Fifth Circuit Rejects Louisiana Public Service Commission’s Challenge to FERC Orders Allocating Production Costs Across Entergy Subsidiaries

On November 14, a panel of the Fifth Circuit (King, Dennis, Clement) issued a decision in Louisiana Public Service Commission v. FERC.  Entergy Corporation, through six operating subsidiaries, sells electricity in Arkansas, Louisiana, Mississippi, and Texas.  The six subsidiaries own their generation and transmission facilities individually, but operate jointly as a single system.  Because of this joint operation, the six subsidiaries share production costs pursuant to a FERC-approved System Agreement.  Each year, Entergy allocates production costs pursuant to the System Agreement and files those costs for FERC approval in what is known as a Bandwidth Proceeding.  The Louisiana Public Service Commission (LPSC) has frequently challenged FERC’s orders in these bandwidth proceedings.  This case involves one of those challenges.  The Fifth Circuit denied the LPSC’s petition for review of FERC’s orders, holding (1) that some of the LPSC’s arguments objected to the method of allocating production costs and therefore had to be raised in a separate proceeding, not in a challenge to the bandwidth proceeding, which merely implements the approved allocation formula; and (2) that FERC reasonably required Entergy to include casualty loss net accumulated deferred income taxes in its allocated production costs.

—Todd Aagaard