We reported last week on Entergy Arkansas’s recent defeat in federal court in a dispute with the Arkansas Public Service Commission (APSC), the state agency that regulates utilities. The short version is this:
(1) Entergy wanted to raise rates on retail customers in Arkansas to reimburse Entergy Arkansas for $135 million the company had to pay to Entergy affiliates in other states after Entergy Arkansas improperly accounted for sales to third parties;
(2) APSC told Entergy Arkansas no and also ordered it to refund about $15 million to retail customers for payments the customers shouldn’t have made;
(3) Entergy Arkansas challenged APSC’s decision in federal court;
(4) A federal judge last week sided with APSC.
Entergy says it plans to appeal, but for now it seems fair to call last week’s ruling a win for Arkansas ratepayers. Yet it also serves as a reminder that a ‘win’ against a utility company is more a matter of perspective than a clear-cut, David vs. Goliath-style victory, because the system is designed to let utilities come out ahead in the long run..
In December, we reported on a settlement between APSC and Entergy, Inc. in a long-running, multi-state dispute over the power company’s operation of the Grand Gulf nuclear power plant in Mississippi. (Entergy Arkansas is a subsidiary of Entergy, Inc.) In that post, we wrote:
Mississippi settled its part of the lawsuit in June 2022 for $300 million, but Entergy offered Arkansas only $142 million. The Arkansas Public Service Commission, headed by then-chairman [Ted] Thomas, rejected the offer. In a filing with the Federal Energy Regulatory Commission in August 2022, the Public Service Commission said Entergy’s settlement offer was “a low-ball amount” and noted that “nothing is said [in the settlement offer] about an actual return of a cash refund to Arkansas retail ratepayers.”
Daniel Tait, a spokesperson for the Energy and Policy Institute, said at the time that “Arkansas stood to receive roughly $418 million if the state had continued the litigation,” based on the percentage the state would have been due from the $1.16 billion the lawsuit sought in damages.
Rather than pursue the full amount at trial, APSC — now headed by Doyle Webb, rather than Ted Thomas — accepted basically the same “low-ball” offer in November that they had rejected a little over a year earlier.
The Grand Gulf settlement isn’t directly related to the lawsuit we reported on last week, but they’re worth considering together because the litigation played out at roughly the same time. The net result of the two lawsuits is that, even after paying around $15 million to retail ratepayers as FERC ordered them to do, Entergy is still ahead of where they could and should be with respect to Arkansas, likely by hundreds of millions of dollars.
Under the terms of the Grand Gulf settlement, $100 million of the settlement amount will be rebated to Entergy Arkansas’ approximately 730,000 retail customers. That works out to roughly $140 per customer. The $15 million in bandwidth costs reimbursements equals another $20 or so per customer, for a total rebate of about $160 dollars each.
But remember: This is not $160 dollars of Entergy’s money that is being paid to customers. A rebate, by definition, is a partial repayment to someone who has paid too much. Entergy was never entitled to that money in the first place, and they are repaying it in order to keep millions more to which they were never entitled.
Speaking of Entergy’s lawyers, even Entergy’s plan to appeal last week’s court ruling shows just how little retail customers can ever truly “win” when it comes to utility companies. Ratepayers are generally on the hook for legal fees incurred by Entergy, even when Entergy is suing (or being sued by) the Arkansas Public Service Commission.
When calculating a settlement offer in the Grand Gulf case, Entergy reduced the proposal by the amount of its legal fees. While exact numbers are hard to locate, deposition testimony regarding the settlement referenced $2,460,479 in fees in the Grand Gulf case in 2022 alone. The settlement occurred in late 2023, so the actual costs are likely higher. Entergy agreed not to include speculative 2024 legal fees in their settlement calculations — gee, thanks! — but they did reserve the right to seek reimbursement of those fees in the future.
This is ridiculous if you think about it at all. The reason Entergy incurred legal fees is because they were overcharging customers in four states by hundreds of millions of dollars, and those states had to sue to get the money back.
Why should ratepayers be on the hook for Entergy’s lawyers in a lawsuit to recover money the customers never should have been charged?
As Entergy Arkansas’ Finance Director Amy L. Morris explained it in testimony, “both the Federal Energy Regulatory Commission and the APSC have routinely permitted the recovery of legal fees in rates because they are a well established cost of doing business.”
As for the case Entergy Arkansas lost last week, we don’t yet know the amount of the legal fees it will pass on to customers. But they will probably be substantial, considering the case has dragged on for years. Entergy Arkansas first asked APSC to let it raise rates in May 2019, followed by multiple rounds of litigating procedural motions, appeals from preliminary rulings, and a full trial. The company is now planning to appeal last week’s decision to the Eighth Circuit Court of Appeals.
Entergy’s legal fees in that case may exceed the $15 million they’ve refunded to customers. So how much of a “win” did Arkansans really get?
And, honestly, why wouldn’t Entergy appeal the recent ruling? The case may not have much merit, but company officials already know they aren’t going to be on the hook for legal fees, regardless of how the appeal turns out. Arkansas is one of 29 states in the contiguous U.S. where retail energy customers have no choice which electricity supplier to use, so even the most unsatisfied customers are unlikely to go anywhere. If a company can recoup legal fees from a captive customer base, it would be stupid NOT to challenge anything and everything, litigating every disagreement and launching Hail Marys in the hope that something goes its way..
The most frustrating thing here might be that APSC has the authority to deny Entergy’s requests for attorneys’ fees. They just very rarely do so. Though, since Entergy would certainly appeal any such denial, it might not matter much in the end.
Certainly, any outcome that tells Entergy they can’t make customers pay for Entergy’s errors is better than the alternative. But the result could be even better for Arkansans if the playing field wasn’t so heavily tilted in Entergy’s favor.