Entergy and PSC agree on rate structure for next five years

Entergy Corp. and Public Service Commission staff agreed Tuesday to a modest increase in rates for some of the utility’s 1 million Louisiana customers, but no hike in monthly bills for others.

At their meeting on Dec. 16, the five elected members of the utility regulation commission will be asked to vote yes or no on the “stipulated settlement” that would set up the rate structure for Entergy customers that would be charged each month for the next five years.

Three commissioners would have to approve for the agreement to go into effect.

While some commissioners have not been briefed yet, at least one says he’ll oppose the agreement while another says he’ll support it.

“I’m going to vote for it. I can say that now,” said PSC Commissioner Clyde Holloway, of Forest Hill. He had been at the PSC’s offices in Baton Rouge on Tuesday and was briefed on the agreement.

“I believe our staff has done an excellent job negotiating this down,” Holloway said.

Entergy sought in February to increase rates by $200 million. The stipulated settlement put the figure at about $10 million.

PSC Commissioner Foster Campbell, of Bossier Parish, said he would oppose it.

“I’m not for raising rates. I’m asking for a decrease,” he said, adding that he is preparing a motion to accomplish that.

Phillip R. May, president and chief executive officer, Entergy Gulf States Louisiana LLC and Entergy Louisiana LLC, would not agree Tuesday to an interview on the issue.

He issued a prepared statement, saying the proposed settlements “are the positive result of a comprehensive regulatory process focused on the balanced benefits to customers, utilities, and all stakeholders that has involved not only the Entergy companies and the commission staff, but also residential customer groups and commercial and industrial customers like Marathon Petroleum Corporation and Occidental Chemical Corporation, and associations like the Alliance for Affordable Energy and AARP.”

PSC Commissioner Scott Angelle, of Breaux Bridge, said he would not be briefed until Thursday on the issue. But he had questions about the percentage of profit allowed. “I want to hear from them (staff lawyers from Entergy and the PSC) why they agreed to that amount,” he said.

PSC Chairman Eric Skrmetta, of Metairie, was unavailable for comment, according to his assistant. PSC Commissioner Lambert Boissiere III, of New Orleans, did not respond to a request for comment.

Basically, a typical residential customer of Entergy Louisiana LLC would be asked to pay about 50 cents more per thousand kilowatt-hours of electricity used each month, starting in 2014, say two commissioners familiar with the deal. The bill in December was $95.12 for 1,000 kwh. Entergy Louisiana provides electricity to about 650,000 customers in 46 parishes from the New Orleans suburbs to the Arkansas border.

Typical residential customers in Louisiana buy about 1,400 kwh of electricity per month.

Monthly rates would not change for the roughly 352,000 customers of Entergy Gulf States Louisiana LLC until at least September 2015, according to the stipulated settlment. Entergy Gulf States covers 18 parishes from Baton Rouge to the state line with Texas. The bill in December was $94.12 for 1,000 kwh, according to Entergy.

Entergy had sought a profit margin of 10.4 percent for both utility companies. The agreement set the margin, called a return on equity, at 9.95 percent.

Commissioner Campbell said that was too much. He said he would move for Entergy shareholders to accept less profit and lower monthly rates for customers.

“Monopoly utilities like Entergy are protected by the state from competition,” Campbell said. “They can attract investment dollars with a 9 percent rate of return.”

Because utility companies operate as a monopoly in a defined service area, the state constitution gives the PSC the authority to set the rates the privately owned companies can charge their customers.

Very generally, a utility company can charge a “base rate” — the cost of making and moving electricity — plus the cost to run the electricity generators. A “base rate” can include a built-in profit while fuel costs cannot.

The rate is multiplied by the amount of electricity a customer uses during a particular month. The pro-rata share of the fuel cost, also based on the amount of electricity, is added to the monthly bill.