Rate Case Roundup: Louisiana

Under an uncontested settlement submitted to and adopted by the Louisiana Public Service Commission, the formula rate plan in effect for Southwestern Electric Power Company (SWEPCO) will be modified to adjust downward the utility's target ROE. The stipulation provides that the new bandwidth midpoint ROE is to be reduced from 10.0% to 9.8%. 

Formula rate plans (FRPs) have been used in Louisiana for a number of years. According to the commission, such plans, which are implemented via an FRP surcharge or rider, are intended to more timely track and adjust for changes in a utility's costs of service. The commission elaborated that FRPs allow for utility rates to remain cost-based, but without the need for protracted and expensive rate case filings when costs do change. 

SWEPCO and the other signatory parties indicated that the lower ROE value will properly account for different cost levels identified by the company. They also acknowledged in the settlement that the new ROE is authorized but not guaranteed. The stipulation requires the utility to prepare and file an FRP report at least annually. 

In addition to ROE, the revised FRP agreement addresses the company's allowance for funds used during construction (AFUDC) with respect to its John W. Turk, Jr., generating project. The Turk power plant, an "ultra-supercritical" coal-fired facility, went into commercial operation in December of 2012. 

By the terms of the settlement, the Turk AFUDC regulatory liability is scheduled to be fully amortized no later than the billing cycle for February of 2018. The utility is instructed to thereafter supply the commission with documentation that the liability has, in fact, been completely amortized and returned to ratepayers via a credit mechanism. 

Although finding most of the proffered FRP stipulation's terms reasonable, the commission did amend the agreement as to the date by which SWEPCO must file a new base rate case, extension of its FRP notwithstanding. The commission ruled that such an application should be tendered by December 31, 2018, not December 31, 2019 as had been set forth in the settlement. Re Southwestern Electric Power Co., Docket No. U-34200, Order No. U-34200-A, May 18, 2017 (La.P.S.C.).