

Note 2 — Revenue Recognition

Cleco adopted the accounting guidance for revenue recognition and all related amendments on January 1, 2018, using the modified retrospective method. The guidance affects entities that enter into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Application of the new revenue standard did not result in a cumulative effect adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The impact of the adoption of the new standard is not material to the results of operations, financial condition, or cash flows of the Registrants.

Revenue from Contracts with Customers

Retail Utility Revenue

Cleco’s revenue from contracts with customers is generated primarily from Cleco Power’s regulated revenue to retail residential, commercial, and industrial customers. Cleco recognizes retail revenue from these contracts as a series, and progress towards satisfaction of the performance obligation is measured using an output method based on kWh delivered. Accordingly, revenue from electricity sales is recognized as energy is delivered to the customer. Cleco bills retail customers, based on rates regulated by the LPSC, on a monthly basis with payments generally due within 20 days of the invoice date. Cleco records retail revenue under the invoice practical expedient, which states that if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, the entity may recognize revenue in the amount that the entity has a right to invoice.

Included in Cleco’s retail revenue is unbilled electric revenue, which represents the amount customers will be billed for services rendered from the last meter reading to the end of the respective accounting period. Cleco uses actual customer energy consumption data available from AMI to calculate unbilled revenue.

Wholesale Revenue

Wholesale revenue is generated primarily through the sale of energy and capacity to cooperatives, municipalities, and the MISO transmission provider. Cleco also enters into transactions through MISO for spot energy sales which are transacted in the Day-Ahead Energy and Operating Reserves Market and the Real-Time Energy and Operating Reserves Market. The electricity revenue performance obligations, representing both energy and capacity, are satisfied as a series of performance obligations, and progress towards satisfaction of the performance obligations are measured using an output method. The energy performance obligation measure of progress is based on kWh delivered. The capacity performance obligation measure of progress is based on time elapsed and will be recognized each month as Cleco’s generating units stand ready to deliver electricity to the customer. Cleco charges its wholesale customers market based rates that are subject to FERC’s triennial market power analysis. Cleco recognizes wholesale revenue, inclusive of both performance obligations, under the invoice practical expedient for the amount Cleco has the right to invoice.

Transmission Revenue

Transmission revenue is earned under a tariff with MISO. The performance obligation of transmission service is satisfied as service is provided. Revenue is recognized upon delivery of the transmission service. Cleco’s revenue from the transmission of electricity is recorded based on a FERC-approved annual formula rate mechanism. This mechanism provides for an annual filing of revenue requirements with rates effective June 1 of each year.

Other Revenue

Other revenue from contracts with customers, which is not a significant source of Cleco’s revenue, includes Teche Unit 3 SSR revenue, connection or other fees, and electric customer credits. The performance obligation under these contracts is satisfied and revenue is recognized as control of the products is delivered or services are rendered.

Revenue Unrelated to Contracts with Customers

Certain energy-related transactions, where Cleco records the change in value of those contracts, qualify as derivative contracts and are recorded pursuant to derivatives and hedging accounting guidance.

Disaggregated Revenue

Operating revenue, net for the three and nine months ended September 30, 2018, was as follows:



	FOR THE THREE MONTHS ENDED SEPT. 30, 2018
(THOUSANDS)	CLECO POWER		OTHER				ELIMINATIONS			TOTAL
Revenue from contracts with customers
Retail revenue
Residential ⁽¹⁾	$	139,162	$	—			$	—		$	139,162
Commercial ⁽¹⁾	79,829		—				—			79,829
Industrial ⁽¹⁾	43,380		—				—			43,380
Other retail ⁽¹⁾	4,039		—				—			4,039
Surcharge	6,206		—				—			6,206
Total retail revenue	$	272,616	$	—			$	—		$	272,616
Wholesale, net ⁽¹⁾	63,624		(2,420		)	⁽²⁾	—			61,204
Transmission	14,718		—				—			14,718
Other ⁽³⁾	2,477		—				—			2,477
Total revenue from contracts with customers	$	353,435	$	(2,420	)		$	—		$	351,015
Revenue unrelated to contracts with customers
Affiliate	$	223	$	22,765			$	(22,988	)	$	—
Other ⁽⁴⁾	7,241		—				—			7,241
Total revenue unrelated to contracts with customers	7,464		22,765				(22,988		)	7,241
Operating revenue, net	$	360,899	$	20,345			$	(22,988	)	$	358,256

⁽¹⁾Includes fuel recovery revenue.

⁽²⁾ Amortization of intangible assets related to wholesale power supply agreements.

⁽³⁾ Other revenue from contracts with customers includes $4.9 million of other miscellaneous fee revenue, $0.6 million of Teche Unit 3 SSR revenue, net of $0.2 million of reserves for capital expenditures, partially offset by $3.0 million of electric customer credits.

⁽⁴⁾Includes unrealized gains associated with FTRs.



	FOR THE NINE MONTHS ENDED SEPT. 30, 2018
(THOUSANDS)	CLECO POWER			OTHER				ELIMINATIONS			TOTAL
Revenue from contracts with customers
Retail revenue
Residential ⁽¹⁾	$	338,357		$	—			$	—		$	338,357
Commercial ⁽¹⁾	218,389			—				—			218,389
Industrial ⁽¹⁾	121,445			—				—			121,445
Other retail ⁽¹⁾	11,633			—				—			11,633
Surcharge	17,637			—				—			17,637
Total retail revenue	$	707,461		$	—			$	—		$	707,461
Wholesale, net ⁽¹⁾	165,255			(7,260		)	⁽²⁾	—			157,995
Transmission	41,166			—				—			41,166
Other ⁽³⁾	(4,375		)	1				—			(4,374		)
Total revenue from contracts with customers	$	909,507		$	(7,259	)		$	—		$	902,248
Revenue unrelated to contracts with customers
Affiliate	$	651		$	55,707			$	(56,358	)	$	—
Other ⁽⁴⁾	32,029			—				—			32,029
Total revenue unrelated to contracts with customers	32,680			55,707				(56,358		)	32,029
Operating revenue, net	$	942,187		$	48,448			$	(56,358	)	$	934,277

⁽¹⁾Includes fuel recovery revenue.

⁽²⁾ Amortization of intangible assets related to wholesale power supply agreements.

⁽³⁾ Other revenue from contracts with customers includes $24.3 million of electric customer credits, partially offset by $13.4 million of other miscellaneous fee revenue, and $6.5 million of Teche Unit 3 SSR revenue, net of $2.4 million of reserves for capital expenditures.

⁽⁴⁾Includes unrealized gains associated with FTRs.

Transaction Price Allocated to Remaining Performance Obligations

For contracts that are greater than one year, the following table discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of September 30, 2018, and (2) when Cleco expects to recognize this revenue:



REMAINING PERFORMANCE OBLIGATIONS	(THOUSANDS)
Three months ending Dec. 31, 2018	$	13,020
Years ending Dec. 31,
2019	28,490
2020	7,068
2021	7,068
2022	6,468
Thereafter	10,210
Total remaining performance obligations	$	72,324

Unsatisfied performance obligations primarily relate to stand-ready obligations as part of fixed capacity minimums.