Company: EAI
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0000065984-25-000012
Chunk: 493

Company: ENTERGY ARKANSAS, LLC
Filing Date: 2025-02-18
Form: 10-K
Item: Item 7
Chunk 493
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 reasonable range calculated for the second refund period and prospectively.  Under the Opinion No. 569-A methodology, System Energy calculated an authorized return on equity of 9.44% for the first refund period, which also fell within the presumptively just and reasonable range calculated for the second refund period and prospectively.With regard to the capital structure, the LPSC’s primary recommendation was that the FERC establish a hypothetical capital structure for System Energy for ratemaking purposes, according to which System Energy’s common equity ratio would be set to Entergy Corporation’s equity ratio of 37% equity and 63% debt.  The APSC and the MPSC recommended that 35.98% be set as the common equity ratio for System Energy.  The FERC trial 

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Table of ContentsEntergy Corporation and SubsidiariesNotes to Financial Statements

staff argued that the average capital structure of the proxy group used to develop System Energy’s return on equity should be used to establish the capital structure.  Using this approach, the FERC trial staff calculated the average capital structure for its proposed proxy group of 46.74% common equity and 53.26% debt.  System Energy disputed all of these recommendations and argued that the use of its actual capital structure was just and reasonable.After conducting a hearing, in March 2021 the FERC ALJ issued an initial decision.  With regard to System Energy’s authorized return on equity, the ALJ determined that the existing return on equity of 10.94% was no longer just and reasonable, and that the replacement authorized return on equity, based on application of the Opinion No. 569-A methodology, should be 9.32%.  The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (January 2017-April 2018) based on the difference between the current return on equity and the replacement authorized return on equity.  The ALJ determined that the April 2018 complaint concerning the authorized return on equity should be dismissed, and that no refunds for a second fifteen-month refund period should be due.  With regard to System Energy’s capital structure, the ALJ determined that System Energy’s actual equity ratio was excessive and that the just and reasonable equity ratio was 48.15% equity, based on the average equity ratio of the proxy group used to evaluate the return on equity for the second complaint.  The ALJ further determined that System Energy should pay refunds for a fifteen-month refund period (September