Note 9 — Electric Customer Credits

Prior to July 1, 2014, Cleco Power’s annual retail earnings were subject to the terms of an FRP established by the LPSC effective February 12, 2010. The FRP allowed Cleco Power the opportunity to earn a target return on equity of 10.7%, including returning to retail customers 60% of retail earnings between 11.3% and 12.3% and all retail earnings over 12.3%. In April 2013, Cleco Power filed an application with the LPSC to extend its current FRP and to seek rate recovery of the Coughlin transfer. On June 18, 2014, the LPSC approved Cleco Power’s FRP extension and finalized the rate treatment of Coughlin. The LPSC’s implementing order was issued on June 27, 2014. Effective July 1, 2014, under the terms of the FRP extension, Cleco Power has the opportunity to earn a target return on equity of 10.0%, including returning to retail customers 60% of retail earnings between 10.9% and 11.75% and all retail earnings over 11.75%. The amount of credits due customers, if any, is determined by Cleco Power and the LPSC annually. The ultimate amount of any customer refund is subject to LPSC approval. Cleco Power must file annual monitoring reports no later than October 31 for the 12-month period ending June 30. The next FRP extension must be filed by June 30, 2017.

On October 31, 2013, Cleco Power filed its monitoring report for the 12 months ended June 30, 2013, which indicated that $2.2 million was due to be returned to customers. On April 9, 2014, the LPSC Staff filed their report indicating agreement with Cleco Power’s refund calculation for the 12 months ended June 30, 2013. On June 18, 2014, the LPSC approved the Staff’s report, authorizing refunds for this filing. Cleco Power credited retail customers’ bills for this refund in September 2014. Also, as part of Cleco Power’s approved FRP extension, retail customers received a $22.3 million refund, which was included on customers’ bills in September 2014.

Cleco Power expects to file its monitoring report for the 12 months ended June 30, 2014 on or before October 31, 2014, which will indicate that approximately $1.7 million is due to be returned to retail customers and this amount is accrued at September 30, 2014. The accrual for estimated Electric customer credits reflected on Cleco and Cleco Power’s Condensed Consolidated Balance Sheets at September 30, 2014 and December 31, 2013, was $2.3 million and $3.5 million, respectively.