Regulatory Assets and Liabilities

9 Months Ended

Sep. 30, 2020


Note 6 — Regulatory Assets and Liabilities

Cleco Power capitalizes or defers certain costs for recovery from customers and recognizes a liability for amounts expected to be returned to customers based on regulatory approval and management’s ongoing assessment that it is probable these items will be recovered or refunded through the ratemaking process.

Under the current regulatory environment, Cleco Power believes these regulatory assets will be fully recoverable; however, if in the future, as a result of regulatory changes or competition, Cleco Power’s ability to recover these regulatory assets would no longer be probable, then to the extent that such regulatory assets were determined not to be recoverable, Cleco Power would be required to write-down such assets. In addition, potential deregulation of the industry or possible future changes in the method of rate regulation of Cleco Power could require discontinuance of the application of the authoritative guidance on regulated operations.

The following table summarizes Cleco Power’s regulatory assets and liabilities:


Cleco Power
(THOUSANDS)	AT SEPT. 30, 2020		AT DEC. 31, 2019
Regulatory assets (liabilities)
Acadia Unit 1 acquisition costs	$	2,045	$	2,124
Accumulated deferred fuel	43,612		22,910
AFUDC equity gross-up *	70,444		72,766
AMI deferred revenue requirement	2,727		3,136
AROs	4,805		3,668
Corporate franchise tax, net	(1,262)		(1,145)
Coughlin transaction costs	884		906
COVID-19 executive order	2,953		—
Deferred taxes, net	(145,173)		(146,948)
Deferred storm restoration costs — Hurricane Laura	57,669		—
Dolet Hills closure costs	28,635		—
Emergency declarations	408		1,349


Energy efficiency	2,820		2,820
Financing costs	7,276		7,554
Interest costs	3,771		3,958
Non-service cost of postretirement benefits	8,891		6,739
Other, net	3,206		153
Postretirement costs	139,369		151,543
Production operations and maintenance expenses	4,754		7,985
St. Mary Clean Energy Center	1,740		(4,696)
Surcredits, net *	—		145
Training costs	6,124		6,241
Tree trimming costs	12,241		11,341
Total regulatory assets, net	$	257,939	$	152,549
* Represents regulatory assets for past expenditures that were not earning a return on investment at September 30, 2020, and December 31, 2019, respectively. All other assets are earning a return on investment.

The following table summarizes Cleco’s net regulatory assets and liabilities:


Cleco
(THOUSANDS)	AT SEPT. 30, 2020		AT DEC. 31, 2019
Total Cleco Power regulatory assets, net	$	257,939	$	152,549
2016 Merger adjustments *
Fair value of long-term debt	121,404		127,977
Postretirement costs	15,908		17,399
Financing costs	7,677		7,935
Debt issuance costs	5,337		5,665
Total Cleco regulatory assets, net	$	408,265	$	311,525

* Cleco regulatory assets include acquisition accounting adjustments as a result of the 2016 Merger.

COVID-19 Executive Order

On March 13, 2020, the LPSC issued an executive order prohibiting the disconnection of utilities for nonpayment. This order resulted in an increase of expenses for Cleco Power. On April 29, 2020, the LPSC issued an order allowing utilities to establish a regulatory asset for expenses incurred from the suspension of disconnections and collection of late fees imposed by the LPSC executive order. On July 1, 2020, the LPSC issued an order terminating the moratorium on disconnections effective July 16, 2020. Cleco began reinstating disconnections and late fees and utilizing collection agencies on October 1, 2020. At September 30, 2020, Cleco Power recognized a regulatory asset of $3.0 million for expenses incurred.

Deferred Storm Restoration Costs — Hurricane Laura

On August 27, 2020, Hurricane Laura made landfall in southwest Louisiana as a Category 4 storm, causing power outages for approximately 140,000 of Cleco Power’s electric customers located primarily in central and southwest Louisiana. In September 2020, the LPSC approved utilities establishing a regulatory asset to track and defer non-capital expenses associated with Hurricane Laura. At September 30, 2020, Cleco Power recognized a regulatory asset of $57.7 million for deferred storm costs, which was the remaining balance of non-capital expenses associated with Hurricane Laura after Cleco Power’s storm reserve was exhausted. Cleco Power anticipates making a filing with the LPSC in the fourth quarter of 2020 requesting interim rate recovery for return on the cost of the storm until such time securitization of the costs associated with Hurricane Laura can be completed. For more information about Hurricane Laura, see Note 18 — “Storm Restoration.”

Dolet Hills Closure Costs

In June 2020, Cleco Power revised depreciation rates for the Dolet Hills Power Station to utilize the December 2021 expected end-of-life and early closure of the Dolet Hills Power Station and defer depreciation expense to a regulatory asset for the amount in excess of the previously LPSC-approved depreciation rates. At September 30, 2020, Cleco Power had $28.6 million accrued as a regulatory asset for accelerated depreciation and closure costs. For more information on the Dolet Hills Power Station, see Note 14 — “Litigation, Other Commitments and Contingencies, and Disclosures about Guarantees — Litigation — Risks and Uncertainties.”

St. Mary Clean Energy Center

On July 1, 2018, Cleco Power began collecting the revenue requirements related to the St. Mary Clean Energy Center

project based on expected commercial operations in the third quarter of 2018. Due to the delay in commercial operations, Cleco Power recorded a $9.6 million regulatory liability for over collections for the 12-month period ending June 30, 2019. On July 1, 2019, Cleco Power’s rider FRP rates were adjusted by the amount of the over collection and the liability was amortized over a period of 12 months. Due to the delay in the current base rate case, Cleco Power continues to charge FRP rates established in July 2019, which includes a portion of the revenue requirements adjusted by the over collections. Cleco Power accrued a regulatory asset of $1.7 million at September 30, 2020, for the resulting under collection of revenue related to St. Mary Clean Energy Center project.