Louisiana Electric Utility Regulation

By Katherine King, Randy Young, Carrie Tournillon, and Mallory McKnight Fuller

This report was last updated on February 22, 2019

The following is prepared by the Kean Miller LLP Utilities Regulation team on important topics affecting consumers of electrical power in Louisiana.  For more information, please contact us at client_services@keanmiller.com

(LPSC Rulemaking) New Generation Deactivation Transparency Rule:  In March 2017, the Louisiana Public Service Commission (“LPSC”) initiated a proceeding to consider (1) whether the LPSC should exercise its authority over future utility generation deactivation and retirement decisions and (2) the rules and procedures that could apply to the LPSC’s exercise of such authority.  In October 2018, the LPSC issued its final rule, which requires electric utilities to report generation unit deactivations and retirements 120 days prior to implementation, including support for the decisions and continuing reports on units that are placed in deactivation status for possible return in the future.  The final rule creates more transparency and accountability on the part of utilities.

Entergy Formula Rate Plan Extension:  In August 2017, Entergy Louisiana, LLC (“Entergy”) filed a request for an extension and modification of its Formula Rate Plan (“FRP”) for test years 2018, 2019, and 2020.  In May 2018, the LPSC approved an extension and modification of Entergy’s FRP subject to the settlement terms reached by Entergy, LPSC Staff, and intervenors.  The settlement terms included, among other things, the flow back to customers of all tax benefits created by the Tax Cuts and Jobs Act of 2017 (“TCJA”).

Entergy Integrated Resource Plan:  In October 2017, Entergy initiated proceedings at the LPSC to begin work on its Integrated Resource Plan (“IRP”) for the years 2018 through 2038.  The objective of the IRP process is generally to evaluate a set of potential resource options that offer the most economical and reliable approach to satisfy future load requirements of the utility.  Entergy’s draft IRP was filed at the LPSC in October 2018.  The final IRP is due in May 2019.  The IRP process does not result in the LPSC’s approval of a proposed resource plan or approval of construction or acquisition of any particular resources.

Louisiana Electric Rates, Industrial Customer Market Access / New Tariff Options:  In April 2017, the LPSC initiated a technical conference series entitled “Status of Electric Rates in Louisiana: Where Are We and Where Are We Going?”  Through this series, the LPSC hoped to achieve its goal of ensuring reliable electric service at the lowest reasonable cost.  The technical conference series invited stakeholders to provide input on the status of electric rates in Louisiana and recommendations of policies or other options the LPSC should consider for the future.  The technical conferences were held in 2017.  In December 2018, LPSC Staff issued a report and request for comments.  A final report from LPSC Staff is expected in early 2019, which will be presented to the Commissioners for a determination regarding steps forward.

(LPSC Rulemaking) MISO Demand Response/ Aggregators of Retail Customers:  In July 2018, the LPSC opened a rulemaking to study the implications of participation of Aggregators of Retail Customers (“ARC”) in the wholesale markets and to determine whether, and under what conditions, such activity should be allowed in the LPSC’s jurisdiction.  ARCs enter into agreements with, and combine the abilities of, multiple retail electric customers to participate in wholesale markets as a Demand Response or Load Modifying Resource.  In September 2018, Commissioner Skrmetta issued a directive that third-party ARCs are not allowed to register LPSC-jurisdictional customers or participate in wholesale markets with their loads pending the outcome of the rulemaking.  In November 2018, LPSC Staff issued a proposed rule and request for comments from stakeholders, the deadline for which was December 2018.  No final rule has been issued as yet.

Entergy Proposed Solar PPA and Experimental Renewal Option (“ERO”) Tariff:  In May 2018, Entergy filed an application with the LPSC seeking approval to enter into a Purchase Power Agreement (“PPA”) for 50 megawatts (“MW”) of unit-contingent, as-available capacity and energy from a solar facility to be constructed in Port Allen, Louisiana.  The PPA arises out of Entergy’s 2016 Request for Proposals (“RFP”) for 200 MW of renewable resources.  A settlement has been reached by participants in the proceeding and will be presented to the LPSC for approval.  In October 2018, in connection with the PPA, Entergy filed a related application with the LPSC seeking authorization to make available a new Experimental Renewable Option and Rate Schedule ERO (“Schedule ERO”).  Schedule ERO would allow Industrial and Commercial customers the opportunity to schedule a portion of the Solar PPA.  Entergy’s Schedule ERO application is currently pending at the LPSC.

Entergy Generation Construction Projects:  In the past two years, the LPSC has approved Entergy proposals for large generation construction projects worth a combined estimated total greater than $2 billion.

Entergy 980 MW Power Plant in St. Charles Parish:  In November 2016, the LPSC approved Entergy’s proposal to construct a 980 MW CCGT unit located in Montz, Louisiana (near New Orleans), at a site adjacent to the existing Little Gypsy generation units.  The project was selected from among bidders in Entergy’s 2014 Request for Proposal (“RFP”) for resources in Amite South (southeast Louisiana area).  The project is estimated to cost $869 million and has a projected in-service date of June 2019.

Entergy 994 MW Power Station in Lake Charles, Louisiana:  In June 2017, the LPSC approved Entergy’s proposal to construct a 994 MW CCGT unit located in Westlake, Louisiana.  The project was selected from among bidders in Entergy’s 2015 RFP for Long-Term Development and Existing Capacity and Energy Resources.  The project is estimated to cost $872 million and has a projected substantial completion date of May 2020.

Entergy 361 MW Combustion Turbine in Washington Parish:  In May 2018, the LPSC approved Entergy’s acquisition of the Washington Parish Energy Center, a new 361 MW simple cycle combustion turbine (“CT”) to be constructed in Bogalusa, Louisiana by a subsidiary of Calpine Corporation (“Calpine”) for a purchase price of approximately $222 million.  Calpine had submitted an unsolicited offer to Entergy to construct the CT and sell it to Entergy for a turn-key price.  The acquisition and related assets is estimated to cost $261 million and has an estimated “turnover” date of April 2021 for delivery of a fully-permitted, fully operational facility.

Entergy Transmission Construction Projects:  The LPSC has also approved Entergy transmission construction projects worth an estimated combined total of more than $192 million, and Entergy recently submitted a new application for certification of an estimated $92 million transmission project.

Entergy Economic Transmission Project in Southeast Louisiana:  In December 2015, the LPSC approved Entergy’s proposal to build a portfolio of transmission projects in southeast Louisiana termed the Louisiana Economic Transmission Project (“LTEP”), which was identified in the MISO Transmission Expansion Plan (“MTEP”) 2015 as addressing congestion in southeast Louisiana at a cost below its estimated benefits.  Pursuant to Entergy’s January 2019 bi-annual report, the revised estimate for the total project cost is approximately $75 million.  The project is 100% complete and in-service.

Entergy Reliability Transmission Project in Lake Charles, Louisiana:  In December 2015, the LPSC approved Entergy’s proposal to build a portfolio of transmission projects termed the Lake Charles Transmission Project (“LCTP”) to meet reliability needs in the Lake Charles, Louisiana area.  The LCTP was submitted as an “out-of-cycle” project for the MTEP 2015 process and was approved by the MISO Board of Directors as a Baseline Reliability Project.  Pursuant to Entergy’s January 2019 bi-annual report, the revised estimate for the total project cost is greater than $187 million, and the estimated in-service date for the entire project is February 2019.

Entergy Economic Transmission Project in Downstream of Gypsy Area:  In November 2018, Entergy submitted an application to the LPSC for certification of a new transmission construction project located in the Downstream of Gypsy (“DSG”) area of southeast Louisiana.  As part of MTEP 2015, MISO identified the project as addressing congestion in southeast Louisiana at a cost below its estimated benefits.  The project is estimated to cost $92.3 million and has a projected in-service date of second quarter 2022.  The proceeding is in its early stages.

Cleco Power Application for Implementation of TCJA:  At the end of January 2019, in an ongoing proceeding, Cleco Power LLC (“Cleco Power”) filed an application with the LPSC seeking authorization to (1) implement rate reductions resulting from the TCJA, (2) modify certain tariffs in connection with the rate reductions, and (3) implement residential base revenue decoupling.  Cleco Power also requested expedited treatment so that its rate reductions can be implemented effective July 1, 2019.  The application is currently pending at the LPSC.

Cleco Cajun Acquisition of NRG South Central:  In April 2018, Cleco Power and its parent company, Cleco Corporate Holdings, LLC (“Cleco Corp”), filed an application at the LPSC requesting approval for Cleco Cajun, a wholesale subsidiary of Cleco Corp, to acquire NRG South Central Generating LLC, along with related generating units and wholesale sale contracts.  In January 2019, the LPSC approved the acquisition with the adoption of 59 Regulatory Commitments.

Cleco Natural Gas Hedging Proposals:  In August 2017, Cleco Power filed applications for natural gas hedging programs with the LPSC (a Long Term Derivative Hedging Program and a Physical Bilateral Hedging Program) pursuant to the LPSC’s General Order requiring each investor owned utility to bring forth three natural gas hedging programs for LPSC consideration.  In January 2019, Cleco Power filed a supplemental filing requesting that a hybrid of its two natural gas hedging programs be recognized as its third program under the LPSC General Order and that certain larger customers be allowed to opt-in to the long term hedging programs.  The supplemental filing is currently pending at the LPSC.

power

President Obama’s centerpiece of his climate policy agenda, the “Clean Power Plan,” has become one of the most heavily litigated environmental regulations ever. Twenty-seven states and numerous industry groups have filed more than fifteen separate lawsuits challenging the Environmental Protection Agency’s (“EPA”) statutory authority to promulgate the regulations.   Seventeen states, the District of Columbia, the cities of New York, Boulder, Chicago, Philadelphia, and South Miami, as well as Broward County, Florida and a number of public interest groups have intervened to support EPA.

The final rule[1] was published in Federal Register on October 23, 2015 titled “Standards of Performance for Greenhouse Gas Emission from New, Modified, and Reconstructed Stationary Sources: Electric Utility Generating Units”.[2] The rule sets carbon dioxide emissions performance rates for affected power plants that reflect the “best system of emission reduction” (BSER), and requires each states to develop its own plan that will achieve those rates. However, if states do not submit approvable plans, EPA will substitute its own plan. Compliance is not required until 2030, although there are interim goals that must be met at 3 interim periods.

The Environmental Protection Agency refers to this regulation package as the “Clean Power Plan” and states that it is a “commonsense approach to cut carbon pollution from power plants.”[3] And that the “Clean Power Plan for Existing Power Plants and the Carbon Pollution Standards for New Power Plants” will maintain an affordable, reliable energy system, while cutting pollution and protecting our health and environment now and for future generations.”[4] However, many dispute whether the Clean Power Plan will have such positive effects, arguing instead concerns of economic feasibility with currently available technology, conflicting provisions, assumptions about renewable energy production that does not currently exist and potential for large loss of employment. “Every company that depends on electricity will be affected by this rule. It is fair to say that every American industry will be affected by this rule.” Karen Harbert of the U.S. Chamber of Commerce stated. The Clean Power Plan poses significant challenges for coal-fired power plants in particular, and the majority of states challenging the rule are coal producing states or rely heavily on coal-fired power plants.

The State of Louisiana and the Louisiana Department of Environmental Quality, are among the challengers to the rule. Petitioners argue that the final rule is in excess of the EPA statutory authority and otherwise is arbitrary, capricious, and abuse of discretion and not in accordance with the law. Among the primary arguments is that the rule may require states to mandate energy efficiency measures in addition to or in lieu of regulation of actual emissions limits. Other challenges include whether the rule will affect stability of the electrical grid.

The most recent notable ruling in the pending litigation is the recent Order denying the Motion for a Stay of the rule filed by several states, requesting that the Court halt the implementation of the Clean Power Plan until the pending litigation on the review of the final rule has concluded. On January 21, 2016 a three judge panel of the US Court of Appeals for the District of Columbia Circuit denied the motions to stay the implementation of the rule. The ruling is a victory for the EPA, which sought to begin implementation of the federal carbon regulations while they are under review in the courts. All U.S. states will now have until September 6, 2016[5] to submit preliminary strategies on cutting carbon emissions from their electrical power systems by thirty-two percent on average below 2005 levels – essentially mandating a massive conversion from coal-fired power generation to lower emitting natural gas and renewable energy sources as well as mandating some energy efficiency measures. EPA has published for comment, model state plans to assist the states, as well as versions of a proposed federal plan that will be implemented if states do not submit approvable measures.

The three judge panel that recently denied the request for a stay of the final rule includes the honorable Sri Srinivasan, Judith Roberts, and Karen Henderson, appointed by Presidents Obama, Clinton and Bush, respectively. The panel further ordered expedited review of the case, setting the matter for oral argument on June 2, 2016 at 9:30a.m. June 3, 2016 has also been reserved by the Court should oral arguments extend into the next day. The deadline for briefing is April 15, 2016 for initial briefs and final briefs to be filed by April 22, 2016.

Due to the complexity of the cases and the hundreds of parties involved, attorneys participating in the litigation do not expect a ruling on the merits until late 2016 or even 2017. Regardless of when the D.C. Circuit rules, observers widely expect that the case eventually will reach the Supreme Court. The high court may not rule until 2018. This is also complicated by the upcoming presidential election. Should a Republican take the White House, the new administration may direct the EPA to rescind the Clean Power Plan.

[1] 40 CFR Parts 60, 70, 71 and 98.

[2] Federal Register at 80 Fed. Reg. 64,510 (October 23, 2015). https://www.gpo.gov/fdsys/pkg/FR-2015-10-23/pdf/2015-22837.pdf.

[3] http://www.epa.gov/cleanpowerplan/fact-sheet-clean-power-plan-carbon-pollution-standards-key-dates.

[4] http://www.epa.gov/cleanpowerplan/fact-sheet-clean-power-plan-carbon-pollution-standards-key-dates.

[5] http://www3.epa.gov/airquality/cpptoolbox/technical-summary-for-states.pdf.

 

Industrial Strength Graphic Only

By Chris Dicharry and Jason Brown

As is now widely known, the Louisiana Legislature has adopted HCR No. 8, which purports to suspend the sales tax exemptions business utilities effective July 1, 2015. On July 1, 2015, the Louisiana Chemical Association (“LCA”) filed a declaratory judgment proceeding attacking the validity of HCR No. 8. The Legislature and the Louisiana Department of Revenue (the “LDR”) have contested the right of LCA to bring the suit on behalf of its members. The LCA suit was amended to add affected taxpayers as parties to the suit.

Kean Miller LLP advises affected taxpayers to make payment of the tax under protest and file suit within thirty days of the protest letter to the LDR in order to obtain optimum protection of your interests. While Louisiana law does allow for protest suits to be filed with the Louisiana Board of Tax Appeals (“BTA”), it is not clear that the BTA has jurisdiction over cases involving constitutional issues. Accordingly, it is recommended that the suit be filed in the 19th Judicial District Court rather than the BTA.

Since the LCA lawsuit was filed, the LDR has issued a statement discouraging payments under protest. In Statement of Acquiescence No. 15-001 (August 13, 2015), the LDR states:

Pending the outcome of the Lawsuit, taxpayers may pay the sales taxes, as they become due and then file an administrative claim for refund under La. R.S. 47:1621 utilizing the Louisiana Department of Revenue Claim for Refund of Overpayment Form (R-20127). If a final, non-appealable judgment is issued by a court of competent jurisdiction declaring HCR No. 8 to be unconstitutional, then LDR will acquiesce that the sales tax payments made pursuant to HCR No. 8 are overpayments within the meaning of La. R.S. 47:1621 regardless of whether the taxpayer initiated its own lawsuit or paid under protest.  All claims for refund must be filed in accordance with the prescriptive period imposed by La. R.S. 47:1623.

It is very likely that the LDR is acting in good faith and attempting to ease the administrative burden of protests for both taxpayers and the LDR. This type of statement by the LDR is not fully binding on the LDR, however. The statement issued by the LDR states that it “is not binding on the public, but is binding on the Department unless superseded by a later [Statement], declaratory ruling, rule, statute, or court case.”

That is, the LDR’s position could change, particularly if a court ruled that payment under protest was the proper procedure. Accordingly, it is strongly recommended that taxpayers pay disputed taxes under protest as previously recommended. Protested taxes must be segregated by the LDR so that they can be promptly refunded.

Taxpayers who wish to preserve the right to a refund of the business utilities sales tax should pay under protest. Failure to protest payments may preclude the eventual refund of sales taxes paid even if the court determines that the tax is invalid. Additionally, taxpayers who do not protest and who are able to get the taxes returned may not receive interest on the returned taxes and may need to get an appropriation from the Legislature before the taxes are returned.