XML 25 R10.htm IDEA: XBRL DOCUMENT v3.20.2
Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Note 1 — Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying condensed consolidated financial statements of Cleco include the accounts of Cleco and its majority-owned subsidiaries after elimination of intercompany accounts and transactions. Cleco’s condensed consolidated financial statements include the financial results of Cleco Cajun from the closing of the Cleco Cajun Transaction on February 4, 2019, through September 30, 2020. For more information about the Cleco Cajun Transaction, see Note 2 — “Business Combinations.”
Basis of Presentation
The condensed consolidated financial statements of Cleco and Cleco Power have been prepared in accordance with GAAP for interim financial information and with the instructions to the Form 10-Q and Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements. Because the interim condensed consolidated financial statements and the accompanying notes do not include all of the information and notes required by GAAP for annual financial statements, the condensed consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes in the Registrants’ Combined Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
These condensed consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments that are necessary to fairly state the financial position and results of operations of Cleco and Cleco Power. Amounts reported in Cleco and Cleco Power’s interim financial statements are not necessarily indicative of amounts expected
for the annual periods due to the effects of seasonal temperature variations on energy consumption, regulatory rulings, the timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices, discrete income tax items, and other factors.
On March 11, 2020, WHO declared the outbreak of COVID-19 to be a global pandemic, and on March 13, 2020, the U.S. declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders and directives in Cleco’s service territory. State and local authorities have also implemented multistep policies with the goal of reopening various sectors of the economy such as retail establishments, health and personal care businesses, and restaurants, among others. However, certain jurisdictions have begun reopening only to delay these plans or return to restrictions in the face of increases in new COVID-19 cases. For example, the governor of the state of Louisiana issued orders in May 2020 to allow businesses to reopen at varying levels of capacity in May and June 2020. To address the June 2020 spike in COVID-19 cases, such reopening activities were temporarily paused or scaled back, and also included closing certain establishments. These restrictions resulted in a decline in new COVID-19 cases, and in September 2020, the State of Louisiana entered into the next phase of its multistep reopening plan. The COVID-19 outbreak may significantly worsen in the U.S. during the upcoming winter months, which may cause federal, state, and local governments to reconsider restrictions on business and social activities. In the event governments increase restrictions, the reopening of the economy may be further curtailed.
Cleco has modified some of its business operations, as these restrictions have significantly impacted many sectors of the economy. Impacts include record levels of unemployment, with businesses, nonprofit organizations, and governmental entities modifying, curtailing, or ceasing normal operations. Cleco has also modified and continues to adjust certain
business practices to conform to government restrictions and best practices encouraged by the CDC, WHO, and other governmental and regulatory authorities.
Cleco cannot predict the full impact that COVID-19, or the significant disruption and volatility currently being experienced in the markets, will have on its business, cash flows, liquidity, financial condition, and results of operations at this time, due to numerous uncertainties. The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the development of effective treatments, the duration of the pandemic, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.
In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. For information on recent authoritative guidance and its effect on financial results, see Note 3 — “Recent Authoritative Guidance.”
Restricted Cash and Cash Equivalents
Various agreements to which Cleco is subject contain covenants that restrict its use of cash. As certain provisions under these agreements are met, cash is transferred out of related escrow accounts and becomes available for its intended purposes and/or general corporate purposes.
Cleco and Cleco Power’s restricted cash and cash equivalents consisted of the following:
Cleco
(THOUSANDS)AT SEPT. 30, 2020AT DEC. 31, 2019
Current
Cleco Katrina/Rita’s storm recovery bonds$2,626 $9,632 
Cleco Power’s charitable contributions1,765 1,200 
Cleco Power’s rate credit escrow228 268 
Total current4,619 11,100 
Non-current
Diversified Lands’ mitigation escrow23 21 
Cleco Cajun’s defense fund
721 719 
Cleco Cajun’s margin deposits
— 100 
Cleco Power’s future storm restoration costs
— 12,269 
Cleco Power’s charitable contributions— 2,094 
Total non-current744 15,203 
Total restricted cash and cash equivalents$5,363 $26,303 
Cleco Power
(THOUSANDS)AT SEPT. 30, 2020AT DEC. 31, 2019
Current
Cleco Katrina/Rita’s storm recovery bonds$2,626 $9,632 
Charitable contributions1,765 1,200 
Rate credit escrow228 268 
Total current4,619 11,100 
Non-current
Future storm restoration costs— 12,269 
Charitable contributions— 2,094 
Total non-current— 14,363 
Total restricted cash and cash equivalents$4,619 $25,463 

Cleco Katrina/Rita had the right to bill and collect storm restoration costs from Cleco Power’s customers. As cash was collected, it was restricted for payment of administration fees, interest, and principal on storm recovery bonds. The change from December 31, 2019, to September 30, 2020, was due to Cleco Katrina/Rita using $11.1 million for the final storm recovery bond principal payment and $0.3 million for the related final interest payment, partially offset by collections of $4.4 million net of administration fees. At September 30, 2020, the remaining $2.6 million of restricted cash is expected to be used for final administrative and winding up activities of Cleco Katrina/Rita, including refunds to Cleco Power customers for amounts remaining after all other costs are paid.
Cleco Power’s restricted cash and cash equivalents held for future storm restoration costs decreased $12.3 million from December 31, 2019, primarily due to the transfer of $8.3 million towards the costs associated with Hurricane Laura and $4.0 million to cover costs associated with other storms. For more information about Hurricane Laura, see Note 18 — “Storm Restoration.”
Reserves for Credit Losses
Customer accounts receivable are recorded at the invoiced amount and do not bear interest. Customer accounts receivables are generally considered to become past due 20 days after the billing date. Cleco recognizes write-offs within the allowance for credit losses once all recovery methods have been exhausted. It is the policy of management to review accounts receivable and unbilled revenue monthly using a reserve matrix based on historical bad debt write-offs as well as current and forecasted economic conditions to establish a credit loss estimate. Management’s historical credit loss analysis included periods of economic recessions, natural disasters, and temporary changes to collection policies. Due to the critical necessity of electricity, none of these past events have significantly impacted Cleco’s credit loss rates. In response to the COVID-19 pandemic, the LPSC issued an executive order prohibiting the disconnection of utilities for nonpayment from March 13, 2020, through July 16, 2020. As a result of this executive order, Cleco Power suspended the assessment of late fees, disconnections, and the utilization of collection agencies, which resulted in no additional charge-offs during the second and third quarters of 2020. On July 16, 2020, Cleco Power began setting up payment plan arrangements for customers with past due balances to be repaid over a period of up to 18 months. On August 27, 2020, Hurricane Laura made landfall in southwest Louisiana causing substantial damage to Cleco’s distribution and transmission facilities and to the properties of Cleco’s customers. Although
Cleco’s service territory experienced a recent decline in the economy related to these events, the economic outlook at September 30, 2020, was still within range of its historical credit loss analysis. Cleco began reinstating disconnections and late fees and utilizing collection agencies on October 1, 2020.
The table below presents the changes in the allowance for credit losses by receivable for Cleco and Cleco Power:
Cleco
(THOUSANDS)ACCOUNTS
RECEIVABLE
OTHER*
TOTAL
Balances, June 30, 2020$3,486 $1,638 $5,124 
Current period provision2,041 — 2,041 
Recovery54 — 54 
Balances, Sept. 30, 2020$5,581 $1,638 $7,219 
* Loan held at Diversified Lands that was fully reserved for at September 30, 2020.
(THOUSANDS)ACCOUNTS
RECEIVABLE
OTHER*
TOTAL
Balances, Dec. 31, 2019$3,005 $1,250 $4,255 
CECL adoption71 — 71 
Current period provision5,675 388 6,063 
Charge-offs(4,091)— (4,091)
Recovery921 — 921 
Balances, Sept. 30, 2020$5,581 $1,638 $7,219 
* Loan held at Diversified Lands that was fully reserved for at September 30, 2020.
Cleco Power
(THOUSANDS)ACCOUNTS
RECEIVABLE
Balances, June 30, 2020$3,486 
Current period provision2,041 
Recovery54 
Balances, Sept. 30, 2020$5,581 
(THOUSANDS)ACCOUNTS
RECEIVABLE
Balances, Dec. 31, 2019$3,005 
CECL adoption71 
Current period provision5,675 
Charge-offs(4,091)
Recovery921 
Balances, Sept. 30, 2020$5,581 
Fair Value Measurements and Disclosures
Various accounting pronouncements require certain assets and liabilities to be measured at their fair values. Some assets and liabilities are required to be measured at their fair value each reporting period, while others are required to be measured only one time, generally the date of acquisition or debt issuance. Cleco and Cleco Power disclose the fair value of certain assets and liabilities by one of three levels when required for recognition purposes. For more information about fair value levels, see Note 7 — “Fair Value Accounting.”