

Note 11 — Regulation and Rates

At December 31, 2015, Cleco Power’s provision for rate refund consisted of $2.5 million for a proposed ROE reduction of transmission rates that Cleco Power was allowed to collect under the MISO tariff and $0.2 million related to Cleco Power’s monitoring report for the 12-month period ended June 30, 2015.

At December 31, 2014, Cleco Power’s provision for rate refund consisted of $2.3 million related to Cleco Power’s monitoring reports for the 12-months ended June 30, 2015, and June 30, 2014.

Transmission ROE

In November 2013, a group of industrial customers from the northern region of MISO and other stakeholders filed a complaint at FERC seeking to reduce the ROE component of the transmission rates that MISO transmission owners, including Cleco, may collect under the MISO tariff. As of December 31, 2015, Cleco Power had $2.5 million accrued for the proposed ROE reduction for the period December 2013 through December 2015. For more information on the ROE complaint, see Note 14 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Transmission ROE.”

FRP

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 ROE 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. In June 2014, the LPSC approved Cleco Power’s FRP extension, finalized the rate treatment of Coughlin, and issued the implementing order. Effective July 1, 2014, under the terms of the FRP extension, Cleco Power is allowed to earn a target ROE 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.

In October 2014, Cleco filed its monitoring report for the 12 months ended June 30, 2014, indicating that $1.6 million was due to be returned to customers. On May 4, 2015, the LPSC Staff issued their report indicating agreement with Cleco Power’s refund calculation for the 12 months ended June 30, 2014. In September 2015, Cleco Power issued refunds of $1.6 million relating to its annual monitoring report for the 12-month period ended June 30, 2014.

Cleco Power filed its monitoring report for the 12-month period ended June 30, 2015, on October 31, 2015, which indicated that $0.2 million is due to be returned to eligible customers. A review of this report by the LPSC has not been completed.