Regulatory Assets and Liabilities

6 Months Ended

Jun. 30, 2021


Note 5 — 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 JUNE 30, 2021		AT DEC. 31, 2020
Regulatory assets
Acadia Unit 1 acquisition costs	$	1,966	$	2,019
Accumulated deferred fuel	75,295		28,194
AFUDC equity gross-up *	68,122		69,670
Affordability study	13,644		—
AMI deferred revenue requirement	2,318		2,591
AROs	7,202		5,488
Coughlin transaction costs	861		876
COVID-19 executive order	2,953		2,953
Deferred storm restoration costs - Hurricane Delta	17,802		17,051
Deferred storm restoration costs - Hurricane Laura	56,412		54,406
Deferred storm restoration costs - Hurricane Zeta	3,494		3,493
Deferred storm restoration costs - Winter Storms Uri & Viola	1,980		—
Dolet Hills Power Station closure costs	91,479		48,982
Dolet Hills Mine closure costs	13,910		—
Emergency declarations	—		270
Energy efficiency	2,350		2,820
Financing costs	7,011		7,184
Interest costs	3,583		3,708
Madison Unit 3 property taxes	4,181		—
Non-service cost of postretirement benefits	10,881		9,901
Other	13,040		4,229
Postretirement costs	155,067		165,437
Production operations and maintenance expenses	2,664		4,058
Rodemacher Unit 2 deferred costs	4,115		1,333
St. Mary Clean Energy Center	6,959		3,479

Training costs	6,007		6,085
Tree trimming costs	10,450		11,807
Total regulatory assets	583,746		456,034
Regulatory liabilities
AFUDC	(5,359)		(4,218)
Corporate franchise tax, net	—		(763)
Deferred taxes, net	(148,411)		(175,584)
Total regulatory liabilities	(153,770)		(180,565)
Total regulatory assets, net	$	429,976	$	275,469
* Represents regulatory assets for past expenditures that were not earning a return on investment at June 30, 2021, and December 31, 2020, respectively. All other assets are earning a return on investment.

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


Cleco
(THOUSANDS)	AT JUNE 30, 2021		AT DEC. 31, 2020
Total Cleco Power regulatory assets, net	$	429,976	$	275,469
2016 Merger adjustments *
Fair value of long-term debt	115,852		119,553
Postretirement costs	14,418		15,411
Financing costs	7,419		7,592
Debt issuance costs	5,086		5,254
Total Cleco regulatory assets, net	$	572,751	$	423,279

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

Accumulated Deferred Fuel

In February 2021, Winter Storms Uri and Viola moved through Louisiana causing substantial damage to Cleco’s distribution assets, electricity generation supply shortages, natural gas supply shortages, and increases in wholesale prices of natural gas in the United States, primarily due to prolonged freezing temperatures. Incremental fuel and purchased power costs were incurred as a result of the winter storms. On March 29, 2021, Cleco Power received approval from the LPSC to recover $50.0 million of these costs through Cleco Power’s FAC over a period of 12 months beginning in May 2021. For more information about the incremental fuel and purchased power costs related to Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

Affordability Study

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan. As a result, Cleco Power was allowed to establish a regulatory asset of $13.6 million related to outside consulting fees for the assessment of Cleco Power’s practices and assistance in the identification of potential cost savings opportunities, while maintaining superior levels of employee safety, reliability, customer service, environmental stewardship, community involvement, and regulatory transparency. The regulatory asset is being amortized over 10 years beginning July 1, 2021.

Deferred Storm Restoration Costs — Winter Storms

In February 2021, Cleco Power’s service territory experienced extreme and unprecedented winter weather.

On February 14, 2021, Winter Storm Uri reached Louisiana resulting in power outages for approximately 11,000 of Cleco Power’s electric customers located primarily in south Louisiana.

On February 17, 2021, Winter Storm Viola reached Louisiana resulting in power outages for approximately 43,000 of Cleco Power’s electric customers located primarily in central and south Louisiana.

On March 17, 2021, the LPSC approved utilities establishing a regulatory asset to track and defer non-capital expenses associated with these winter storms. For more information about Winter Storms Uri and Viola, see Note 17 — “Storm Restoration — Winter Storms Uri and Viola.”

Dolet Hills Mine Closure Cost

On March 17, 2021, the LPSC approved the establishment of a regulatory asset for lignite costs that exceeded $150 per ton that would otherwise be billed through Cleco Power’s FAC and any reasonable incremental third-party professional costs

related to the closure of the mine. At June 30, 2021, Cleco Power had a regulatory asset of $13.9 million for these mine-related incurred costs.

Madison Unit 3 Property Taxes

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan. As a result, beginning July 1, 2022, Cleco Power will be allowed to recover property taxes paid for Madison Unit 3, including a carrying charge at Cleco Power’s weighted average cost of capital, grossed up for taxes. At June 30, 2021, Cleco Power recorded a regulatory asset of $4.2 million for the accrued 2021 Madison Unit 3 property taxes. The amount included in the cost recovery mechanism each year will amortize over 12 months.

Other

On June 16, 2021, the LPSC approved Cleco Power’s new retail rate plan resulting in Cleco Power establishing several regulatory assets. Cleco Power was allowed to establish a regulatory asset to recover the undercollection of revenues related to the Northlake Transmission Agreement. At June 30, 2021, Cleco Power had $3.5 million recorded for this regulatory asset, which is being amortized over 12 months beginning July 1, 2021. In addition, the LPSC approved recovery of other previously deferred costs totaling $4.1 million which are being amortized over four years beginning July 1, 2021. These costs are primarily associated with Cleco Power’s recently approved base rate case.

In June 2017 and prior to the approval of Cleco Power’s new retail rate plan, the LPSC approved the establishment of a regulatory asset upon the completion of the Coughlin Pipeline project for the revenue requirement associated with the project until Cleco Power’s new retail rate plan was approved. At June 30, 2021, Cleco Power had a regulatory asset of $5.4 million related to the deferred revenue associated with the Coughlin Pipeline project. As approved by the LPSC in Cleco Power’s new rate plan, the regulatory asset is being amortized over four years beginning July 1, 2021.

St. Mary Clean Energy Center

At June 30, 2021, Cleco Power had a regulatory asset of $7.0 million for revenue requirements related to the St. Mary Clean Energy Center. As approved by the LPSC in Cleco Power’s new retail rate plan, the regulatory asset is being amortized over four years beginning July 1, 2021.