

Note 11 — 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 a target return on equity of 10.7%, while providing the opportunity to earn up to 11.3%. Additionally, 60.0% of retail earnings between 11.3% and 12.3% and all retail earnings over 12.3%, were required to be refunded to customers. 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 is allowed to earn a target return on equity of 10.0%, while providing the opportunity to earn up to 10.9%. Additionally, 60% of retail earnings between 10.9% and 11.75% and all retail earnings over 11.75% are required to be refunded to customers. The amount of credits due to customers, if any, is determined by Cleco Power and the LPSC annually. Credits are typically included on customers’ bills the following summer, but the amount and timing of the refunds is ultimately 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, indicating 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.

On October 31, 2014, Cleco filed its monitoring report for the 12 months ended June 20, 2014. As of December 31, 2014, Cleco Power had accrued $1.6 million to be returned to customers based on the results in the12 month period ended June 30, 2014. The ultimate amount of customer refund is subject to LPSC approval. The accrual for estimated electric customer credits reflected on Cleco Corporation and Cleco Power’s Consolidated Balance Sheets at December 31, 2014 and 2013, was $2.3 million and $3.5 million, respectively.