In November, the state of Arkansas reached an agreement with Entergy that will result in a $142 million settlement from the Louisiana-based power company, including rebates for Arkansas customers.
While that may sound like a good deal, the agency negotiating on Arkansas’s behalf, the Arkansas Public Service Commission, rejected exactly the same dollar offer from Entergy in August 2022. At the time, the Public Service commission dismissed the offer as “a low-ball amount.”
The state of Mississippi, which was a part of the same lawsuit against Entergy, extracted more than twice what Arkansas got in its settlement, despite the two states having similar claims.
So what changed at the Arkansas Public Service Commission in the last 15 months?
For one thing, turnover at the top. Two out of three commissioners have left since last August, including former chair Ted Thomas, who had served on the commission since 2015. In January, Gov. Sarah Huckabee Sanders appointed Doyle Webb, the former head of the Republican Party of Arkansas, as the commission’s new chair.
There are rumors of another factor: former Gov. Mike Huckabee, Sanders’ father. According to at least one Louisiana official, Huckabee helped make the settlement happen on behalf of Entergy, though the company denies it has ever hired the former governor in any capacity.
The settlement at issue came in the long-running Grand Gulf lawsuit. In a complaint originally filed in 2017, utility regulators in Arkansas, Mississippi and Louisiana, as well as the City of New Orleans, alleged that Entergy and its subsidiaries mismanaged the Grand Gulf Nuclear Station in Mississippi, resulting in customers in all three states being overcharged by hundreds of millions of dollars.
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 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.”
At the same time Arkansas rejected Entergy’s offer, it also asked the Federal Energy Regulatory Commission to hold a hearing on Entergy’s “continued imprudent mismanagement” of the Grand Gulf facility.
In September 2022, citing an expiring term and growing frustration with changes to solar energy regulations in the state, Thomas tendered his resignation as chair to then-Gov. Asa Hutchinson. Hutchinson appointed Katie Anderson to replace Thomas as chair in October 2022. Then, after taking office in January, Sanders appointed Webb — the former state GOP chair and husband to Arkansas Supreme Court Justice Barbara Webb — to be the new chair of the commission. Katie Anderson remained on the commission after Webb became chairman, replacing outgoing commissioner Kimberly O’Guinn.
According to documents on file with the Federal Energy Regulatory Commission, the federal entity that oversees utility rate disputes, Arkansas and Entergy had a settlement conference in January 2023. In July, Entergy reported to FERC that settlement talks with Arkansas had reached an impasse.
In mid-September, though, Webb had a meeting with representatives of Entergy Arkansas, according to emails obtained by the Arkansas Times through the Freedom of Information Act. The emails further show that “settlement talks” with Entergy occurred in late October. In November, Arkansas and Entergy announced that the Public Service Commission had accepted a $142 million offer nearly identical to the one they had rejected in August 2022, leaving Louisiana and New Orleans as the remaining parties in the lawsuit.
This settlement took the other parties by surprise.
“We were shocked, to be honest,” Louisiana Public Service Commissioner Davante Lewis said by phone recently. “We didn’t see it coming. Settlements hadn’t been part of the extensive discussions [about the lawsuit] between Arkansas, Louisiana and New Orleans, because no new offer had been made.”
Not long after the settlement was announced, a rumor began to circulate about what had transpired.
“I was told that Mike Huckabee had been hired by Entergy to be a lobbyist or consultant for them with the Arkansas Public Service Commission,” Lewis said. “That is how the settlement got done.” Lewis said Entergy employees have privately confirmed Huckabee’s involvement to him.
Entergy denies that Huckabee played any role in the settlement talks or anything else related to its business. “Entergy Arkansas has not employed Mr. Huckabee in any capacity,” said Kacee Kirschvink, communications manager for Entergy Arkansas. “No Entergy affiliate nor operating company, including Entergy Arkansas, has directly or indirectly engaged Mr. Huckabee in any capacity.”
Entergy does not have a flawless track record of knowing what their subsidiaries and contractors are doing on Entergy’s behalf, however. In 2018, for instance, reporters discovered “supporters” of a new power plant in New Orleans were actually actors, paid by one of Entergy’s contractors to demonstrate on behalf of a proposed new power plant, contrary to Entergy’s denials.
Two attorneys for other parties in the Grand Gulf suit, speaking separately to the Arkansas Times on the condition of anonymity, echoed Lewis’ claims. “I was explicitly told that Entergy hired the governor’s father” to make the settlement happen, one said.
“I’m confident that Mike Huckabee was involved,” said the other.
In any case, Arkansas likely could have secured a better deal, experts say. As the Public Service Commission noted when initially rejecting the offer last year, the amount that Arkansas settled for represented a fraction of what the state stood to gain if it was successful at trial. Lewis called the $142 million “woefully shy” of what Arkansas taxpayers deserved.
Daniel Tait, a spokesperson for the Energy and Policy Institute, calculates that Arkansas stood to receive roughly $418 million if the state had continued the litigation. Collectively, the three states and the city of New Orleans asserted $1.16 billion in claims against Entergy, Tait explained – a $361 million claim for “imprudent operation” of the Grand Gulf nuclear plant between 2016 and 2020, primarily for what is known as “replacement energy,” and an $800 million claim related to an overall decrease in energy output from the plant from 2012 to 2020. Arkansas would have received 36% of any recovery in that suit, a higher percentage than either Mississippi or Louisiana.
That amounts to about $276 million that Arkansas may have left on the table, according to Tait.
Despite a settlement that amounts to roughly a third of what the state would have received at trial, Arkansas and Entergy have touted it as a good thing for Arkansans, as it “avoids ongoing costly litigation.” According to Entergy, the utility’s roughly 730,000 Arkansas customers will receive $100 million in billing rebates thanks to the settlement, starting as soon as Feb. 1. (Assuming equal distribution among the customers, that works out to about $137 per customer, though Entergy Arkansas says it will calculate the exact amount once the settlement is approved by federal regulators.)
The Public Service Commission similarly praised the settlement. “The litigation costs associated with Grand Gulf have been substantial, up to this point, especially given that the costs of litigation from both sides have been passed onto ratepayers,” said commission spokesperson Danni Hoefer. “The APSC anticipated that litigation costs would increase considerably as litigation persisted toward a trial and subsequent appeals, which would have included experts’ fees, attorneys’ fees, etc.,” Hoefer said. “In the interest of ratepayers, the [commission] felt that settlement was the most prudent path at this time.”
According to Hoefer, the Public Service Commission’s legal bills in the Grand Gulf litigation totaled roughly $4 million from when the lawsuit began in 2017 through March of this year. While that is no small sum, it’s dwarfed by what the state likely could have recovered at trial. (Even if those legal fees tripled, paying $12 million to lawyers to recover an additional $276 million would still be a good investment.)
Regardless, Arkansas’s settlement is low compared with what Mississippi received.
Mississippi stood to receive 33% of any amount won at trial (compared to Arkansas’s 36%), which would have been about $383 million. The Mississippi Public Service Commission settled that state’s portion of the case against Entergy for $300 million, or roughly 78% of its potential recovery at trial. Entergy described the Mississippi settlement as “fair and reasonable” and noted that it “allows the return of considerable sums to Entergy Mississippi customers at a time when bills are high.”
Arkansas’s $142 million settlement, on the other hand, equates to just over a third of what the state could have received at trial. In other words, if Arkansas’s settlement had simply matched Mississippi’s in terms of percentage of each state’s potential trial recovery, Arkansas would have received $326 million. The Arkansas Public Service Commission accepted less than half of that amount.
Long-time followers of Arkansas political wrangling may recall the Grand Gulf facility has been a hot-button issue in the past. When then-Gov. Bill Clinton informed the public about the threat of increased electric bills to pay for a nuclear facility in Mississippi, the issue “contributed indirectly to his defeat in 1980 and also to the revival of his political career in 1982,” according to an account Ernie Dumas wrote for the Encyclopedia of Arkansas. The inimitable political cartoonist George Fisher nicknamed the facility “Grand Goof,” a sobriquet which stuck for years as the project continued to be an issue in Arkansas elections in the 1980s and 1990s.
As for Louisiana and New Orleans, Lewis says Arkansas’s settling “strains the lawsuit a bit,” as the remaining plaintiffs “are now on the hook for more of the costs of litigation” now that Arkansas is out. Nevertheless, perhaps to underscore just how winnable Louisiana and New Orleans consider the lawsuit to be, Lewis says that “the commission plans to continue the fight.”
If Louisiana and New Orleans are able to absorb the costs of the litigation, continuing the fight seems to be the right call. Both lawyers who spoke anonymously to the Times about the case said that a win is all but guaranteed when the case goes to trial, since the issues presented are less about whether any plaintiff was entitled to recover money and almost entirely about how much the plaintiffs should receive.
As for Huckabee, the Arkansas Public Service Commission “has no knowledge of whether Entergy (or any of its agents/subsidiaries) has hired or otherwise engaged Mike Huckabee in any capacity,” according to Hoefer. The governor’s office did not respond to our request for comment.
Ironically, it might be better for Doyle Webb and the Public Service Commission if the governor’s father did play a role. Otherwise, Webb is going to have to explain why, as soon as he was appointed to the commission, it accepted an offer that it had rejected as inadequate barely a year earlier and left $276 million on the table under the guise of “avoiding litigation costs.”
Webb did not respond to a request for comment.