Entergy Corp. asked state regulators Friday afternoon to increase the monthly rates it charges Louisiana customers for electricity.
A residential customer, living in the New Orleans suburbs and in north Louisiana, who buys 1,000 kilowatt hours of electricity per month from Entergy Louisiana LLC would pay up to $7.56 per month more, according to the Entergy Rate Case Filing. A small general business, using 12,500 kWh, could see their monthly bill increase by $86.72, if the increase is approved.
The February bill for an Entergy Louisiana residential customer of using 1,000 kWh of electricity was $101.29.
A typical residential customer uses about 1,400 kWh of electricity per month, according to state regulators. Entergy Louisiana LLC and Entergy Gulf States L.L.C. serve about 1 million customers — roughly half of Louisiana.
Investments in infrastructure and plants have about have about doubled since 2004 to about $4.6 billion for Entergy Louisiana, the filings showed. Those increased costs are among the factors that have caused prices to escalate, said Kimberly Fontan, director of Louisiana regulatory affairs for Entergy Services Inc., based in Jefferson.
Fontan said Entergy’s rates are among the lowest in the nation and that status would not change much if utility regulators approve the increase requested by the privately owned utility company.
“Even with the increases, we’re still well below the rates in the South and in the nation,” Fontan said.
During 2012, Fontan said, the average electricity costs for Entergy’s Louisiana residential customers was 8.35 cents per kilowatt-hour, which was well below the national average of 11.91 cents. As a result, Entergy customers averaged about $3.50 a day to power their homes — less than the cost of one large coffee latte, she said.
Any increase, which first must be approved by the five-elected members of the state Public Service Commission, would not take place until February 2014.
“It’s not surprising that the company wants an increase,” said PSC Chairman Eric Skrmetta, of Metairie, on Friday. “I’m not saying they’re not due … But I don’t know if that’s even reasonable, yet.”
Now that the rate case has been filed officially, Skrmetta said, PSC staff will begin a yearlong review of the numbers, look at the situations involved and gather advice from experts in utility engineering and financing.
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.
The profit, called return on equity, would increase slightly for Entergy Louisiana and decrease slightly for Entergy Gulf States, according to the Entergy filings.
Fontan said keeping the return on equity in the 10 percent range would make it easier for the corporation to acquire financing at favorable rates, which would benefit customers more than having a lower profit margin.
Entergy calculated the rate request using two different scenarios.
One scenario includes the costs of joining a regional cooperative oversees the transmission of electricity, called MISO, later this year. Entergy projects its customers will save more than $1.4 billion over the next decade once the utility joins the 13-state Midwest Independent Transmission System Operator Inc., based in Carmel, Ind.
The second scenario projects costs for both MISO and for a plan to divest Entergy’s transmission system into company called ITC Holdings Corp, of Novi, Mich. Approval for that $1.8 billion transaction is pending at the PSC.
Under the MISO-only scenario, the base rate increase for Entergy Louisiana residential customers would be $6.80 per 1,000 kilowatt hours, a 6.9 percent. Under the MISO-ITC scenario the rate increase would be 7.7 percent or $7.56, the filing showed.