Opinion ID: 187138
Heading Depth: 3
Heading Rank: 1

Heading: The ALJ's Initial Decision

Text: In June 2001, LPSC filed a complaint against Entergy with the FERC, asserting that the cost allocation among the Entergy operating companies had become unjust, unreasonable, and unduly discriminatory in violation of Sections 205 and 206 of the Federal Power Act, 16 U.S.C. §§ 824d(b), 824e(a). The case was assigned to presiding administrative law judge (ALJ) Lawrence Brenner. The Arkansas Public Service Commission (APSC), which regulates Entergy Arkansas, and the Mississippi Public Service Commission (MPSC), which regulates Entergy Mississippi, disputed LPSC's claim. Based on an evidentiary record involving 6,218 transcript pages and over 390 exhibits, ALJ Brenner decided the following four issues which are pertinent to this petition. a. Disruption of Rough Equalization. First, ALJ Brenner found that the cost allocations among the Entergy operating companies had become unduly discriminatory in violation of the Federal Power Act because the production costs among the companies were no longer roughly equal. 106 F.E.R.C. at 65,109-10. He explained that, [b]eginning with 2000, the increase in natural gas prices and the dependence of [Entergy Louisiana] on gas-fueled generation has caused its production costs to rise dramatically in relation to System average. Id. at 65,110. [L]ooking at the history back to 1986, it is clear that prior to the current period beginning with 2000, there was no period where an Operating Company was hammered like [Entergy Louisiana] has been with double-digit percentage deviations above System average for each of the past four years (2000-2003), while [Entergy Arkansas] has enjoyed greater than mirror image double-digit disparities below System average. Id. at 65,111. He further found that 2000, or even 2000-2003, cannot be chalked off as an aberrational temporary period, id. at 65,110, given price forecasts which left no reasonable prospect of the situation self-correcting under the existing mechanisms of the System Agreement. Id. at 65,112. b. Bandwidth Remedy. ALJ Brenner decided that a numerical bandwidth was the appropriate remedy to bring the Entergy System into rough production cost equalization. 106 F.E.R.C. at 65,113. He thought it appropriate to impose a limit measured over a rolling multi-year average and to also impose a higher annual limit to achieve some relief for the first year, to limit large swings in future individual years, and to start the multi-year rolling average towards smoother, achievable results. Id. To this end, he ordered a +/- 5 percent bandwidth to apply to a rolling three-year average and a +/- 7.5 percent bandwidth to apply annually. Id. c. Vidalia Hydropower Plant. ALJ Brenner found that, when calculating production costs for the bandwidth remedy, the costs of the Vidalia hydropower plant should be included. Id. at 65,118. Entergy had argued that the plant was not a System resource, but was built with an eye ... towards satisfying the political and economic policy needs of the State of Louisiana, at the direction of the LPSC. Id. at 65,117. ALJ Brenner found that there was sufficient evidence to conclude that Vidalia was planned as a resource for the benefit of the Entergy System because [a]fter Vidalia went into service, it provided energy that was ultimately used to serve the loads on the System. Id. at 65,118. d. Implementation of Remedy. ALJ Brenner ordered that his +/- 7.5 percent annual remedy be effective beginning with all of the previous calendar year of 2003, 106 F.E.R.C. at 65,113, so that for each calendar year beginning with 2003, no Entergy Operating Company is more than +/- 7.5% relative to System average, id. at 65,115.