Council’s direct testimony.  In its testimony, the FERC trial staff recommended refunds for two primary reasons: (1) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with rate refunds; and (2) it concluded that System Energy should have excluded specified accumulated deferred income tax balances in account 190 associated with a deemed contract satisfaction and reissuance that occurred in 2005.  The FERC trial staff recommended refunds of $84.1 million, exclusive of any tax gross-up or FERC interest.  In addition, the FERC trial staff recommended the following prospective modifications to the Unit Power Sales Agreement: (1) inclusion of a rate base credit to recognize the time value of money associated with the advance collection of lease payments; (2) exclusion of executive incentive compensation costs for members of the Office of the Chief Executive and long-term performance unit costs where awards are based solely or primarily on financial metrics; and (3) exclusion of unvested, accrued amounts for stock options, performance units, and restricted stock awards.  With respect to issues that ultimately concerned the reasonableness of System Energy’s rate of return, the FERC trial staff stated that it was unnecessary to consider such issues in the proceeding, in light of the pending case concerning System Energy’s return on equity and capital structure.  On all other material issues raised by the